U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Eyemakers, Inc.
formerly "21st Century Vision, Inc."
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0350797
- ------------------------------ -----------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification
number)
4100 McEwen, Suite 160, Dallas, Texas 75244
--------------------------------------------------
(Address of principal executive offices)
Issuer's Telephone Number: (972) 386-8977
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered: n/a
Name of exchange on which each class is to be registered: n/a
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
BUSINESS
General
The Company is principally engaged in building a national network of
independently-owned, Company-managed optometry practices that include full
service retail facilities that are located primarily in shopping malls and
other high traffic areas. The Company intends to acquire optometry practices
and build optometry practice facilities and subsequently sell those practices
and facilities to independent optometrists. As part of the sale of the
optometry practice or facility, the Company will provide practice management
services to the independent optometrists.
The Company operates through its wholly-owned subsidiaries, Optical
Resource Management, Inc., ("Optical"), and Budget Opticals of America, Inc.
("Budget"). Optical, an optometry practice management company for independent
optometrists, currently manages eight practices in the Dallas/Fort Worth area
doing business as "Eyemakers[registered]." These eight are "one-door practices"
wherein an independent optometrist owns and profits from the sale of glasses,
contacts and exams. This is compared to a "two door operation" wherein an
independent optometrist leases office space from a corporate entity and profits
only from the sale of contacts and eye exams. In a "two door operation" the
corporate entity owns the retail glasses business. Optical, listed as 21st
Century Vision and Budget are ranked as number 71 and number 96, respectively
in the annual Top 100 Optical Chains as reported by the April, 1997 edition of
20/20 Magazine.
As of December 31, 1997, twenty-nine optical operations in Central Texas,
Houston and Dallas, Texas are doing business under the Budget Opticals of
America name. Sixteen of these operations are run as two-door operations owned
by Budget; three, formerly owned by Budget, were converted into one-door
practices owned by independent optometrists; and ten do business as Budget
Opticals of America under name use agreements. These name use agreements
provide for the use of the Budget name, lab and various other Budget services.
Budget currently plans to sell the remaining sixteen Budget owned operations to
independent optometrists and provide practice management services to the
acquiring optometrist, thus converting these "two door operations" into "one
door practices" with resulting management fees. Consequently, Budget would
operate in the same manner as Optical. Of these sixteen facilities, four are
located in Venture Stores and seven in Big Kmart stores.
Budget's success to date has come in part from maintaining and expanding
its relationship with a large, Texas-based managed care organization as well as
developing relationships with other managed care organizations. While
Management believes the eye care component of managed care has been slower to
develop in Texas than in other parts of the country, Budget's relationships
with managed care organizations position the Company for steady growth in this
arena.
The Company was organized in Nevada in March 1995 as "21st Century Vision,
Inc." ("Vision") and subsequently changed its name to "Eyemakers, Inc." in
August 1996. Eyemakers became a public company in January 1996 through its
issuance of shares in the state of Nevada pursuant to an exemption provided
by Rule 504 of Regulation D. The Company was subsequently approved for listing
on Standard & Poors. The Company purchased all of the outstanding capital
stock of Optical and Budget in May 1996 and August 1997, respectively. Optical
and Budget are each Texas corporations, incorporated in July 1994 and July
1987, respectively. The Company's common stock is traded on the OTC electronic
bulletin board under the symbol "EYEM." The Company does not currently file
periodic reports under the Securities and Exchange Act of 1934.
Strategy
The Company's strategy is to develop a national network of independently-
owned, Company-managed optometry practices. The Company offers the
comprehensive practice management components necessary to efficiently develop
and manage an optometry practice including management information systems,
business analysis and reporting, volume pricing on goods, human resources and
training, handling of managed care and marketing. For these services, the
Company receives a fee equal to 10% of gross sales for a sale of a facility for
ten years with an additional 6% management fee for ten years and,
prospectively, thereafter. To achieve its strategy, the Company intends to use
the following key elements:
Acquire and Convert - The Company intends to selectively acquire
existing optometry practices, sell those practices to independent
optometrists and subsequently provide practice management services to the
independent optometrists, locking in future revenue streams. In States
where the corporate practice of medicine is regulated, such as Texas, the
Company will structure these acquisitions to comply with each state's
regulations. Not unlike other areas of health care, the eye care industry
is experiencing considerable consolidation with existing retail chains
rapidly working to gain market share.
Contrary to the process followed in many consolidation strategies,
successful acquisitions by the Company will not be dependent upon
significant restructuring or cost cutting within acquired entities.
Rather, individual acquired practices can be resold to single, motivated
doctors. The resale of the practice can be accomplished following a
formula recognizing revenues based on a percentage of practice gross sales
over ten years. In many cases, the purchasing doctors will be the former
employees of the independent selling owner/doctor. Providing such
opportunities will not only ensure a continuity of revenue and patient
flow but will also facilitate acquisitions by allowing the seller to
provide his employees or fellow doctors with an exceptional financial
opportunity. Specifically, doctors who were formerly employed by a chain
would, under the Eyemakers plan, have the opportunity to own and profit
from their optical practice.
Build New Optometry Facilities - The Company intends to build and
sell to independent optometrists "one door" optometry facilities in
shopping malls and other high traffic areas. Unlike a single independent
optometrist, the Company can obtain prime retail space and obtain goods at
a cost that is competitive with competing chains, passing the savings on
to the acquiring optometrist. The Company will profit not only from the
sale of the facilities, but from the additional fees generated by the
management services provided by the Company to the optometrist as well.
THE INDUSTRY
General
A survey published in the February, 1997 edition of 20/20 Magazine
revealed that the size of the retail optical market was approximately $12.9
billion in 1994, $13.8 billion in 1995, and $14.6 billion in 1996. Management
believes the primary factors fueling the growth include:
Doctor is the Gatekeeper - The doctor is the driving component in the
eye care business. No prescription optical products may be legally sold
without a patient first receiving an eye examination and doctor's
prescription. However, the doctor is generally in a dilemma over his
opportunities - remain an independent or affiliate with a corporate chain.
Independent doctors typically either attempt to finance an entry into
the business entirely alone or through the purchase of a franchise
package. While providing the security available in working for themselves,
those independent of any trade name will have trouble competing for
patients in or out of managed care and for advantageous costs of products
and prime locations. Independents aligned with franchisors gain more
support from the larger group, yet ultimately management believes that the
franchisor provides them little in the way of operating support or
business services.
Corporate affiliated doctors typically lease space along side a
retail optical operation owned by a corporate chain. These doctors do
benefit from the increased patient awareness of the trade name due to
advertising and good locations. However, these doctors do not share in the
business opportunities or profits of the glasses side, being limited to
eye exam fees and contact lenses and they often lack security, many times
practicing under 30-day termination clauses for their subleased space.
Demographics and Presbyope - As we age, the human anatomy begins to
deteriorate. Our eyes classically weaken around the age of 40-45. This is
a simple phenomenon to observe as many will notice people of this age
holding reading materials increasingly further from their eyes in order to
focus. The largest component of the demographics (77 million people) known
as the "Baby-Boomers" are approaching this point in their lives.
Throughout this process, this population segment is seeking vision
correction, some of them for the first time in their lives. Management
believes that due to social status and income, these new patients seldom
seek or settle for the lowest price solution to something so vital as
their vision. Additionally, as the population of literate and active
senior citizens continues to grow in size, demand for an unprecedented
volume of eye wear and eye care services is expected to become a reality.
Technology - Eye care products and services continue to evolve and
improve. Lighter, thinner lenses are available for glasses. Extended wear
and disposable (even daily disposable) contact lenses have gained mass-
market acceptance. Eye examinations can now be performed quickly and more
accurately than ever before, yielding better results for the patients and
improved preventative care. As the technology, skill levels and market
education matures, laser eye surgery will have an impact on the eye care
industry as well. As a uniquely specialized component of a larger health
care specialty, laser surgery providers are working to network with the
doctors that manage large groups of patients. It should be noted, however,
that while creating new sources of revenue, laser surgery does not
eliminate the problem of presbyopia, the single largest factor driving the
growth in eye care revenue.
Lifestyle and Fashion - Eye care products have evolved beyond the
simple utility of sight enhancement. It is now fashionable and
advantageous to have different pairs of glasses for a variety of occasions
(e.g., work, leisure, driving, sports, etc.). These products also support
the largest margins. Licensing and branding efforts currently include, but
are not limited to such well-known names as Guess , Polo, Harley-Davidson,
Laura Ashley, Kathy Ireland, Mickey Mouse, and Nautica. Management
believes that today's eye wear consumer is as concerned with how well they
are seen as they are with how well they see.
Convenience - Unlike other health care specialties, eye care is now
available and expected to be as convenient as going to a shopping mall or
strip center. No longer is the average patient required to make a special
appointment and travel out of their way to a professional building for
this element of health care. Both the service and the products can be
found at local retail shopping establishments where the patient can also
shop elsewhere, be entertained and dine.
Managed Care - As more of the population obtain their insurance
through managed care programs, significantly larger numbers of the public
are motivated to have annual eye exams for preventative reasons.
Management believes, rather than being negative, these trends are actually
enhancing opportunities for larger optical operations that are able, due
to their size, to contract with managed care providers. Independent
optometrists more readily recognize their own need to become part of a
larger network or risk being left out of larger managed care contracts.
Confusing Pricing - Over the past several years, the eye care
consumer has faced an array of confusing optical choices involving "buy
one, get one free" on limited selections and "pizza coupon" discounting.
Corporate Retailers - Large corporate chains have been lured into the
industry by the high gross profit margin potential of sales of glasses.
They generally have been able to gain market share through lower costs of
goods, high visibility locations and large advertising budgets. They have
been largely successful, in spite of the limitations placed on the
affiliated optometrists, many ranking within the Top 100 optical chains
according to 20/20 Magazine. However, management believes that it is the
entrance and methods of these companies that generally causes the entire
industry to be viewed as a commodity or consumer good. Further, management
believes that independent optometrists lose much of their freedom to
operate as well as a significant portion of their profits when aligned
with the typical corporate chain model.
Mass Merchandisers - Wal-Mart set the pace several years ago for the
mass merchant to offer eye exams and eye wear in many locations. Venture
Stores, K-Mart and others have followed, providing competitive services.
The success achieved by these retailers in general merchandise has already
become evident in the optical industry, as Wal-Mart Optical Stores as a
whole are in the top five optical chains nationally.
Impact of Consolidation of Eye Care Industry on Optometrists -
Neither the independent nor the corporate aligned doctor is immune to
difficulties in exercising their professional skills. Both are facing a
variety of pressures in today's optical market.
Public Market - Traditionally, the optical industry has been operated with
more of a "mom-and-pop" mentality than a corporate model. In fact, advertising
was not even allowed until the mid 1970s. This characteristic is in a state of
dramatic shift. Management believes that the aforementioned combination of
factors pertaining to the optical industry has created a very significant and
potentially lucrative window of opportunity for any company that succeeds in
providing an avenue for independent doctors to compete in this new market
environment.
Several corporations have previously been founded or grown focusing
primarily upon the retail sales of optical goods. Vision Monday, one of the
most respected trade journals within the industry, began tracking the
industry's larger public companies in January 1996. The Vision Monday Optical
Stock Index ("VMOSI") tracks all of the business components in the domestic
and international optical industry including retail, suppliers, lasers, and
managed care. The December 15, 1997 issue of Vision Monday broke down the 39
companies being as follows:
Business Category Number Low PE<F1> High PE<F1> Average PE<F1>
Retail 6 3 48 12
Suppliers 20 1 71 27
Lasers 7 3 42 15
Managed Care 6 2 46 17
<F1> "PE" means the ratio of a company's trading price to its earnings.
Implementation
The Doctor Centered Model
The Company focuses on independent optometrists. By using this
strategy, the Company believes it has identified the means to motivate the
doctor and the entire practice to greater success. While other companies
provide practice management services, management believes that its focus is
unique within the industry. The Company developed its strategy with close
attention to the Texas Optometry Act and Rules. Its management agreement is a
direct result of this effort and provides the Company with what it considers to
be a competitive advantage. In its essence, the agreement outlines the
following:
1. The doctor owns the practice and oversees patient care;
2. The doctor contracts with the management company to provide
personnel, purchasing, marketing, information, contract negotiation
and reporting services from the Company; and
3. In its capacity of providing management services the Company does
not engage in buying or selling wholesale or retail optical goods nor
controlling the operations of the practice outside of that prescribed
by the owner.
As the Company expands into other states it will comply with the
Optometry regulations of each state. The Company also utilizes simplified
pricing methods and believes that the use of Eyemakers "every day low pricing"
or the Budget "one price point" significantly reduces patient confusion.
As of December 31, 1997, Optical manages all eight practices doing
business as "Eyemakers[registered]," four of which were built by Optical and
sold to independent optometrists. In accordance with its strategy, Budget has
sold and now manages three of its operations. Budget currently intends to
convert its remaining Company-owned operations into "one-door operations."
Given an average-sized practice, the practice management formula is
implemented as follows (figures may vary depending on the size/anticipated
volume of the mall or acquired facility):
1. The Company builds a new mall-based facility for approximately
$350,000;
2. An independent optometrist purchases the facility for
approximately $1,500,000 over ten years (estimated at 10% gross revenue per
year for ten years); and
3. The optometrist is currently charged 6% of gross revenues for
practice management during and subsequent to the ten year term.
FUNDAMENTAL PRACTICE MANAGEMENT FORMULA EQUATION
1 High-Traffic, Mall-Based Eye Care Facility - 10 Years
$350,000 capital expenditure generates $15,000,000 estimated gross practice
sales over 10 years, which generates (based on estimates):
Facility purchase - $1,500,000 (10% of gross practice sales of
$15,000,000 for 10 Years)
Management Fees - 900,000 (6% of gross practice sales of
$15,000,000 for 10 years)
--------------
Estimated gross
revenue - $2,400,000
Assuming a practice generates $1,500,000 of gross revenues each year, the
Company's initial capital expenditure of $350,000 would be recovered in
eighteen months.
The acquisition model using this formula works with identical
mechanics. However, instead of building a new location for approximately
$350,000, the Company would acquire an existing location or chain and in turn
sell each facility to an independent doctor under the same terms. In either
case, whether selling a built or acquired facility, the Company will be able to
lock in 10-year revenue streams at a rate currently equal to 16% of the
practice's gross sales. After 10 years, a minimum of 6% of the practice gross
sales is anticipated to continue to flow to the Company indefinitely. The
Company refers to this process as its "Practice Management Formula," or
capturing 10% of gross sales for a sale of a facility for ten years with an
additional 6% management fee for ten years and, prospectively, thereafter.
Management intends to use the Practice Management Formula, where applicable, on
future facilities built and sold to doctors. As an entry to certain new
geographies or as a negotiated option, the Company intends to, from time
to time, sell such facilities at an agreed price, recording the sale and cost
of the sale in the year of the transaction ("up front sale"). The existing
Eyemakers[registered] locations are all operating under the 6% management
component of the Formula. Four of these eight were sold as an up front sale in
1995 and 1996 producing revenues of $2,565,744 over the two years.
In its role of selling facilities and managing practices, the Company
has the unique opportunity to assist the independent optometrist in
counteracting the confusing pricing issues his patients and other consumers
face. The Company offers choices to doctors who may want either the "every day
low price" value pricing brand names under the Eyemakers[registered] trade name
or the "one price point" value packaging of quality eye wear under the Budget
Opticals of America trade name with its corollary opportunity within K-Mart
mass merchant outlets. Furthermore, although each practice is independently-
owned by an optometrist, each practice can operate under the Company owned
trade names of "Eyemakers[registered]" and "Budget Opticals of America" which
creates a public image of a multi-site chain operation.
Suppliers and Landlords
As part of its management services, the Company's business requires
ongoing interaction with a variety of third party suppliers of goods and
services. These include not only the retail goods sold, but doctor equipment,
lab equipment, fixtures, merchandising materials, construction and mall
management services. The Company has spent considerable time reviewing
suppliers of these business components. Relationships have been established
within the preferred suppliers in order to ensure quality products, contain
costs, and receive superior service.
The Company has been able to establish relationships with retail shopping
center management. The Company has also developed relationships with product
vendors to obtain high quality optical goods at favorable, volume purchased
unit costs.
Competition
The Company has different national chain competitors in regulated
states and unregulated states. Sterling Vision, Vision 21, Sight Resource and
Physicians Resource Group, Inc. are competitors on the acquisition component of
the strategy. Lenscrafters and Eyemasters represent primarily retail, mall-
based competition. Cole National/Pearle Optical operates in strip-centers,
stand-alone locations, and in department stores as a retail competitor and are
primarily based on a classic franchise model, offering the owning doctor little
in the way of business support or competitive advantage. The Company has, in
fact, built its own trade name eye care operations successfully in mall and
strip-center locations in direct competition with these national chains.
Ongoing competition is anticipated. Management is confident, however,
that its strategy affords ongoing growth and profitability, even with increased
competition. This confidence is based on continuing market growth, the
Company's cost of goods, its centrally located labs, and its unique positioning
with its acquiring independent optometrists, among the other points discussed
herein.
Employees
The Company currently employs approximately 107 people, of which
approximately 105 are full-time. The majority of these employees work as retail
sales staff at the thirty-seven Eyemakers and Budget locations. The Company has
no contractual obligations with any labor unions nor are its employees
represented by organized labor. The Company recognizes that its continued
success will depend in large measure on its ability to attract and retain
qualified personnel. Management believes that its employee relations are very
good. All employees are employees of the Company and staff at each location is
under the Company's management. Each owning doctor communicates directly with
the operations management of the Company on all employee/staff related issues.
All employee salaries and expenses are reimbursed by the owning doctor, with no
mark-up by the Company.
Seasonality
The business of the Company is somewhat seasonal in that the optical
industry is itself seasonal. The calendar fourth quarter, traditionally the
highest sales volume calendar quarter for retail, is only the third highest in
sales volume within the optical industry, as most people traditionally buy
items of a non-health care nature. Across the industry overall, the first and
third calendar quarters generate approximately two thirds of the combined
annual revenues.
This natural seasonality of the industry may not necessarily be
represented in the patterns of the Company's revenues, depending on the fiscal
quarter in which the Company opens and/or acquires new facilities.
Patents and Trademarks
The Company holds a national trademark on the "Eyemakers[registered]"
name, acquired at the time of its acquisition of Optical and is considering a
national trademark for "Budget Opticals of America." The Company holds an
exclusive license for the use of "Mister Magoo" for advertising purposes within
the optical industry.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company operates through its wholly-owned subsidiaries, Optical
Resource Management, Inc., ("Optical"), and Budget Opticals of America, Inc.
("Budget"). Optical, an optometry practice management company for independent
optometrists, currently manages eight practices in the Dallas/Fort Worth area
doing business as "Eyemakers[registered]." These eight are "one-door practices"
wherein an independent optometrist owns and profits from the sale of glasses,
contacts and exams. This is compared to a "two door operation" wherein an
independent optometrist leases office space from a corporate entity and profits
only from the sale of contacts and eye exams. In a "two door operation" the
corporate entity owns the retail glasses business. Optical, listed as 21st
Century Vision, and Budget are ranked as number 71 and number 96, respectively
in the annual Top 100 Optical Chains as reported by the April, 1997 edition of
20/20 Magazine (Jobson Publishing).
The Company's principal strategies are to acquire optometry practices,
build optometry facilities including retail space, sell the practices and
facilities to independent optometrists and manage the practices of those
optometrists.
Results of Operations for the Year Ending December 31, 1996 Compared with the
Year Ending December 31, 1995
Total revenues for the year ended December 31, 1996 decreased $79,456 as
compared to 1995, to $2,656,340 from $2,735,796. The change in revenue was due
in part to reducing the management fee from 11% to 6% in July 1996 in spite of
increased retail sales at the managed eye care practices.
Total costs and expenses increased for the year ended December 31, 1996 as
compared to 1995 by $869,687, to $2,135,982 from $1,266,295. This increase was
due primarily to increased leased personnel and marketing expenses as a result
of increased sales at the managed eye care practices. Other general and
administrative expenses increased to $792,508 in 1996 from $354,419 in 1995
primarily due to the addition of a CEO in late 1995, investor relations
expenses in 1996 and facility leases on new locations under which the Company
is the lessee and subleases the location to the owning doctor.
Interest income increased to $138,455 in 1996 from $37,489 in 1995 due to
interest earned on long-term notes receivable from the sale of facilities
during 1995 and in 1996.
Interest expense increased to $50,620 in 1996 from $13,657 in 1995 because
of the interest portion of capital leases signed in 1995 to open new facilities
in 1995.
The net income for the year ended December 31, 1996 was $375,672 and was
associated with the net sale of the facility in 1996. The net income for 1996,
when compared to 1995, decreased due to the increased cost to build and open
the facility sold in 1996, the decrease in management fee as a percent of
managed practice sales, and the increase in other general and administrative
expenses.
Results of Operations for the Six Months Ending June 30, 1997 Compared with the
Six Months Ending June 30, 1996
Revenues for the six months ended June 30, 1997 increased by $256,147 as
compared to the same period in 1996, to $1,066,070 from $809,923. The change in
revenue was due to the increased number of managed practices in 1997.
Costs and expenses for the six months ended June 30, 1997 increased by
$348,928 as compared to the same period in 1996, to $1,150,141 from $801,214.
This increase was due to the increased number of personnel at the managed
practices and the addition of a Chief Operating Officer in January 1997.
Interest income for the six months ended June 30, 1997 increased by
$111,795 as compared to the same period in 1996, to $111,795 from $0. This
increase was due to interest earned on notes payable from the sale of
facilities. Interest expense for the six months ended June 30, 1997 increased
by $13,678 as compared to the same period in 1996, to $25,000 from $11,322. The
change in interest expense was due to increased capital leases in 1996.
The net income for the six months ended June 30, 1997 increased $22,327 as
compared to a net loss in 1996, to $1,716 from $20,613. This change primarily
resulted from the increased interest income.
Liquidity and Capital Resources
Cash as of December 31, 1996 was $8,168 as compared to $7,890 as of
December 31, 1995. The change was primarily the net of cash used by
operating activities ($855,171) and cash provided by financing activities
($896,811).
Cash provided by financing activities related primarily to $530,000 of
proceeds from sale of common stock and $408,984 from proceeds from notes
payable. Cash used by operating activities related primarily to increases in
management fee receivables of $749,856 and notes receivable from sale of
facility of $1,106,688.
Management believes that the Company's existing cash resources and cash
generated from operations will be sufficient to fund the Company's ongoing
operations through the remainder of 1998; however, the Company is dependent
upon the proceeds of current or future offerings and the anticipated cash flow
from operations in order to continue its business strategies.
Changes in the Company's financial condition at June 30, 1997 as compared
with December 31, 1996 resulted primarily from the increased activity and
number of managed practices during 1997. Other changes included a decrease in
other current liabilities and an increase in stockholders' equity as a result
of the Company raising $750,000 through the sale of convertible Preferred Class
A shares during 1997.
ITEM 3 - DESCRIPTION OF PROPERTY
FACILITIES
The Company leases approximately 3,567 square feet for its principal
executive offices in Dallas, Texas at a rate of $3,270 per month. This office
serves as both the Dallas/Ft. Worth and National headquarters for the Company.
The Company currently leases the following optometry facilities:
Location Square Feet Rent per Month
Harker Heights, Texas 6,192 $2,786 <F1>
Irving Mall, Irving, Texas 1,888 5,177 <F2>
Richardson Square Mall,
Richardson, Texas 1,217 4,177 <F3>
Plano, Texas 1,800 3,030 <F4>
Arlington, Texas 3,163 5,272 <F5>
Bryan, Texas 1,172 947
College Station, Texas 2,200 2,024
Temple, Texas 1,000 1,980
Killeen, Texas 1,000 1,600 <F6>
Round Rock, Texas 1,060 987
Killeen, Texas 1,100 1,100 <F7>
Georgetown, Texas 1,200 1,105 <F8>
Waco, Texas 1,500 1,600
Within Kmart Stores and
others throughout Texas
eleven separate locations
totaling 9,900 6% of sales
[FN]
<F1> For the Principal offices of the Company's subsidiary, Budget.
<F2> The facility is subleased to Dr. George Orm, III on the same terms as the
master lease.
<F3> The facility is subleased to Dr. George Orm, Jr. on the same terms as the
master lease.
<F4> The facility is subleased to Dr. Glenn DeShaw on the same terms as the
master lease.
<F5> The facility is subleased to Dr. Dwight Allison on the same terms as the
master lease.
<F6> The facility is subleased to Dr. Michelle Trevino on the same terms as the
master lease.
<F7> The facility is subleased to Dr. Michelle Trevino on the same terms as the
master lease.
<F8> The facility is subleased to Dr. Stephen Hyle on the same terms as the
master lease.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31,
1997, with respect to the beneficial ownership of the common stock by each
person who is proposed to serve or currently serves as a director of the
Company, the executive officers of the Company, each person (or group of
persons whose shares are required to be aggregated) known to the Company to be
the beneficial owner of more than five percent (5%) of the common stock, and
all such directors and executive officers of the Company as a group. Unless
otherwise noted, the persons named below have sole voting and investment power
with respect to the shares shown as beneficially owned by them.
Title of Name and Address Amount & Nature Percent of Class
Class of Beneficial Owner of Beneficial Owner<F1> <F1>
- ------------------------------------------------------------------------------
common Dr. George Orm, III<F2> 1,735,360 32.67%
4100 McEwen, Suite 160
Dallas, TX 75244
common James Mellon <F3> -0- <F9>
4100 McEwen, Suite 160
Dallas, TX 75244
common Darrell R. Jolley <F4> 2,500 <F9>
4100 McEwen, Suite 160
Dallas, TX 75244
common Ed Lech <F5> -0- <F9>
4100 McEwen, Suite 160
Dallas, TX 75244
common Max C. Tanner <F6> 300,000 5.65%
2950 E. Flamingo Rd.
Suite G
Las Vegas, NV 89121
common The Strateia Group, Inc.<F7> 323,916 6.10%
2925 LBJ Freeway, Suite 279
Dallas, TX 75234
common All Officers and Directors 1,737,860 32.72%
as a Group <F8>
[FN]
<F1> Does not assume exercise of warrants and options granted to purchase nor
conversion of preferred stock totaling 4,371,582 shares of common stock.
<F2> Does not assume the exercise of an option to purchase 250,000 shares of
common stock at $1.50 per share, expiring on June 15, 1998.
<F3> Does not assume exercise of an option to purchase 89,000 shares of common
stock at $3.25 per share, expiring on December 1, 2005; does not assume
conversion of Series B Preferred shares into 356,400 shares at $4.25 per
share.
<F4> Does not assume exercise of an option to purchase 40,000 shares of common
stock at $.10 per share, expiring on December 15, 1999; exercise of an
option to purchase 30,000 shares of common stock at $.25 per share,
expiring on December 15, 1999; exercise of an option to purchase 15,000
shares of common stock at $.50 per share, expiring on December 15, 1999;
exercise of an option to purchase 40,000 shares of common stock at $1.00
per share, expiring on December 15, 1999; exercise of an option to
purchase 27,500 shares of common stock at $1.50 per share, expiring on
December 15, 1999; or exercise of an option to purchase 667 shares of
common stock at a rate of $1.50 per share, originally set to expire on
December 15, 1997 but which expiration date was extended to February 28,
1998.
<F5> Does not assume conversion of Series B Preferred shares into 6,000 shares
of common stock at $4.25 per share.
<F6> Does not include the exercise of an option to purchase 100,000 shares of
common stock at $.50 per share, expiring on December 31, 1998.
<F7> The Strateia Group, Inc. is owned and controlled in part by Joe H. Glover,
a consultant to the Company, and Robert W. Moehler. Includes 73,916 shares
of common stock owned by MFC Group which is controlled by Robert W.
Moehler.
<F8> Does not include the exercise or conversion of warrants, options or
convertible preferred stock of the Company totaling 853,900 shares of
common stock by officers and directors of the Company.
<F9> Less than 1%.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, KEY EMPLOYEES
AND CONTROL PERSONS
The following table sets forth the directors, executive officers and other
significant employees of and consultants to the Company, their ages, terms of
office and all positions with the Company. Directors are elected for a term of
one year, and serve until the next annual meeting or until their successors are
duly elected by the shareholders and qualify. Officers and other employees
serve at the will of the Board of Directors, subject however to any employment
agreements. See "Executive Compensation."
Name Age Position
_____________________________________________________________________________
Dr. George Orm, III 45 Chairman of the Board
James C. Mellon 51 CEO, President and Director
Darrell R. Jolley, CPA 35 Chief Financial Officer, Secretary,
Treasurer and Director
Ed Lech 46 Director
Joe H. Glover 47 Consultant
Dr. George Orm, III has been the Chairman of the Board and a Director of
the Company since 1994. Dr. Orm graduated from University of Houston in 1974
with a Bachelor's degree. In 1976, Dr. Orm completed his training at University
of Houston, graduating with a Doctorate in Optometry. While a student, Dr. Orm
was awarded the Gold Key International Award. This is the highest honor society
obtainable by an optometric student, awarded for outstanding professional
and ethical attitude through scholarship and leadership of his class and
profession. After building, buying, and selling various profitable optometric
practices, Dr. Orm established the first Eyemakers[registered] location in 1990
at Town East Mall in Mesquite, Texas. Dr. Orm has continued to work as a
practicing Optometrist while laying the foundation for the growth of the
Eyemakers[registered] concept. Dr. Orm presently owns the Town East, Montfort
and Irving Eyemakers[registered] locations.
James C. Mellon has been CEO, President, and Director of the Company since
October 1997. Prior to joining the Company, Mr. Mellon was President of Budget.
Mr. Mellon is a successful entrepreneur with over thirty years experience in
the optical industry. His experience includes marketing, advertising and
purchasing in middle and upper management. In 1967, Mr. Mellon obtained a
degree in Ophthalmic Dispensing and is a licensed optician with the Opticians
Association of America and Fellow National Academy of Opticians. At different
times prior to starting Budget Opticals of America in 1987, he owned Gibson
Optical Boutiques and Plaza Op.
Darrell R. Jolley has been the Chief Financial Officer, Secretary,
Treasurer and a Director of the Company since 1996. Mr. Jolley was the Chief
Financial Officer, Chief Operating Officer, Secretary, Treasurer and a Director
of Optical from September 1994 until May 1996. Mr. Jolley has a natural
inclination to new businesses and industries and has intentionally developed
his business skills for start-up and fast growth companies. He has taken
companies from the brink of bankruptcy to profitable growth, helped sell a
company out of bankruptcy and helped an international company refocus its
efforts onto its core business. From December 1992 to August 1994 he served as
Controller and Vice President of Harris Adacom Systems, Inc., an international
computer distribution company. From May 1990 through November 1992 he was
Controller and Vice President of Douglas Packaging, Inc., a folding carton
manufacturer. From 1985 to 1990, Mr. Jolley was employed by Deloitte and
Touche. Mr. Jolley attended the University of Texas at Austin majoring in
Business Honors Program with a specialization in Accounting. Mr. Jolley
obtained his CPA certification in January 1989.
Ed Lech has been a Director of the Company since 1997. Mr. Lech was a
Director of Budget Opticals of America since 1996. Mr. Lech holds a BA in
Mathematics from Suny at Buffalo and an MSM from Purdue University. In 1996, he
became President and CEO of Graham - Patten, a software engineering company.
Since joining Graham - Patten, he has led the effort to develop a vision for
the future, instituting formal processes for strategic and business planning.
In 1991, he joined Intermac to manage the start up of their software and
systems division, being promoted to Vice President and General Manager. In
1981, Mr. Lech was employed as an engineer at NCR, being responsible for the
development and introduction of several major high technology products.
Joe H. Glover has been a consultant to the Company since 1994 through his
company and has performed financial & management consulting and reviewing
potential acquisitions for the Company since its inception. Mr. Glover is the
President and a shareholder of The Strateia Group, Inc., which he co-founded in
1993 and which is a business development and consulting firm engaging in
various business acquisitions and development activities in the real estate,
retail and long term care medical facilities fields. Through The Strateia
Group, Inc., he is involved with small cap and emerging markets, assisting
numerous companies in acquisitions and business development, as well as those
seeking listing on Nasdaq. From October of 1990 through December 1992, Mr.
Glover served in various capacities with the sister companies of Thompson
Professional Properties, Inc. and Dedicated Care Holding, Inc. As President, he
oversaw the dissolution of the entities, which was due to a separation of the
founding shareholders. Mr. Glover graduated in 1972 from the United States
Naval Academy in Annapolis, Maryland with a degree in Naval Engineering.
ITEM 6 - EXECUTIVE COMPENSATION
The following table sets forth the compensation received by the Chief
Executive Officer during the last three fiscal years. No other officers or
directors of the Company received compensation in the form of salary and bonus
exceeding $100,000. Directors do not received any compensation for their role
as a Director. All Officers and Directors of the Company are reimbursed for any
out-of-pocket expenses incurred by them on behalf of the Company.
Annual Compensation Awards
----------------------------- -------------
Name Year Salary Bonus Restricted
and Stock
Principal Award(s)
Position
- -----------------------------------------------------------------------------
Wayne Allison<F1> 1995 $30,000 -0- 400,000<F2>
1996 $90,000 -0- -0-
1997 $76,000 40,000 -0-
James Mellon<F3> 1997 $65,000 250,000<F4> 89,000<F5>
[FN]
<F1> CEO, President and a Director from August 1995 to mid August 1997.
<F2> Mr. Allison was granted stock options to purchase the following:
100,000 Shares at $.10 expiring on 12/15/99; 100,000 Shares at $.25 per
Share expiring on 12/15/99; 50,000 Shares at $.50 per Share expiring on
12/15/99; and 150,000 Shares at $1.00 per Share expiring on 12/15/99.
<F3> CEO, President and a Director from mid August 1997 to present.
<F4> Mr. Mellon shall receive $250,000 as a covenant not to compete, which
$250,000 is considered to have been earned in 1997; however, Mr. Mellon
has elected to receive the $250,000 over time. In 1997, he was paid
$60,000 of the $250,000 and as of March 14, 1998, he has been paid
$140,000 during the 1998 fiscal year.
<F5> Mr. Mellon was granted stock options to purchase 89,000 shares at $3.25
per share, expiring on December 1, 2005.
Option/SAR Grants in Last Fiscal Year
Individual Grants
______________________________________________________________________________
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
______________________________________________________________________________
Mellon 89,000 19% $3.25/share 12/1/2005
The Company proposes to compensate management for the current year ending
December 31, 1998 with the following amounts:
OFFICERS/DIRECTORS PROPOSED AMOUNT
Dr. George Orm, III None
Jim Mellon $140,000
Darrell R. Jolley, CPA $100,000
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the officers of the Company are engaged in other businesses. Some
of the directors of the Company are engaged in other businesses either
individually or through partnerships and corporations in which they have an
interest, hold an office or serve on boards of directors. Certain conflicts of
interest may arise between the Company and its directors. Some of the directors
have other business interests to which they devote a major or significant
portion of their time.
The Company will attempt to resolve any such conflicts of interest in
favor of the Company. The officers and directors of the Company are accountable
to it and its shareholders as fiduciaries, which requires that such officers
and directors exercise good faith and integrity in handling the Company's
affairs. A shareholder of the Company may be able to institute legal action on
behalf of the Company or on behalf of itself and all similarly situated
shareholders of the company to recover damages or for other relief in cases of
the resolution of conflicts in any manner prejudicial to the Company.
In May of 1996, the Company acquired all of the outstanding common stock
of Optical. As a result of this acquisition, the shareholders and officers and
directors of Optical became shareholders and officers and directors of the
Company. Prior shareholders of Optical who became more than 5% shareholders of
the Company as a result of this acquisition are as follows: Dr. George Orm,
III, The Strateia Group and Marathon Capital. Officers and directors of Optical
prior to the acquisition who subsequently became officers and directors of the
Company are as follows: George Orm, III, Wayne Allison and Darrell R. Jolley.
Dr. George Orm, III owns three practices operating under the Eyemakers
[registered] trade name within the State of Texas that are managed by the
Company. As the owner of these practices, Dr. Orm receives compensation from
these operations. Dr. Orm is Chairman of the Board and a principal shareholder
of the Company. (See Note M to the Company's 1996 Audited Financial
Statements.) These practices in Texas are located one each in Mesquite, Irving
and Dallas. Dr. Orm is indebted to the Company as the maker of a Promissory
Note in the amount of $964,000, dated August 1, 1995, payable to Optical
Resource Management for his purchase of the Irving, Texas facility. The monthly
payments on this note are $12,212.25. As of the date of this Memorandum, Dr.
Orm is current on all note payments to the Company.
Optical acquired the Eyemakers[registered] trademark from Dr. Orm on May
10, 1996. (See Note M to the Company's Audited Financial Statements.)
Dr. Orm has been granted options to purchase 250,000 shares of common
stock at a rate of $1.50 per share, expiring on June 15, 1998.
Wayne Allison, formerly the Chief Executive Officer and Director of the
Company loaned the Company $25,000 on November 10, 1995, pursuant to which the
Company executed a 10% convertible promissory note. Mr. Allison has converted
the $25,000 debt into 55,000 shares of common stock at a rate of $.50 per
share, but which shares have not yet been issued. For making this loan, Mr.
Allison was also granted options to purchase 16,667 shares of common stock at a
rate of $1.50 per share, originally set to expire on December 15, 1997 but
which expiration date was extended to February 28, 1998. Mr. Allison was also
granted options to purchase the following: 100,000 shares of common stock at a
rate of $.10 per share, expiring December 15, 1999; 100,000 shares of common
stock at a rate of $.25 per share, expiring December 15, 1999; 50,000 shares of
common stock at a rate of $.50 per share, expiring December 15, 1999; and
150,000 shares of common stock at a rate of $1.00 per share, expiring December
15, 1999.
Darrell Jolley, Chief Financial Officer, Secretary, Treasurer and a
Director of the Company loaned the Company $1,000 on November 10, 1995,
pursuant to which the Company executed a 10% convertible promissory note. Mr.
Jolley has converted the $1,000 debt into 2,200 shares of common stock at a
rate of $.50 per share. For making this loan, Mr. Jolley was also granted
options to purchase 667 shares of common stock at a rate of $1.50 per share,
originally set to expire on December 15, 1998 but which expiration date was
extended to February 28, 1998. Mr. Jolley has also been granted options to
purchase the following: 40,000 shares of common stock at a rate of $.10 per
share, expiring December 15, 1999; 30,000 shares of common stock at a rate of
$.25 per share, expiring December 15, 1999; 15,000 shares of common stock at
a rate of $.50 per share, expiring December 15, 1999; and 40,000 shares of
common stock at a rate of $1.00 per share, expiring December 15, 1999; and
27,500 shares of common stock at a rate of $1.50 per share, expiring December
15, 1999.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is presently authorized to offer 20,000,000 shares of common
stock, $.001 par value per share. The holders of Common Stock (i) have equal
ratable rights to dividends from funds legally available therefore, when, as
and if declared by the Board of Directors of the Company; (ii) are entitled
to share ratably in all of the assets of the Company available for distribution
or winding up of the affairs of the Company; (iii) do not have preemptive
subscription or conversion rights and there are no redemption or sinking fund
applicable thereto; and (iv) are entitled to one non-cumulative vote per share,
on all matters which Shareholders may vote on at all meetings of Shareholders.
PREFERRED STOCK
The Company is also presently authorized to issue 5,000,000 shares of
preferred stock, par value $.001 per share. Under the Articles of
Incorporation, as amended, the Board of Directors has the power, without
further action by the holders of the common stock, to designate the relative
rights and preferences of the preferred stock, and issue the preferred stock in
such one or more series as designated by the Board of Directors. The
designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or
other preferences, any of which may be dilutive of the interest of the holders
of the common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of the Company without further shareholder action and may adversely
effect the rights and powers, including voting rights, of the holders of common
stock. In certain circumstances, the issuance of preferred stock could depress
the market price of the common stock. The Board of Directors effects a
designation of each series of preferred stock by filing with the Nevada
Secretary of State a Certificate of Designation defining the rights and
preferences of each such series. The rights and preferences of the Series A
Preferred Stock are herein incorporated by reference to Exhibit 4.1 filed with
this Form 10-SB. The rights and preferences of the Series B Preferred Stock are
herein incorporated by reference to Exhibit 4.2 filed with this Form 10-SB.
NON-CUMULATIVE VOTING
The holders of Shares of Common Stock of the Company do not have
cumulative voting rights which means that the holders of more than fifty
percent (50%) of such outstanding Shares, voting for the election of directors,
can elect all of the directors to be elected, if they so choose, and, in such
event, the holders of the remaining Shares will not be able to elect any of the
Company's directors.
REPORTS
The Company will furnish annual reports to Shareholders, certified by its
independent accountants.
TRANSFER AGENT
The Company has engaged the services of Silver State Registrar & Transfer
Corp., 3541 Summer Estates Circle, Salt Lake City, UT 84121 to act as Transfer
Agent and Registrar for its securities.
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
Principal Market
The Company's securities are traded on the NASD electronic bulletin
board, quotations for which are under the symbol "EYEM." The market
makers are:
Fahnstock & Co., Inc. (FAHN)
125 Broad Street
15th Floor
New York, NY 10004
(800) 223-3012
Knight Securities (NITE)
525 Washington Blvd.
Jersey City, NJ 07310
(800) 222-4910
Baird, Patrick & Co. (BPAT)
20 Exchange Place
11th Floor
New York, NY 10005-3202
(800) 221-5853
Wien Securities Corp. (WIEN)
525 Washington Blvd.
Jersey City, NJ 07310
(800) 624-0050
Nasa, Weiss & Co. (NAWE)
30 Montgomery
Jersey City, NJ 07302
(800) 526-3041
Hill, Thompson, Magid & Co. (HILL)
15 Exchange Place
Jersey City, NJ 07302
(800) 631-3083
Paragon Capital Corp. (PGON)
2424 N. Federal Hwy.
Suite 266
Boca Raton, FL 33431
(800) 521-8877
Sharpe Capital, Inc. (SHRP)
120 Broadway
28th Floor
New York, NY 10271
(800) 355-5781
H.J. Meyers & Co. (HJMC)
180 Maiden Lane
19th Floor
New York, NY 10038
(212) 412-8350
Herzog, Heine, Geduld, Inc. (HRZG)
(800) 221-3600
William Frankel & Co. (FRAN)
30 Montgomery St.
Jersey City, NJ 07302
(800) 631-3091
First London Securities (FLSC)
2600 State St.
Dallas, TX 75204
(800) 248-9461
Bid Information
The Company's Common Stock is currently trading on the OTC electronic
bulletin board under the symbol "EYEM." The Company's Common Stock has been
approved for trading by the NASD since February 27, 1996. The following high
and low bid information was provided by the Trading & Market Services
department of the OTC Bulletin Board. According to the Trading & Market
Services department, no trades were reported for this security prior to 5/6/96
and quote summaries are not available prior to 7/5/96 as only one market maker
was posting quotes for this security. The quotation reflects inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
High Bid Low Bid
__________________________
Fiscal Year Ending December 31, 1997
Fourth Quarter Ending 12/31/97 $3.1875 $1.875
Third Quarter Ending 9/30/97 $4.4375 $2.25
Second Quarter Ending 6/30/97 $4.6875 $1.375
First Quarter Ending 3/31/97 $2.5625 $1.375
Fiscal Year Ending December 31, 1996
Fourth Quarter Ending 12/31/96 $3.25 $1.5
Third Quarter Ending 9/30/96 $2.50 $2
Second Quarter Ending 6/30/96 $3.25 $1.375
First Quarter Ending 3/31/96 -0- -0-
Stockholders
The Company's transfer agent, Silver State Transfer & Registrar, confirms
that, as of October 8, 1997, there are 103 shareholders of record for the
Company.
DIVIDENDS
To date, the Company has not paid any dividends on its Common Stock. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition, and other relevant factors. The Board
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain all earnings, if any, for use in the Company's business
operations. Under Nevada Corporate Law, dividends may be paid out of surplus
or, in case there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or the proceeding fiscal year.
ITEM 2 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings which would
have a material affect upon their operations or financial statements.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
During the two most recent fiscal years, the Company has used the same
principal independent accountant and has not had any disagreements with said
independent accountant.
In November, 1996, the Company decided to change from the independent
accountant used previously to a larger firm specializing in the provision of
accounting services for small- to mid-tier public companies. The Company has
had no disagreements with said independent accountant.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
The following tables outlines all securities the Company sold or issued
within the past three years without registering the securities under the
Securities Act.
Date Type of Number of Number of Consideration
Security Securities Investors
Issued
______________________________________________________________________________
3/23/95 Common 485,000 3 The Company issued these
Stock Shares at $.001 per Share
pursuant to Section 4(2) of
the Securities Act of 1933.
7/20/95 Common 135,000 4 The Company issued these
Stock Shares at $.05 per Share
pursuant to Section 4(2) of
the Securities Act of 1933.
11/10/95 Convertible 479,000 18 Pursuant to Section 4(2) of
Debenture the Securities Act of 1933
the Company issued
convertible debentures for
$305,000, convertible at
prices ranging from $.50 to
$1.00 per share into common
stock between 11/10/96 and
4/15/97. On 9/30/96, 53,000
shares were issued pursuant
to such conversion. On
11/10/96, 375,000 shares were
issued pursuant to such
conversion.
11/10/95 Warrants 181,499 18 Pursuant to Section 4(2) of
the Securities Act of 1933
the Company issued warrants
to purchase 181,499 shares of
common stock at prices
ranging from $1.00 to $3.00
per share, expiring at dates
ranging from 11/10/97 to
4/15/98. The warrant rights
were attached to the
convertible debentures dated
11/10/95.
12/1/95 Options 1,961,000 25 Pursuant to Section 4(2) of
the Securities Act of 1933
the Company issued options to
purchase 1,961,000 shares of
common stock ranging in price
from $.10 per share to $1.50
per share, expiring at dates
ranging from 6/15/98 to
12/15/99.
2/01/96 Common 500,000 45 The Company completed a
Stock securities offering under
Rule 504 of Regulation D at
$.10 per share.
5/31/96 Common 2,925,000 6 The Company completed a stock
Stock for stock agreement, whereby
it issued these shares for
the outstanding shares of the
acquired company, pursuant to
Section 4(2) of the
Securities Act of 1933.
7/9/96 Common 300,000 1 The Company issued these
Stock Shares, valued at $.50 per
Share, in exchange for legal
services rendered by its
securities counsel, Max
Tanner, or assigns pursuant
to Section 4(2) of the
Securities Act of 1933.
8/1/96 Options to 100,000 1 The Company issued options to
purchase Max Tanner to purchase
common stock 100,000 shares of common
stock at $.50 per share
pursuant to Section 4(2) of
the Securities Act of 1933
9/1/96 Convertible 49,166 4 Pursuant to Section 4(2) of
debenture the Securities Act of 1933
the Company issued
convertible debentures for
$67,500, convertible at
$1.00 to $1.50 per share
into common stock on or
before 9/1/97. On 9/30/96,
16,666 shares were issued
pursuant to such conversion.
9/1/96 Warrants 24,583 4 Pursuant to Section 4(2) of
the Securities Act of 1933
the Company issued warrants
to purchase 24,583 shares of
common stock at $3.00 per
share expiring on 9/1/97.
The warrant rights were
attached to the convertible
debentures dated 9/1/97.
9/25/96 Common 400,000 12 The Company completed a
Stock securities offering under
Rule 504 of Regulation D at
$1.50 per Share.
9/30/96 Common 4,029 4 Pursuant to Section 4(2) of
Stock the Securities Act of 1933
The Company issued these
shares of common stock upon
conversion of interest
payable on debentures
converted to common stock on
9/30/96 at prices ranging
from $.50 to $1.50 per share.
11/1/96 Options 240,000 2 The Company issued options to
purchase 240,000 shares of
common stock at $1.50 per
share, expiring on 12/15/99,
pursuant to Section 4(2) of
the Securities Act of 1933
11/10/96 Common 35,249 19 Pursuant to Section 4(2) of
Stock the Securities Act of 1933
the Company issued common
Stock in conversion of
interest payable on
debentures converted to
common stock on 9/30/96 at
prices ranging from $.50
to $1.50 per share.
12/8/96 Common 6,100 35 The Company issued these
Stock shares, valued at $.50 per
share, as a stock bonus to
its employees, pursuant to
Section 4(2) of the
Securities Act of 1933.
3/27/97 Series A 500,000 17 Pursuant to Section 4(2) of
Preferred Securities Act of 1933 and
Stock Regulation D, Rule 506
promulgated thereunder, the
Company issued these shares
in an offering to raise an
aggregate of $750,000. These
shares are convertible into
common stock at $1.50 per
share on or before 3/27/99.
3/27/97 Warrants 250,000 17 Pursuant to Section 4(2) of
Securities Act of 1933 and
Regulation D, Rule 506
promulgated thereunder, the
Company issued these
warrants to purchase 250,000
shares of common stock at
$3.50 per share, expiring
on 4/1/99, in conjunction
with the sale of Series A
Preferred Shares on 3/27/97.
4/1/97 Options 15,000 1 The Company issued options to
purchase 15,000 shares of
common stock at $1.50 per
share, expiring on 12/15/99,
pursuant to Section 4(2) of
Securities Act of 1933.
6/30/97 Options 15,000 1 The Company issued options to
purchase 15,000 shares of
common stock at $2.50 per
share, expiring on 12/15/99,
pursuant to Section 4(2) of
the Securities Act of 1933.
6/30/97 Common Stock 76,190 3 The Company issued these
shares upon conversion of
debt at $1.3125 per share
pursuant to Section 4(2) of
the Securities Act of 1933
8/22/97 Series B 600,000 13 The Company completed a
Preferred stock for stock exchange
Stock whereby it issued these
shares plus $325,000 cash for
the outstanding shares of the
acquired company, pursuant to
Section 4(2) of the
Securities Act of 1933.
These shares are convertible
into common stock at $4.25
per share, on or before
8/22/99.
8/22/97 Options 275,000 20 The Company issued options to
purchase 275,000 shares of
common stock at $1.50 per
share, expiring on 12/1/05,
pursuant to Section 4(2) of
the Securities Act of 1933
8/31/97 Convertible 66,667 4 Pursuant to Section 4(2) of
debentures the Securities Act of 1933
the Company issued
convertible debentures for
$200,000, convertible at
$3.00 per share into common
stock on or before 8/31/99.
8/31/97 Warrants 40,000 4 Pursuant to Section 4(2) of
the Securities Act of 1933
the Company issued warrants
to purchase 40,000 shares of
common stock at $3.00 per
share, expiring 8/31/99. The
warrant rights were attached
to the convertible debentures
dated 8/31/97.
11/1/97 Options 25,000 1 Pursuant to Section 4(2) of
the Securities Act of 1933
the Company issued options to
purchase 25,000 shares of
common stock at $1.50 per
share, expiring 12/15/99.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted provisions to its Articles of Incorporation and
Bylaws which limit the liability of officers and directors and provides for
indemnification by the Company of its officers and directors to the full extent
permitted by Nevada law. The adopted provisions provide that the personal
liability of a director or officer of the Corporation for damages for breach of
fiduciary duty as a director or officer shall be limited to acts or omissions
which involve intentional misconduct, fraud or a knowing violation of the law.
The adopted provisions also provide for indemnification of the officers and
directors of the Company in most cases for any liability suffered by them or
arising out of their activities as officers and directors of the Company if
they were not engaged in intentional misconduct, fraud or a knowing violation
of the law. Such provisions substantially limit the shareholders' ability to
hold officers and directors liable for breaches of fiduciary duty, and may
require the Company to indemnify its officers and directors.
<PAGE>
PART F/S
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accounants 3
Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statement of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
<PAGE>
King Griffin & Adamson P.C.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders
Eyemakers, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Eyemakers, Inc.
and subsidiaries [sic] as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Eyemakers, Inc.
and Subsidiary as of December 31, 1995 and 1996, and the consolidated results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ KING GRIFFIN & ADAMSON P.C.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
April 30, 1997
Pacific Center II
14160 Dallas Parkway Ninth Floor
Dallas, Texas 75240
T 972.788.4466 F 972.788.2778
E-Mail: [email protected]
Certified Public Accountants & Consultants
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
1995 1996
____________ ____________
CURRENT ASSETS
Cash $ 7,890 $ 8,168
Receivables
Management fees ($208,503 and $482,221
from related parties) 235,267 595,514
Advances ($0 and $101,702 from related
parties) - 112,108
Interest and other ($32,029 and $100,298
from related parties) 40,989 118,490
Notes receivable - current portion
($36,364 and $90,322 from
related parties 40,687 148,943
Prepaid expenses 9,303 147,905
____________ ____________
Total current assets 334,136 1,131,128
PROPERTY AND EQUIPMENT - net 164,877 140,548
NOTES RECEIVABLE - net of current portion
$1,327,692 and $1,237,369 from
related parties) 1,418,369 2,375,914
OTHER ASSETS
Deferred offering costs - 25,000
Licensing fees - 40,278
Other 5,417 29,535
____________ ____________
Total other assets 5,417 94,813
____________ ____________
$ 1,922,799 $ 3,742,403
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 102,500 $ 212,484
Accounts payable 23,545 47,247
Current portion of obligations under
capital leases 22,405 54,277
Accrued expenses 95,682 360,522
Deferred tax liability 41,000 268,078
____________ ____________
Total current liabilities 285,132 942,608
LONG-TERM LIABILITIES
Obligations under capital leases - net of
current portion 130,283 65,352
Deferred tax liability 518,000 527,600
____________ ____________
Total long-term liabilities 648,283 592,952
____________ ____________
Total liabilities 933,415 1,535,560
COMMITMENTS AND CONTINGENCIES (Notes E, F
H, I, J and K)
STOCKHOLDERS' EQUITY
Common stock - $.001 par value, 20,000,000
shares authorized, 1,000,000 and
5,235,044 shares issued and
outstanding, respectively 1,000 5,235
Additional paid-in capital 1,000 862,277
Retained earnings 987,384 1,339,331
____________ ____________
Total stockholders' equity 989,384 2,206,843
____________ ____________
$ 1,922,799 $ 3,742,403
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
____________ ____________
REVENUES
Sales of facilities ($1,364,056 and $0
from related parties) $ 1,459,056 $ 1,106,688
Management fees ($315,644 and $277,514
from related parties) 388,041 347,943
Leased personnel ($493,138 and $614,749
from related parties) 628,388 823,517
Marketing and other ($174,941 and
$276,869 from related parties) 260,311 378,192
____________ ____________
Total revenues 2,735,796 2,656,340
COSTS AND EXPENSES
Compensation - leased personnel 628,388 823,517
Cost of sales of facilities 103,885 291,099
Advertising 136,456 146,353
Depreciation and amortization 43,147 82,505
Other general & administrative expenses 354,419 792,508
____________ ____________
Total costs and expenses 1,266,295 2,135,982
____________ ____________
INCOME FROM OPERATIONS 1,469,501 520,358
Interest income ($32,029 and $121,036 from
related parties) 37,489 138,455
Interest expense (13,657) (50,620)
____________ ____________
NET INCOME BEFORE INCOME TAXES 1,493,333 608,193
Provision for income taxes (551,862) (232,521)
____________ ____________
NET INCOME $ 941,471 $ 375,672
============ ============
EARNINGS PER COMMON SHARE $ 0.94 $ 0.08
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 1,000,000 4,973,098
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
[The following page of the following table has been modified from its original
version in the Report of Independent Certified Public Accountant, as the
original is in spreadsheet form and it is not possible to present all the
columns going across as is done in the original. The original has seven main
columns, which are left to right: the stub (descriptive) information,
"Common Shares," "Common Stock," "Additional Paid In Capital," "Treasury
Shares," "Retained Earnings," and "Total." For EDGAR purposes, each of the
six columns starting with "Common Shares" has been recreated with the stub
information as if they were each on a different page.]
EYEMAKERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED 1995 AND 1996
[start of first set of columns]
Common Shares
-------------
Balance, January 1, 1995 1,000,000
Net Income -
_____________
Balance, December 31, 1995 1,000,000
Issuance of common stock to acquire trademark in May
from a related party 1,925,000
Deemed distribution related to acquiring the trademark
from the related party in May
Issuance of common stock in reverse acquisition
transaction in May 1,120,000
Issuance of common stock for legal services in August 300,000
Purchase of common stock from shareholder in August (125,000)
Issuance of treasury stock for investor relations services
in August 125,000
Issuance of common stock on conversion of notes payable
and accrued interest in September 73,695
Sale of common stock in October, net of offering costs 400,000
Return of treasury stock from investor relations firm
in November (75,000)
Settlement of shareholder note payable with treasury stock
in November 75,000
Issuance of common stock on conversion of notes payable
in November 410,249
Issuance of common stock grant to employees in December 6,100
Net income -
_____________
Balance, December 31, 1996 5,235,044
=============
[start of second set of columns]
Common Stock
-------------
Balance, January 1, 1995 $ 1,000
Net Income -
_____________
Balance, December 31, 1995 1,000
Issuance of common stock to acquire trademark in May
from a related party 1,925
Deemed distribution related to acquiring the trademark
from the related party in May
Issuance of common stock in reverse acquisition
transaction in May 1,120
Issuance of common stock for legal services in August 300
Purchase of common stock from shareholder in August (125)
Issuance of treasury stock for investor relations services
in August 125
Issuance of common stock on conversion of notes payable
and accrued interest in September 74
Sale of common stock in October, net of offering costs 400
Return of treasury stock from investor relations firm
in November (75)
Settlement of shareholder note payable with treasury stock
in November 75
Issuance of common stock on conversion of notes payable
in November 410
Issuance of common stock grant to employees in December 6
Net income -
_____________
Balance, December 31, 1996 $ 5,235
=============
[start of third set of columns]
Additional Paid
In Capital
-------------
Balance, January 1, 1995 $ 1,000
Net Income -
_____________
Balance, December 31, 1995 1,000
Issuance of common stock to acquire trademark in May
from a related party 1,923,075
Deemed distribution related to acquiring the trademark
from the related party in May (2,112,000)
Issuance of common stock in reverse acquisition
transaction in May 40,815
Issuance of common stock for legal services in August 149,700
Purchase of common stock from shareholder in August (199,875)
Issuance of treasury stock for investor relations services
in August 199,875
Issuance of common stock on conversion of notes payable
and accrued interest in September 64,245
Sale of common stock in October, net of offering costs 504,600
Return of treasury stock from investor relations firm
in November (119,925)
Settlement of shareholder note payable with treasury stock
in November 149,925
Issuance of common stock on conversion of notes payable
in November 257,798
Issuance of common stock grant to employees in December 3,044
Net income -
_____________
Balance, December 31, 1996 $ 862,277
=============
[start of fourth set of columns]
Treasury Shares
-------------
Balance, January 1, 1995 -
Net Income -
_____________
Balance, December 31, 1995 -
Issuance of common stock to acquire trademark in May
from a related party -
Deemed distribution related to acquiring the trademark
from the related party in May
Issuance of common stock in reverse acquisition
transaction in May -
Issuance of common stock for legal services in August -
Purchase of common stock from shareholder in August 125
Issuance of treasury stock for investor relations services
in August (125)
Issuance of common stock on conversion of notes payable
and accrued interest in September -
Sale of common stock in October, net of offering costs -
Return of treasury stock from investor relations firm
in November 75
Settlement of shareholder note payable with treasury stock
in November (75)
Issuance of common stock on conversion of notes payable
in November -
Issuance of common stock grant to employees in December -
Net income -
_____________
Balance, December 31, 1996 $ -
=============
[start of fifth set of columns]
Retained Earnings
-------------
Balance, January 1, 1995 $ 45,913
Net Income 941,471
_____________
Balance, December 31, 1995 987,384
Issuance of common stock to acquire trademark in May
from a related party -
Deemed distribution related to acquiring the trademark
from the related party in May -
Issuance of common stock in reverse acquisition
transaction in May (23,725)
Issuance of common stock for legal services in August -
Purchase of common stock from shareholder in August -
Issuance of treasury stock for investor relations services
in August -
Issuance of common stock on conversion of notes payable
and accrued interest in September -
Sale of common stock in October, net of offering costs -
Return of treasury stock from investor relations firm
in November -
Settlement of shareholder note payable with treasury stock
in November -
Issuance of common stock on conversion of notes payable
in November -
Issuance of common stock grant to employees in December -
Net income 375,672
_____________
Balance, December 31, 1996 $ 1,339,331
=============
[start of sixth set of columns]
Total
-------------
Balance, January 1, 1995 $ 47,913
Net Income 941,471
_____________
Balance, December 31, 1995 989,384
Issuance of common stock to acquire trademark in May
from a related party 1,925,000
Deemed distribution related to acquiring the trademark
from the related party in May (2,112,000)
Issuance of common stock in reverse acquisition
transaction in May 18,210
Issuance of common stock for legal services in August 150,000
Purchase of common stock from shareholder in August (199,875)
Issuance of treasury stock for investor relations services
in August 199,875
Issuance of common stock on conversion of notes payable
and accrued interest in September 64,319
Sale of common stock in October, net of offering costs 505,000
Return of treasury stock from investor relations firm
in November (119,925)
Settlement of shareholder note payable with treasury stock
in November 149,925
Issuance of common stock on conversion of notes payable
in November 258,208
Issuance of common stock grant to employees in December 3,050
Net income 375,672
_____________
Balance, December 31, 1996 $ 2,206,843
=============
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 941,471 $ 375,672
Adjustments to reconcile net income to
net cash used by operating activities
Depreciation and amortization 43,147 82,505
Investor relations services paid for in
common stock - 30,000
Interest expense paid for in common stock - 23,527
Employee stock grant for services - 3,050
Deferred income tax provision 551,862 232,521
Changes in operating assets and liabilities
Receivables (181,697) (749,856)
Prepaid expenses (8,773) (38,602)
Notes receivable from sales of facilities (1,459,056) (1,106,688)
Accounts payable 3,141 23,702
Accrued expenses 61,446 268,998
____________ ____________
Net cash used by operating activities (48,459) (855,171)
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (139,394) (48,454)
Other - 7,092
____________ ____________
Net cash used by investing activities (139,394) (41,362)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock - 530,000
Payments received from notes receivable - 40,887
Proceeds from notes payable 102,500 408,984
Payments on notes payable - (50,000)
Proceeds from capital lease obligations 122,643 -
Payments on capital lease obligations (29,400) (33,060)
____________ ____________
Net cash provided by financing activities 195,743 896,811
____________ ____________
CHANGE IN CASH 7,890 278
CASH, beginning of year - 7,890
____________ ____________
CASH, end of year $ 7,890 $ 8,168
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid $ 12,315 $ 17,144
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
AND INVESTING ACTIVITIES
Issuance of common stock for legal services $ - $ 125,000
Offering costs from sale of common stock paid
for in common stock $ - $ 25,000
Issuance of common stock to acquire trademark $ - $ 13,000
Offset of receivables to acquire trademark $ - $ 200,000
Issuance of note payable for treasury stock $ - $ 199,875
Payment of note payable with treasury stock $ - $ 149,925
Issuance of common stock for prepaid investor
relations services $ - $ 79,950
Issuance of common stock on conversion of
notes payable and related accrued interest $ - $ 322,527
The accompanying notes are an integral part
of these consolidated financial statements.
7
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE A - NATURE OF OPERATIONS
EYEMAKERS, INC. ("Eyemakers"), a non-reporting public company, was incorporated
on March 23, 1995 as 21st Century Vision, Inc. under the laws of the State of
Nevada for the purpose of acquiring modern technology and marketing concepts
related to the eye-care industry, and to develop training, management services
and business opportunities for the independent optometrist market. Eyemakers
became a public company in January 1996 through its issuance of shares in the
state of Nevada pursuant to exemption provided by Rule 504 of Regulation D
promulgated under the Securities Act of 1933, as amended. The name was changed
to Eyemakers, Inc. from 21st Century Vision, Inc. by board resolution on August
19, 1996.
On May 17, 1996, the stockholders approved the acquisition of Optical Resource
Management, Inc., ("ORM") by Eyemakers (see Note C). For accounting purposes,
as the ORM stockholders end up with the majority of Eyemakers' common stock,
the acquisition by Eyemakers of all of the common stock of ORM was accounted
for as a recapitalization of ORM with ORM as the acquirer (a reverse
acquisition). Accordingly, the financial statements, prior to the reverse
acquisition of Eyemakers, included herein are those of ORM. The results of
operations of Eyemakers (which are nominal) have been included in the
consolidated statements of operations from the reverse acquisition date. ORM
was formed July 22, 1994 under the laws of the State of Texas.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Eyemakers, Inc.
and its subsidiary (the "Company"). All significant intercompany transactions
and balances have been eliminated in consolidation.
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments with
original maturities of three months or less when purchased.
Treasury Stock
Treasury stock is recorded at cost. The excess of the sales price over the
recorded cost of treasury stock, if any, is credited to additional paid-in
capital.
Income Taxes
The Company accounts for income taxes in accordance with the asset and
liability approach. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax
assets and liabilities.
Receivables
Management fees receivable represent amounts to be collected for accounting,
marketing, purchasing and management information services provided to doctors
of optometry and for unpaid direct reimbursement of payroll and other pass-
through charges.
8
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation on the straight-line method over the estimated useful lives of
the related assets of three years. Assets held under capital leases are
amortized using the straight-line method over the estimated useful lives of
the related assets of three years.
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized.
Revenue Recognition
The Company recognizes revenue from four major activities:
(1) Selling "facilities" to doctors of optometry to be operated under the
Eyemakers) trade name. Facilities are defined as the furniture, fixtures,
finish out, equipment, and telephone number. Activities which precede the sale
of facilities include identifying locations; negotiating and obtaining
facility leases; contracting for and overseeing the tenant finish-out
activities which furnish and equip the location to be a retail eye-care
"practice" for a doctor of optometry; and sub-leasing and maintaining the
physical location to a doctor of optometry where a retail eye-care "practice"
has been established. At the time of sale, substantially all of the above
services have been completed. The Company records the sale of the facility
when the transaction is completed as the discounted cash flows of the payments
contracted to be paid monthly over 10 years (see Note I). A retail eye-care
practice is defined as the operating entity, owned by a doctor of optometry,
licensed to provide the complete range of optometric services.
(2) Executing practice management agreements with licensed doctors of
optometry wherein the Company, among other things, provides administrative,
personnel management, marketing, purchasing and information services. The
Company currently charges 6% of the practice's gross sales for such services.
From August 1, 1994 through June 30, 1996, the Company charged 11%. The
Company recognizes revenue as the practice generates sales.
(3) Marketing charges equal to 5% of the practice's gross sales. The Company
recognizes revenue as the practice generates sales.
(4) The Company is reimbursed for the following costs:
o General and administrative expenses (e.g., rent and supplies)
o Salaries, bonuses, employment taxes and benefit costs of personnel
which are leased to the doctor of optometry to manage the practice.
The Company recognizes the revenues as the services are rendered.
Deferred Offering Costs
Deferred offering costs are capitalized and will be recorded as a reduction to
stockholders' equity upon completion of the Company's Private Placement
Memorandum (see Note N) and the Company's planned Form SB-2, or expensed if
the offering is not successful.
Trademark
The trademark is recorded at cost (see Note M) and is amortized over the
estimated useful life of fifteen years.
9
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Based Compensation
The Company measures compensation cost for its stock based compensation plans
under the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees." The difference, if any, between
the fair value of the stock on the date of grant over the amount received for
the stock is accrued over the related vesting period. SFAS No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") requires companies
electing to continue to use APB 25 to account for its stock-based compensation
plan to make pro forma disclosures of net income and earnings per share as if
SFAS 123 had been applied (see Note J).
Earnings Per Share
Earnings per share have been computed by dividing net income by the weighted
average number of common shares and common equivalent shares outstanding
during each respective year. Common equivalent shares include common stock
options and convertible debentures.
Accounting Estimates
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management must make estimates based on future
events that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the
consolidated financial statements, and revenues and expenses during the
reporting period. Actual results could vary from the estimates that were used.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Adoption of New Accounting Standards
The Company intends to adopt SFAS No. 128, "Earnings Per Share" ("SFAS 128")
effective December 15, 1997. This statement requires the replacement of
primary earnings per share with basic earnings per share and fully diluted
earnings per share with diluted earnings per share. Management of the Company
does not expect the adoption of this statement will have a material impact on
the earnings per share computation.
NOTE C - BUSINESS COMBINATION
On May 17, 1996, the stockholders approved the acquisition of ORM by
Eyemakers. Under the terms of the agreement, the shares and options of ORM's
stockholders and option holders were exchanged for shares and options in
Eyemakers on a one-for-one basis, such that the Eyemakers options contain the
same terms and conditions as the options of ORM. Accordingly, Eyemakers issued
2,925,000 shares of its common stock for all the outstanding shares of ORM's
common stock. Additionally, outstanding options to acquire stock of ORM were
converted to options to acquire 2,621,499 shares of Eyemakers' common stock.
As discussed previously, the financial statements prior to the reverse
acquisition transaction are ORM's with Eyemakers results of operations being
included from the reverse acquisition date. Prior to the acquisition,
Eyemakers had 1,120,000 shares outstanding.
10
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at December 31,1995 and 1996 consists of:
1995 1996
_________ _________
Equipment held under capital leases $ 185,389 $ 185,389
Computer software 8,623 7,757
Office equipment 16,770 66,090
_________ _________
210,782 259,236
Less: accumulated
depreciation and amortization (45,905) (118,688)
_________ _________
Total $ 164,877 $ 140,548
========= =========
Amortization expense for equipment held under capital leases was $41,246 and
$61,769 for the years ended December 31, 1995 and 1996, respectively.
Accumulated amortization for equipment held under capital leases at December
31, 1995 and 1996 was $41,246 and $103,015, respectively.
NOTE E - NOTES PAYABLE
Notes payable at December 31, 1995 and 1996 are as follows:
1995 1996
_________ _________
8% notes payable to three individuals
due May 19, 1997, not secured $ - $ 100,000
10% bank note payable maturing June
8, 1997 payable in monthly
installments, not secured - 21,500
10% convertible notes payable,
maturing in 1997, not secured 102,500 73,500
Stockholder notes payable (see Note
M), not secured - 17,484
_________ ________
102,500 212,484
Current maturities 102,500 212,484
_________ ________
Long-term portion $ - $ -
========= ========
On November 6, 1995, the Board of Directors authorized the Company to enter
into one year convertible notes carrying an annual interest rate of 10% and
convertible into shares of the Company's common stock, at a conversion rate of
$0.50 of indebtedness per share of common stock. Through warrants attached to
the convertible notes, the debt holder may elect to purchase, at $ 1.50 per
share, additional common stock at a rate of one common share for every three
common shares that the debt holder is entitled to receive upon conversion.
11
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE E - NOTES PAYABLE (continued)
On February 11, 1996, the Company ceased the solicitation and sale of
convertible notes at $0.50 with attached warrants, but authorized the sale of
one year convertible notes carrying an annual interest rate of 10%, at a
conversion rate of $1.00 of indebtedness per share of common stock. Through
warrants attached to the convertible notes, the debt holder may elect to
purchase, at $3.00 per share, additional common stock at a rate of one common
share for every two common shares the debt holder is entitled to received
[sic] upon conversion.
On May 10, 1996, the Company ceased the solicitation and sale of convertible
notes at $1.00 with attached warrants, but authorized the sale of one year
convertible notes carrying an annual interest rate of 10%, at a conversion
rate of $1.50 of indebtedness per share of common stock. Through warrants
attached to the convertible notes, the debt holder may elect to purchase, at
$3.00 per share, additional common stock at a rate of one common share for
every two common shares the debt holder is entitled to received upon
conversion. The Company continued to issue convertible notes, convertible into
the Company's common stock in connection with this transaction through
September 1996.
As of December 31, 1996, $299,000 of convertible notes plus $23,527 of accrued
interest were converted into a total of 483,944 shares of the Company's common
stock. Convertible notes at December 31, 1996 totaled $73,500.
NOTE F - LEASE COMMITMENTS
The Company has entered into various capital leases for computer and medical
equipment. Approximate future minimum lease payments under capital leases as
of December 31, 1996 are as follows:
1997 $ 72,222
1998 33,429
1999 28,644
2000 17,875
________
Total Payments 152,170
Less Interest Portion 32,541
________
Present value of minimum
lease payments 119,629
Less current portion 54,277
________
Long-term portion $ 65,352
========
The Company has also entered into operating leases for its corporate
headquarters, and for facility locations in regional shopping malls in Irving,
Richardson and Arlington, and another facility location in Plano. The Company
expenses the cost of the monthly leases and records revenue from the practices
for the monthly lease payments received (see Note M).
12
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE F - LEASE COMMITMENTS (continued)
Future minimum lease payments on non-cancelable operating leases with initial,
non-cancelable lease terms in excess of one year as of December 31, 1996 are
as follows:
1997 $ 252,931
1998 254,996
1999 259,356
2000 218,689
2001 196,638
Thereafter 826,115
___________
$ 2,008,725
===========
Rental expense for the years ended December 31, 1995 and 1996 was $60,451 and
$209,359, respectively.
NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments," requires disclosure about the fair value of
all financial assets and liabilities for which it is practicable to estimate.
Cash, receivables, accounts payable and accrued expenses are carried at
amounts that reasonably approximate their fair values.
The carrying amount and fair value of notes receivable, notes payable, and
capital leases at December 31, 1996 are as follows:
1996
__________________________
Carrying Fair
Amount Value
___________ ___________
Notes receivable $ 2,524,857 $ 2,524,857
Notes payable $ 212,484 $ 212,484
Capital lease obligations $ 119,629 $ 119,629
The fair value of the Company's fixed rate debt have been estimated based upon
relative changes in the Company's variable borrowing rates since origination
of the fixed rate debt. Fair values of variable rate debt and demand notes are
deemed to approximate the carrying amount.
13
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE H - INCOME TAXES
Deferred tax assets and liabilities at December 31, 1995 and 1996 are as
follows:
1995 1996
_________ _________
Deferred tax assets - current $ 41,000 $ 150,752
Deferred tax liabilities - current 82,000 418,830
_________ _________
Net current deferred tax liability $ 41,000 $ 268,078
========= =========
Deferred tax assets - noncurrent $ 34,000 $ 398,768
Deferred tax liabilities - noncurrent 552,000 926,368
_________ _________
Net noncurrent deferred tax liability $ 518,000 $ 527,600
========= =========
The current deferred tax asset and liability and noncurrent deferred tax
liability result from differences in financial and income tax reporting
(income tax reporting is on a cash basis) primarily differences in
receivables, notes receivable, prepaid expenses and current liabilities. The
noncurrent deferred tax asset results from the benefit of the net operating
losses.
Significant components of the provision for income taxes for the years ended
December 31, 1995 and 1996 are as follows:
1995 1996
_________ _________
Federal
Current $ - $ -
Deferred 484,655 205,139
State
Current - -
Deferred 67,207 27,382
_________ _________
Total income tax $ 551 862 $ 232,521
========= =========
The Company will file a consolidated tax return for the year ended December
31, 1996. The net operating loss at December 31, 1996 is approximately
$960,000 and begins to expire in 2010.
The Company's income tax expense for the years ended December 31, 1995 and
1996 differed from the statutory Federal rate of 34% as follows:
1995 1996
_________ _________
Tax at Federal statutory rate of 34% $ 507,733 $ 206,786
State income tax 62,207 27,382
Other (18,078) (1,647)
_________ _________
Total $ 551,862 $ 232,521
14
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE I - BUSINESS AND CREDIT RISK CONCENTRATION
AND SIGNIFICANT CUSTOMERS
The Company's business activities are primarily with customers located in the
Dallas-Fort Worth metroplex area. Financial instruments that potentially
expose the Company to credit loss include receivables and notes receivable.
The significant portion of the Company's revenue during 1995 and 1996 is
generated from the sale of and fees from four "practices".
The Company sold three facilities during 1995 and one facility in 1996. The
Company financed the sales over ten (10) years with initial payments deferred
4 or 10 months. Each note bears interest with rates varying from 9.25% to 10%.
At December 31, 1996, notes receivable totaling $2,524,857 from the sale of
facilities were due by the four practices. The collateral by which each note
is secured includes all leasehold improvements, furniture and equipment, and
all business records. The Company also advances amounts to its customers; such
amounts are not secured. As of December 31, 1996, all notes were current on
payments due to the Company.
Management fees receivables are unsecured.
During the year ended December 31, 1995, two customers accounted for 71% and
15% of revenue, respectively. During the year ended December 31, 1996, the two
customers accounted for 39% and 5%, respectively of the Company's total
revenues.
Management evaluates receivables and notes receivable balances on an on-going
basis, and provides allowances as necessary for amounts estimated to
eventually become uncollectible. In the event of complete non-performance of
receivables and notes receivable, the maximum exposure to the Company is the
recorded amount shown on the balance sheet.
NOTE J - STOCK OPTIONS AND WARRANTS
The Company has a nonqualified, compensatory stock option plan, under which it
has granted options to officers and key employees to purchase shares of the
Company's common stock at prices ranging from $0.10 to $3.00. Options may be
exercised at any time prior to December 15, 1999.
Under terms of the Company's convertible notes payable, holders of the notes
may convert unpaid indebtedness to common stock. The convertible notes have
warrants attached to them (see Notes E and L).
Under terms of the Company's business development stock option plan, (a
compensatory plan) certain individuals and entities have been granted options
to purchase the Company's common stock at prices ranging from $0.25 to $1.50.
The options expire June 15, 1998 through December 31, 1999.
15
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE J - STOCK OPTIONS AND WARRANTS (continued)
Shares Under Option / Warrants
___________________________________________________
Non-qualified Notes Business
Compensatory Payable Development Total
________________________________________________________________________
Outstanding at
January 1, 1995 - - - -
During the year ended
December 31, 1995
Granted 636,000 292,087 1,325,000 2,253,087
Exercised - - - -
Canceled - - - -
___________________________________________________
Outstanding at
December 31, 1995 636,000 292,087 1,325,000 2,253,087
During the year ended
December 31, 1996
Granted 240,000 592,774 100,000 932,774
Exercised - (487,277) - (487,277)
Canceled (7,000) (108,002) - (115,002)
___________________________________________________
Outstanding at
December 31, 1996 869,000 289,582 1,425,000 2,583,582
___________________________________________________
The fair value of options issued during 1995 and 1996 was $629,647 and
$226,817, respectively. The following table summarizes information about
options outstanding at December 31, 1996 under the Compensatory Stock Option
Plan:
Compensatory Stock Options and Warrants
_______________________________________
Options Outstanding Options Exercisable
___________________________________________________ _________________________
Weighted Avg Weighted
Remaining Avg. Weighted Avg.
Range of Number Contractual Exercise Number Exercisable
Exercise Prices Outstanding Life Price Exercisable Price
_______________ ___________ ___________ ________ ___________ ___________
$.10 to $3.00 869,000 3.7 years $ 0.86 88,000 $ 0.88
The following table summarizes information about options outstanding at
December 31, 1996 under the Business Development Stock Option Plan:
Business Development Stock Options and Warrants
_______________________________________________
Options Outstanding Options Exercisable
___________________________________________________ _________________________
Weighted Avg Weighted
Remaining Avg. Weighted Avg.
Range of Number Contractual Exercise Number Exercisable
Exercise Prices Outstanding Life Price Exercisable Price
_______________ ___________ ___________ ________ ___________ ___________
$.25 to $1.50 1,425,000 2.7 years $ 0.91 1,300,000 $ 1.21
16
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE J - STOCK OPTIONS AND WARRANTS (continued)
The options granted in 1995 and 1996 have exercise prices which approximate
fair value and accordingly, no compensation cost has been recognized for
compensatory stock options in the consolidated financial statements. Had
compensation cost for the Company's stock options been determined consistent
with FASB statement No. 123, the Company's net income and earnings per share
would have been decreased to the pro forma amounts indicated below:
Years ended December 31,
________________________
1995 1996
_________ _________
Net income As reported $ 941,471 $ 375,672
Pro forma $ 925,173 $ 147,534
Earnings per share As reported $ 0.94 $ 0.08
Pro forma $ 0.93 $ 0.03
During 1995, the fair value of each option grant is estimated on the date of
grant using the minimum value method through the Black-Scholes option-pricing
model with the following assumptions used for grants in 1995; dividend yield
of 0%, expected volatility of 5%, risk free interest rate 6% over a 2-4 year
period, and an expected life of 2-4 years. The model assumes minimal
volatility and fair values of common stock underlying the stock options at the
grant date are based on the estimated fair market value of the Company.
During 1996, the fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions used for grants in 1996; dividend yield of 0%, expected volatility
of 34%, risk free interest rate 6% over a 2-3 year period, and an expected
life of 2-3 years. The model calculates the underlying common stock value at
the date of grant based on the relative price earnings ratios of other
comparable public companies.
NOTE K- COMMITMENTS AND CONTINGENCIES
In June 1996, the Company entered into a license agreement with UPA
Productions of America ("Licensor") granting the Company the rights to use for
advertising, promotion or publicizing the cartoon figure referred to as
"Mister Magoo". The agreement provides exclusive use of Mister Magoo to the
Company within the eyecare industry. The agreement has a term of three years
with options to extend for two additional three-year terms. The Company paid
$50,000 to the Licensor in 1997 for all licenses, rights and privileges under
the agreement for the first term. Additional royalties are incurred annually
at rates of: 2% for the Company's sales up to $50 million; 1% for sales of $50
to $100 million; and 1/2% for sales over $100 million.
In the normal course of its business, the Company ~s subject to litigation.
Management of the Company, based on discussions with its outside legal
counsel, does not believe any claims, individually or in the aggregate, will
have a material adverse impact on the Company's financial position, results of
operations or cash flows.
17
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE L - STOCKHOLDERS' EQUITY
All of the following issuances were sold prior to any public offering, in
reliance on the "private placement" exemption of Section 4(2) under the
Securities Act of 1933, as amended. Such shares will not be available for sale
in the open market without registration. Shares owned by officers, directors
or affiliates are deemed to be restricted stock under Rule 144. Under the
volume limitations of Rule 144, persons owning restricted stock for two years
would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the then outstanding shares of
common stock or the average weekly reported trading volume on all national
securities exchanges and through NASDAQ during the four calendar weeks
preceding such sale:
On August 1, 1994, ORM issued 1,000,000 shares of its common stock to its
founder at $0.002.
On May 10, 1996, ORM issued 1,925,000 shares of its common stock at $1.00
to its founder as part of the purchase price of the Eyemakers trademark
(see Note M).
On August 1, 1996, the Company issued 300,000 shares of its common stock
at $0.50 for legal services in connection with the Company's various
registrations and offerings.
In September and November 1996, the Company issued a total of 483,944
shares of its common stock upon conversion of debentures and related
interest payable. The convertible debentures and interest converted at
prices ranging from $0.50 to $1.00 (see Note M). The debentures were
originally issued from November 1995, and throughout 1996.
In September 1996, the Company approved the issuance of a total of 6,100
shares of its common stock at $0.50 to all employees as of August 26,
1996. The shares were issued in December 1996.
On October 1, 1996, the Company issued 400,000 shares of its common stock at
$1.50 pursuant to exemption provided by Rule 504 of Regulation D promulgated
under the Securities Act of 1933, as amended. As a result of Rule 504, these
shares are not restricted as to resale under Rule 144.
On August 1, 1996, the Company purchased 125,000 shares of its common stock,
previously issued pursuant to Rule 504, from a shareholder at $1.60 per share.
The Company paid for the purchase with a note payable totaling $200,000. The
Company then transferred the 125,000 treasury shares to an investor relations
firm for services to be rendered. In November 1996, the Company cancelled its
contract with the investor relations firm and received back 75,000 shares as
treasury stock. The investor relations firm had sold 45,000 shares in the
market to raise capital for its ongoing marketing efforts. These efforts
resulted in $30,000 of expense and $50,000 of prepaid expense on the Company's
books at December 31,1996. The Company transferred the 75,000 shares back to
the original shareholder at $2.00 per share as payment on the outstanding note
payable. The difference between the note payable amount and the cost of
treasury is accounted for as a contribution to additional paid-in capital.
NOTE M-RELATED PARTY TRANSACTIONS
Dr. George E. Orm III, the Company's chairman and principal stockholder, is
also the sole stockholder of KODA, Inc., a company that owns Dr. Orm's three
eye-care practices. Total receivables due from KODA, Inc. at December 31, 1995
and 1996 were $204,263 and $414,028, respectively.
In August 1995, Dr. George E. ORM, III purchased an eye-care facility in
Irving, Texas from ORM for $964,056, and the Company sold an eye-care facility
in Richardson, Texas (separate from the facility mentioned earlier) to George
E. Orm III's father, George E. Orm Jr., for $400,000.
18
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
Years ended December 31, 1995 and 1996
NOTE M - RELATED PARTY TRANSACTIONS (continued)
For the years ended December 31, 1995 and 1996, the Company had the following
transactions and year-end balances with related parties:
1995 1996
___________ ___________
Revenues $ 2,347,779 $ 1,169,132
Interest income 32,029 121,036
Management fee receivables 208,503 482,221
Interest receivable 32,029 100,298
Advances - 101,702
Notes receivable 1,364 056 1,327,691
On May 10, 1996, the Company acquired the Eyemakers trade name from KODA, Inc.
for $2,125,000 (its estimated fair value). The trade name was registered with
the US Patent and Trademark Office on December 1, 1992 as trademark #1737806.
The Company credited management fees receivable of $200,000 from KODA, Inc.
and issued 1,925,000 shares (at $1.00 per share) of its voting common stock in
satisfaction of the purchase price. For accounting purposes, as the trademark
was purchased from a related entity, the asset has been recorded by the
Company at the basis of KODA. Inc (in accordance with generally accepted
accounting principles) of $13,000. The difference between the recorded cost of
the trademark and the basis of the trademark of $2,112,000 is reflected as a
contra to additional paid-in capital (a deemed distribution). The trademark
was independently appraised in 1994 at $1,400,000.
In 1995, certain employees and their relatives loaned funds to the Company at
10% under convertible debentures payable in one year. Effective November 1996,
the loans were converted into one share of the Company's common stock for each
$.50 of unpaid indebtedness plus accrued interest. The outstanding balances
due at December 31, 1995 and 1996 to these related parties were $ 102.500 and
$0, respectively.
NOTE N - SUBSEQUENT EVENTS
On December 5, 1996, the Company issued a Private Placement Memorandum
("Memorandum"), offering 400,000 shares of its Series A, convertible Preferred
stock ("Preferred shares"), par value $.001, at $1.875 per share. The Company
has five million shares of Preferred stock authorized. As of December 31,
1996, no shares had been sold under this Memorandum. In February 1997, 124,000
Preferred shares were sold under this Memorandum. On March 27, 1997 this
Memorandum was closed.
On March 28, 1997, the Company issued a Private Placement Memorandum ("Second
Memorandum"), offering 500,000 shares of its Series A, convertible Preferred
stock, par value $.001, at $3.00 per unit ("Unit"). Each unit consists of two
preferred shares with one attached warrant to purchase one share of the
Company's common stock at $3.50 per share. The investors who purchased 124,000
Preferred shares under the Memorandum were given an opportunity to rescind
their investment but chose to continue their investment in the Company by
agreeing to the terms and conditions set forth in the Second Memorandum. This
offering was closed on April 9, 1997 after having sold the total offered
250,000 Units.
19
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (AUDITED) AND THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
December 31 Unaudited
1996 June 30, 1997
____________________________
ASSETS
Cash 8,168 3,585
Receivables 826,112 1,271,224
Other current assets 296,848 222,215
____________________________
Total current assets 1,131,128 1,497,024
Property and equipment net 140,548 100,548
Notes receivable 2,375,914 2,375,914
Other assets 94,813 76,480
____________________________
3,742,403 4,049,966
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable 212,484 90,984
Other current liabilities 730,124 537,274
____________________________
Total current liabilities 942,608 628,258
Long term liabilities 592,952 592,952
Common stock 5,235 5,314
Preferred stock - 750
Additional paid-in capital 862,277 1,481,645
Retained earnings 1,339,331 1,341,047
____________________________
Total liabilities and stockholders' equity 3,742,403 4,049,966
============================
STATEMENT OF OPERATIONS
Total revenues 2,656,340 1,066,070
Total costs and expenses 2,135,982 1,150,141
____________________________
Income from operations 520,358 (84,071)
Interest income 138,455 111,795
Interest expense (50,620) (25,000)
____________________________
Net income before income taxes 608,193 2,724
Provision for income taxes (232,521) (1,008)
____________________________
Net income 375,672 1,716
============================
Earnings per share 0.08 0.00
============================
Weighted average shares outstanding 4,973,098 6,871,050
============================
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 1997
Note A - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Eyemakers, Inc. and Subsidiary (the
Company) for quarterly financial reporting purposes are the same as those
disclosed in the Company's annual financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the information
presented.
The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
financial statements be read in conjunction with the audited annual financial
statements and footnotes thereto.
Note B - RECLASSIFICATIONS
The accompanying condensed consolidated financial statements contain certain
reclassifications of previously reported information. The reclassifications
have been made to more appropriately reflect the operating results of the
Company.
Note C - NOTES PAYABLE
In April 1997, the Company converted $100,000 of 8% notes payable to 76,190
shares of the Company's common stock at the rate of $1.3125 per share.
Note D - STOCKHOLDERS' EQUITY
In April 1997, the Company closed a Private Placement Memorandum dated March
27, 1997 whereby the Company sold 500,000 shares of its Series A Preferred
Stock for $1.50 per share. The Preferred Series A shareholders earn a coupon of
5% on the outstanding value of their shares. Series A Preferred Shares are
convertible one for one to the Company's common stock. Attached to the
preferred shares were warrants to purchase 250,000 shares of the Company's
common stock at $3.50 per share.
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (AUDITED)
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
December 31 Unaudited
1996 September 30, 1997
____________________________
ASSETS
Cash 8,168 78,690
Receivables 826,112 1,427,534
Other current assets 296,848 137,501
____________________________
Total current assets 1,131,128 1,643,725
Property and equipment net 140,548 80,548
Notes receivable 2,375,914 2,375,914
Other assets 94,813 92,313
____________________________
3,742,403 4,192,500
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable 212,484 290,984
Other current liabilities 730,124 475,622
____________________________
Total current liabilities 942,608 766,606
Long term liabilities 592,952 592,952
Common stock 5,235 5,311
Preferred stock - 500
Additional paid-in capital 862,277 1,481,898
Retained earnings 1,339,331 1,345,233
____________________________
Total liabilities and stockholders' equity 3,742,403 4,192,500
============================
STATEMENT OF OPERATIONS
Total revenues 2,656,340 1,598,582
Total costs and expenses 2,135,982 1,721,635
____________________________
Income from operations 520,358 (123,053)
Interest income 138,455 166,245
Interest expense (50,620) (33,824)
____________________________
Net income before income taxes 608,193 9,368
Provision for income taxes (232,521) (3,466)
____________________________
Net income 375,672 5,902
============================
Earnings per share 0.08 0.00
============================
Weighted average shares outstanding 4,973,098 5,937,566
============================
<PAGE>
EYEMAKERS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 1997
Note A - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Eyemakers, Inc. and Subsidiary (the
Company) for quarterly financial reporting purposes are the same as those
disclosed in the Company's annual financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the information
presented.
The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
financial statements be read in conjunction with the audited annual financial
statements and footnotes thereto.
Note B - RECLASSIFICATIONS
The accompanying condensed consolidated financial statements contain certain
reclassifications of previously reported information. The reclassifications
have been made to more appropriately reflect the operating results of the
Company. See the notes to the audited financial statements for December 31,
1996.
Note C - BUSINESS COMBINATION
In August 1997, the Company and the shareholders of Budget Opticals of America,
Inc., a Texas corporation, agreed to merge effective December 31, 1997. Under
the terms of the agreement, the shareholders of Budget received cash totaling
$50,000, 600,000 shares of the Company's Preferred Series B stock and the
Company was obligated to pay and additional $325,000 for non-compete agreements
during 1997 and 1998. The Series B shares are convertible into shares of the
Company's common stock, one-for-one, at $4.25 per share or the Series B holders
may elect to be paid the value of their shares at the end of two years at $4.25
per share. The Preferred Series B shareholders earn a coupon of 5% on the
outstanding value of their shares.
Note D - NOTES PAYABLE
In April 1997, the Company converted $100,000 of 8% notes payable to 76,190
shares of the Company's common stock at the rate of $1.3125 per share.
Note E - STOCKHOLDERS' EQUITY
In April 1997, the Company closed a Private Placement Memorandum dated March
27, 1997 whereby the Company sold 500,000 shares of its Series A Preferred
Stock for $1.50 per share. The Preferred Series A shareholders earn a coupon of
5% on the outstanding value of their shares. Series A Preferred Shares are
convertible one for one to the Company's common stock. Attached to the
preferred shares were warrants to purchase 250,000 shares of the Company's
common stock at $3.50 per share.
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
2.0 The Acquisition Agreement entered into by and between 21st Century
Vision, Inc., a Nevada corporation, and Optical Resource Management,
Inc., a Texas corporation, dated May 17, 1996, filed with SEC in this
Registration Statement.
2.1 The Agreement of Merger entered into by and among Eyemakers, Inc.
a Nevada corporation, Eyemaq, Inc., a Texas corporation, and Budget
Opticals of America, Inc., a Texas corporation, dated August 22, 1997,
(exhibits and schedules excluded, which exhibits and schedules are
available upon request) filed with SEC in this Registration Statement.
2.2 Amendment to the Agreement of Merger entered into by and among Eyemakers
Inc., a Nevada corporation, Eyemaq, Inc., a Texas corporation, and
Budget Opticals of America, Inc., a Texas corporation, dated January __,
1998, filed with SEC in this Registration Statement.
3.0 Certificate of Incorporation of 21st Century Vision, Inc., consisting of
Articles of Incorporation filed with the Secretary of State of the State
of Nevada on March 23, 1995, filed with SEC in this Registration
Statement.
3.1 Certificate of Incorporation of Optical Resource Management, Inc.,
consisting of Articles of Incorporation filed with the Secretary of
State of the State of Texas on July 22, 1994, filed with SEC in this
Registration Statement.
3.2 By-Laws of 21st Century Vision, Inc., dated March 23, 1995, are attached
hereto, filed with SEC in this Registration Statement.
3.3 By-Laws of Optical Resource Management, Inc., filed with SEC in this
Registration Statement.
3.4 Certificate of Amendment of Articles of Incorporation of 21st Century
Vision, Inc., filed with the Secretary of State of the State of Nevada
on August 26, 1996, filed with the SEC in this Registration Statement.
3.5 Articles of Incorporation of Budget Opticals of America, Inc., a Texas
corporation, filed with the Secretary of State of the State of Texas
on July 29, 1987, filed with the SEC in this Registration Statement.
3.6 Plan and Agreement of Reorganization by Merger of Eyemaq, Inc. with
and Into Budget Opticals of America, Inc. Under the Name of Budget
Opticals of America, Inc., filed with the Secretary of State of the
State of Texas on December 31, 1997, filed with the SEC in this
Registration Statement.
3.7 By-Laws of Budget Opticals of America, Inc., a Texas corporation, are
attached hereto, filed with the SEC in this Registration Statement.
4.0 Common Stock certificate, filed with SEC in this Registration Statement.
4.1 Certificate of Designation of Series A Preferred Stock, filed with the
Secretary of State of the State of Nevada on December 4, 1996, filed
with the SEC in this Registration Statement.
4.2 First Amendment to the Certificate of Designation of Series A Preferred
Stock, filed with the Secretary of State of the State of Nevada on
April 8, 1997, filed with the SEC in this Registration Statement.
4.3 Certificate of Designation of Series B Preferred Stock, filed with the
Secretary of State of the State of Nevada on January 29, 1998, filed
with the SEC in this Registration Statement.
10.0p 10% Convertible Note due November 10, 1996 between Optical Resource
Management, Inc., a Texas corporation, and Wayne Allison (former
President, CEO and a Director of the Company), in the amount of
$25,000.00, No. P-003, dated November 10, 1995, filed with SEC in this
Registration Statement.
10.1p 10% Convertible Note due November 10, 1996 between Optical Resource
Management, Inc., a Texas corporation, and Darrell Jolley (Chief
Operating Officer, Secretary, Treasurer and a Director of the Company),
in the amount of $1,000.00, No. P-013, dated November 10, 1995, filed
with SEC in this Registration Statement.
10.2p Promissory Note between Dr. George Orm, III (Chairman of the Board) and
Optical Resource Management, Inc., a Texas corporation, in the amount of
$1,100,000.00, dated August 1, 1995, filed with SEC in this Registration
Statement.
10.3p Practice Management Agreement between Dr. George Orm, III (Chairman of
the Board) and Optical Resource Management, Inc., dated October, 1994,
filed with SEC in this Registration Statement.
10.4p Standard Office Lease Agreement between Blue Lake Partners, Ltd., a
Texas limited partnership, and Optical Resource Management, Inc., a
Texas corporation, commencing July 1, 1995, filed with SEC in this
Registration Statement.
10.5p Promissory Note between Dr. George E. Orm, Jr. and Optical Resource
Management, Inc., a Texas corporation, in the amount of $400,000.00,
dated November 16, 1995, filed with SEC in this Registration Statement.
10.6p EYEMAKERS Trademark information for Optical Resource Management, Inc.,
filed with SEC in this Registration Statement.
10.7p Commercial Lease between Enzo Pelligrino and Budget Opticals of America,
Inc. dated June 25, 1996, filed with the SEC in this Registration
Statement.
10.8p Vision Center Master Lease Agreement between Venture Stores, Inc. and
Budget Opticals of America, Inc. effective as of January 7, 1996, filed
with the SEC in this Registration Statement.
10.9p Employment Agreement by and between Budget Opticals of America, Inc. and
James Mellon, dated August 22, 1997, filed with the SEC in this
Registration Statement.
10.10p Non-Qualified Stock Option Agreement by and between Eyemakers, Inc. and
Darrell Jolley (Chief Financial Officer, Secretary, Treasurer and a
Director of the Company), dated December 1, 1995, filed with the SEC in
this Registration Statement.
10.11p Non-Qualified Stock Option Agreement by and between Eyemakers, Inc. and
Darrell Jolley (Chief Financial Officer, Secretary, Treasurer and a
Director of the Company), dated March 31, 1997, filed with the SEC in
this Registration Statement.
10.12p Non-Qualified Stock Option Agreement by and between Eyemakers, Inc. and
George E. Orrm III (Chairman of the Board), dated December 1, 1995,
filed with the SEC in this Registration Statement.
21.0 Subsidiaries of the Registrant as of March 14, 1998, filed with SEC in
this Registration Statement.
27.0 Financial Data Schedule for the period ending 12/31/96, filed with the
SEC in this Registration Statement.
27.1 Financial Data Schedule for the period ending 6/30/97, filed with the
SEC in this Registration Statement.
27.2 Financial Data Schedule for the period ending 9/30/97, filed with the
SEC in this Registration Statement.
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Eyemakers, Inc.
Date: March 14, 1998
By: /s/ JAMES MELLON
James Mellon
Chief Executive Officer
STOCK-FOR-STOCK AGREEMENT
REORGANIZATION AGREEMENT between 21st Century Vision, Inc., a Nevada
corporation (hereinafter referred to as "21st"), and shareholders of Optical
Resource Management, Inc., a Texas corporation (hereinafter referred to as
"ORM").
For the Acquisition by 21st of all the outstanding stock of ORM, in
exchange for stock of 21st.
AGREEMENT, dated as of this 17th day of May, 1996, between 21st and all of
the Shareholders of ORM (hereinafter collectively referred to as the "ORM
Shareholders").
WHEREAS, the ORM Shareholders own 2,925,000 shares of common stock, $.001
par value per share, of ORM, and which constitutes all of the outstanding
common stock of ORM, for a total of 2,925,000 issued and outstanding shares of
common stock of ORM.
WHEREAS, the ORM Shareholders have options to purchase up to 2,729,501
shares of the common stock of ORM, at various prices as set forth in Schedule
I, attached hereto, which, if exercised, would result in a total of 5,654,501
issued and outstanding shares of ORM.
WHEREAS, the ORM Shareholders own and have the right to sell, transfer and
exchange all of the shares and options for the purchase of the capital stock of
ORM. 21st hereby offers 2,925,000 shares of its common stock and options to
purchase 2,729,501 shares of common stock to the ORM Shareholders, in the
amounts and with the same terms as set forth in Schedule I, hereto, for all of
the outstanding common stock and options of ORM. The ORM Shareholders wish to
make said exchange.
WHEREAS, the parties hereto intend that the securities exchange described
herein between 21st and the Shareholders of ORM will be tax free in accordance
with the provisions of Section 368(a)(1)(B) of the Internal Revenue Code.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto have agreed and by these
present do hereby agree as follows:
1. Exchange of Securities. Subject to the terms and conditions herein-
after set forth, at the time of the closing referred to in Section 6 hereof
(the "Closing Date"), 21st will issue and deliver, or cause to be issued and
delivered to the ORM Shareholders, in exchange for all of the issued and
outstanding shares and options of ORM, 2,925,000 shares of its common stock and
options to purchase 2,729,501 shares of its common stock in the amounts and
with the same terms as set forth in Schedule I, attached hereto. The shares
and options of 21st will be allocated as set forth in Schedule I, attached
hereto. The shares and options of ORM Shareholders and option holders will
be exchanged for shares and options in 21st on a one-for-one basis, such that
the options of 21st shall contain the same terms and conditions as the options
of ORM.
<PAGE>
2. Representations and Warranties by ORM and ORM Shareholders. ORM and
ORM Shareholders each represent and warrant to 21st, all of which represen-
tations and warranties shall be true at the time of closing, and shall survive
the closing for a period of six (6) months from the date of closing, except as
to the warranties and representations set forth in subsection (i) herein, which
shall survive for a period of three (3) years from the date of closing, and
those set forth in subsection (l) herein, which shall survive for a period of
six (6) months from the date of closing, or from the date when the accounts
receivable may become due and payable, whichever shall occur later, that:
(a) ORM is a corporation duly organized and validly existing and in
good standing under the laws of the State of Texas and has the corporate
powers to own its property and carry on its business as and where it is
now being conducted. Copies of the Certificate of Incorporation and the
By-Laws of ORM, which have heretofore been furnished by ORM Shareholders
to 21st, are true and correct copies of said Certificate of Incorporation
and By-Laws including all amendments to the date hereof.
(b) The authorized capital stock of ORM consists of 25,000,000
shares of common stock, $.001 par value ("Common Stock of ORM"), of which
2,925,000 shares have been validly issued and are now outstanding.
(c) ORM has options to purchase 2,729,501 shares of common stock
with terms of purchase as set forth in Schedule I, attached hereto.
(d) ORM Shareholders have full power to exchange the shares and
options to purchase the capital stock of ORM on behalf of themselves upon
the terms provided for in this Agreement, and said shares and options have
been duly and validly issued and are free and clear of any lien or other
encumbrance.
(e) From the date hereof, and until the date of closing, no
dividends or distributions of capital, surplus, or profits shall be paid
or declared by ORM in redemption of their outstanding shares or otherwise,
and except as described herein no additional shares or options shall be
issued by said corporations.
(f) Since the date hereof, ORM has not engaged in any transaction
other than transactions in the normal course of the operations of their
business, except as specifically authorized by 21st in writing.
(g) ORM is not involved in any pending or threatened litigation
which would materially affect its financial condition disclosed to 21st in
writing.
(h) ORM has and will have on the Closing Date, good and marketable
title to all of its property and assets shown on Schedule II, attached
hereto, free and clear of any and all liens or encumbrances or
restrictions, except as shown on Schedule II, attached hereto and except
for taxes and assessments due and payable after the Closing Date and
easements or minor restrictions with respect to its property which do not
materially affect the present use
2
<PAGE>
of such property.
(i) (1) The inventories of ORM as reflected in Schedule II,
furnished by ORM Shareholders to 21st prior to the execution hereof, are
valued at book value.
(2) The inventory of ORM listed on the schedule referred to in
(i) (1) above is hereinafter collectively referred to as the "Inventory."
The Inventory is in good and usable condition.
(j) As of the date hereof, there are no accounts receivable of ORM
of a material nature, except for those accounts receivable set forth in
Schedule II, attached hereto.
(k) ORM does not now have, nor will it have on the Closing Date, any
long-term contracts ("long-term" being defined as more than one year)
except those set forth in Schedule II attached hereto.
(l) ORM does not now have, nor will it have on the Closing Date any
pension plan, profit-sharing plan, or stock purchase plan for any of its
employees except those set forth in Schedule II, attached hereto and
certain options to proposed executive officers.
(m) ORM does not now have, nor will it have on the Closing Date, any
known liabilities or contingent liabilities other than those disclosed in
their audited financial statements dated 12/31/95 and updated, unaudited
financial statements dated 3/31/96 attached hereto as Schedule IV except
in the ordinary course of business or in connection with its proposed
private offering.
3. Representations and Warranties by 21st. 21st represents and warrants
to the ORM Shareholders, all of which representations and warranties shall be
true at the time of closing, and shall survive the closing for a period of six
(6) months from the date of closing, as follows:
(a) 21st is a corporation duly organized and validly existing and in
good standing under the laws of the State of Nevada and has the corporate
power to own its properties and carry on its business as now being
conducted and has authorized capital stock consisting of 25,000,000 shares
of common stock, $.001 par value per share, of which there are 1,120,000
shares presently outstanding.
(b) 21st has the corporate power to execute and perform this
Agreement, and to deliver the stock required to be delivered to ORM
Shareholders hereunder.
(c) The execution and delivery of this Agreement, and the issuance
of the stock required to be delivered hereunder have been duly authorized
by all necessary corporate actions, and neither the execution nor delivery
of this Agreement, nor the issuance of the stock, nor the performance,
observance or compliance with the terms and provisions of this Agreement
will violate any provision of law, any order of any court or other
governmental
3
<PAGE>
agency, the Certificate of Incorporation or By-Laws of 21st or any
indenture, agreement or other instrument to which 21st is a party, or by
which 21st is bound, or by which any of its property is bound.
(d) The shares of Common Stock and options of 21st deliverable
pursuant hereto will on delivery in accordance with the terms hereof, be
duly authorized, validly issued, and fully paid, and non-assessable.
4. Conditions to the Obligations of 21st. The obligations of 21st here-
under shall be subject to the conditions that:
(a) 21st shall not have discovered any material error or
misstatement in any of the representations and warranties by the ORM
Shareholders herein, and all the terms and conditions of this Agreement to
be performed and complied with shall have been performed and complied
with.
(b) There shall have been no substantial adverse changes in the
conditions, financial, business otherwise of ORM from the date of this
Agreement, and until the date of closing, except for changes resulting
from those operations in the usual and ordinary course of business, and
between such dates the business and assets of ORM shall not have been
materially adversely affected as the result of any fire, explosion,
earthquake, flood, accident, strike, lockout, combination of workmen,
taking over of any such assets by any governmental authorities, riot,
activities of armed forces, or acts of God or of the public enemies.
(c) 21st shall upon request and at the time of closing, receive an
opinion of counsel to the effect that: (1) ORM is duly organized and
validly existing under the laws of the State of Texas and has the power
and authority to own its properties and to carry on its respective
business wherever the same shall be located and operated as of the Closing
Date; and, (2) this Agreement has been duly executed and delivered by ORM
Shareholders and constitutes a legal, valid and binding obligation of the
ORM Shareholders enforceable in accordance with its terms.
(d) ORM does not now have, nor will it have on the date of closing,
any known or unknown liabilities or contingent liabilities, except as
specifically set forth on Schedule II, attached hereto.
(e) Counsel for 21st, Max C. Tanner, Esquire, shall provide an
opinion to be delivered at the Closing Date to the effect that: (1) 21st
Century Vision, Inc. is a Nevada corporation, validly existing and in good
standing with respect to its corporate charter; (2) that 21st is not under
investigation by the SEC, the NASD or any state securities commission;
(3) that there are no known securities violations; (4) all shares issued
by 21st have been validly issued in accordance with Nevada or Federal law,
are fully paid, are non-assessable and are fully tradeable; and (5) there
are no outstanding options, rights, warrants, conversion privileges or
other agreements which would require issuance of additional shares.
4
<PAGE>
5. Conditions to the Obligations of ORM Shareholders. The obligations
of the ORM Shareholders hereunder are subject to the conditions that:
(a) ORM Shareholders shall not have discovered any material error or
misstatement in any of the representations and warranties made by 21st
herein and all the terms and conditions of this Agreement to be performed
and complied with by 21st shall have been performed and complied with.
(b) The ORM Shareholders shall upon request, at the time of closing,
receive an opinion of counsel to the effect that: (1) 21st is a
corporation duly organized and validly existing under the laws of the
State of Nevada, and has the power to own and operate its properties
wherever the same shall be located as of the Closing Date; (2) the
execution, delivery and performance of this Agreement by 21st has been
duly authorized by all necessary corporate action and constitutes a legal,
valid and binding obligation of 21st, enforceable in accordance with its
terms; (3) the securities to be delivered to ORM Stockholders pursuant to
the terms of this Agreement has been validly issued, is fully paid and
non-assessable; and, (4) the exchange of the securities herein
contemplated does not require the registration of the 21st securities
pursuant to any Federal law dealing with the issuance, sale, transfer,
and/or exchange of corporate securities.
6. Closing Date. The closing shall take place on or before May 31,
1996, or as soon thereafter as is practicable, at the Law Offices of Max C.
Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada 89121, or at such
other time and place as the parties hereto shall agree upon.
7. Actions at the Closing. At the closing, 21st and ORM Shareholders
will each deliver, or cause to be delivered to the other, the securities to be
exchanged in accordance with Section I of this Agreement and each party shall
pay any and all Federal and State taxes required to be paid in connection with
the issuance and the delivery of their own securities. All stock certificates
shall be in the name of the party to which the same are deliverable.
8. Conduct of Business, Board of Directors, etc. Between the date
hereof and the Closing Date, ORM will conduct its business in the same manner
in which it has heretofore been conducted and the ORM Shareholders will not
permit ORM to: (1) enter into any contract, etc., other than in the ordinary
course of business; or (2) declare or make any distribution of any kind to
the stockholders of ORM, without first obtaining the written consent of 21st.
Upon closing, the old officers and members of the board of directors of
21st will tender their resignations and a new Board of Directors will be
elected by the shareholders of 21st, which shall consist of the following
individuals.
Wayne Allison
Darrell R. Jolley
Dr. George Orm, III
Richard Lottie
John A. Chalk, Jr.
William G. Robertson
5
<PAGE>
Upon election of the above Board of Directors, and subject to the
authority of the Board of Directors as provided by law and the By-Laws of 21st,
the new officers of 21st, after the closing date of this Agreement shall be as
follows:
Wayne Allison President and Chief Executive Officer
Darrell R. Jolley Chief Operating Officer, Secretary & Treasurer
9. Access to the Properties and Books of ORM. The ORM Shareholders
hereby grant to 21st, through their duly authorized representatives and during
normal business hours between the date hereof and the Closing Date, the right
of full and complete access to the properties of ORM and full opportunity to
examine their books and records.
10. Miscellaneous
(a) This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Nevada.
(b) Each of the Constituent Corporations shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
consummation of this Agreement, including, without limiting the generality
of the foregoing, fees and expenses of financial consultants, accountants
and counsel and the cost of any documentary stamps, sales and excise taxes
which may be imposed upon or be payable in respect to the transaction.
(c) At any time before or after the approval and adoption by the
respective stockholders of the Constituent Corporations, if required, this
Reorganization Agreement may be amended or supplemented by additional
written agreements, as may be determined in the judgment of the respective
Boards of Directors of the Constituent Corporations to be necessary,
desirable or expedient to further the purpose of this Reorganization
Agreement, to clarify the intention of the parties, to add to or to modify
the covenants, terms or conditions contained herein, or otherwise to
effectuate or facilitate the consummation of the transaction contemplated
hereby. Any written agreement referred to in this paragraph shall be
validly and sufficiently authorized for the purposes of this
Reorganization Agreement if signed on behalf of ORM or 21st, as the case
may be, by its Chairman of the Board, or its President.
(d) This Reorganization Agreement may be executed in any number of
counterparts and each counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
Reorganization Agreement.
(e) This Agreement shall be binding upon and shall inure to the
benefit of the heirs, executors, administrators and assigns of the ORM
Shareholders and upon the successors and assigns of 21st.
6
<PAGE>
(f) All notices, requests, instructions, or other documents to be
given hereunder shall be in writing and sent by registered mail:
If to ORM
Shareholders, then: 4100 McEwen, Suite 160
Dallas, TX 75244
If to 21st,
then: The Law Offices of Max C. Tanner
2950 East Flamingo Road
Suite G
Las Vegas, NV 89121
The foregoing Reorganization Agreement, having been duly approved or
adopted by the Board of Directors, and duly approved or adopted by the
stockholders of the constituent corporation, as required, in the manner
provided by the laws of the States of Nevada and Texas, the Chairman of the
Board, the President and the Secretary of said corporations, and the
Shareholders of ORM do now execute this Reorganization Agreement under the
respective seals of said corporation by the authority of the directors and
stockholders of each, as required, as the act, deed and agreement of each of
said corporations. This Stock-For-Stock Agreement may be signed in two or more
counterparts.
21ST CENTURY VISION, INC.
By: /s/ DONALD CORLEY
Donald Corley, President
OPTICAL RESOURCE MANAGEMENT, INC.
By: /s/ WAYNE ALLISON
Wayne Allison, President
7
<PAGE>
SHAREHOLDERS OF OPTICAL RESOURCE MANAGEMENT, INC.
Name Number of Shares
- ----------------------- -----------------
/s/ GEORGE ORM III 1,900,000
George Orm, III
/s/ DWIGHT ALLISON 100,000
Dwight Allison
The Palmetto Group 175,000
By /s/ JACK L. KILLEN
Its President
The Strateia Group, Inc. 250,000
By /s/ JOE H. GLOVER
Its President
Micro-Cap, LLC 350,000
By /s/ DANIEL H. WEAVER
Its Manager
Exit Strategy, Inc. 150,000
By /s/ S. INGERSOLL
Its President
<PAGE>
SCHEDULE I
<PAGE>
SCHEDULE I
A. OPTICAL RESOURCE MANAGEMENT, INC. Shareholders pre-merger, which shares
are to be exchanged for 21st Century Vision, Inc.'s shares on a one-for-
one basis.
NAME NUMBER OF SHARES
- ---------------------- --------------------
George Orm, III 1,900,000
Dwight Allison 100,000
The Palmetto Group 175,000
The Strateia Group, Inc. 250,000
Micro-Cap, LLC 350,000
Exit Strategy, Inc. 150,000
B. OPTICAL RESOURCE MANAGEMENT, INC. Option Holders pre-merger, which options
are to be exchanged for 21st Century Vision, Inc.'s options containing the
same terms and conditions as the ORM options.
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
- --------------------- ------------ -------------- --------------
Wayne Allison $.10 100,000 12/15/99
$.25 100,000 12/15/99
$.50 50,000 12/15/99
$.50 50,000 12/15/97
$1.00 150,000 12/15/99
$1.50 16,667 12/15/97
Darrell Jolley $.10 40,000 12/15/99
$.25 30,000 12/15/99
$.50 15,000 12/15/99
$.50 2,000 12/15/97
Schedule I - Page 1
<PAGE>
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
- ------------------------ ------------- ------------- -------------
Darrell Jolley (cont'd) $1.00 40,000 12/15/99
$1.50 667 12/15/97
Donald Corley $.10 24,000 12/15/99
$.25 8,000 12/15/99
$.50 4,000 12/15/99
$1.00 8,000 12/15/99
Erica Chapman $.10 2,500 12/15/99
$.25 5,000 12/15/99
$.50 2,500 12/15/99
$.50 40,000 12/15/97
$1.00 7,500 12/15/99
$1.50 13,334 12/15/97
Lisa Jones $.10 2,500 12/15/99
$.25 5,000 12/15/99
$.50 2,500 12/15/99
$1.00 3,500 12/15/99
Angelique Mansfield $.50 3,000 12/15/99
Brent Shehane $.50 4,000 12/15/99
Jason Toombs $.50 3,000 12/15/99
Jennifer Morgan $.50 2,000 12/15/99
Mandy Rogers $.50 2,000 12/15/99
Pete Cunningham $.50 4,000 12/15/99
Rick Kelly $.50 10,000 12/15/99
Michelle Leslie $.50 3,000 12/15/99
Schedule I - Page 2
<PAGE>
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
- ----------------------- ------------- -------------- -----------------
Lanier Management $1.00 20,000 6/15/98
$3.00 10,000 6/15/98
Mark Frerichs $.50 10,000 12/15/97
$1.50 3,334 12/15/97
George Orm, III $1.50 250,000 6/15/98
Dwight Allison $.50 25,000 6/15/98
Glenn DeShaw $.50 25,000 6/15/98
Marathon Capital $.50 200,000 6/15/98
$1.50 100,000 6/15/98
Micro-Cap, LLC $.50 200,000 6/15/98
$1.50 200,000 6/15/98
KRI Growth Stocks $.50 50,000 6/15/98
$1.50 75,000 6/15/98
Wellstar $.25 100,000 6/15/98
Ira Allison $.50 10,000 12/15/97
$1.50 3,334 12/15/97
Charles Jolley $.50 20,000 12/15/97
$1.50 6,667 12/15/97
Benny Glover $.50 6,000 12/15/97
$1.50 2,000 12/15/97
Scott Young $.50 7,000 12/15/97
$1.50 2,334 12/15/97
Cecil Corley $.50 3,000 12/15/97
$1.50 1,000 12/15/97
Schedule I - Page 3
<PAGE>
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
- ----------------------- ------------- ------------- --------------
Mike Gordon $.50 6,000 12/15/97
$1.50 2,000 12/15/97
Paul Gordon $.50 1,000 12/15/97
$1.50 333 12/15/97
Jerry Jacobs $.50 50,000 12/15/97
$1.50 16,667 12/15/97
Guerilla Management $.50 53,000 6/15/98
$1.50 35,332 6/15/98
Joe Kahl $1.00 12,500 6/15/98
$3.00 6,250 6/15/98
Dave Hammer $.25 12,500 12/15/97
$.50 12,500 12/15/97
Jim Almond $.25 12,500 12/15/97
$.50 12,500 12/15/97
Jerry White $.25 12,500 12/15/97
$.50 12,500 12/15/97
Dan Weaver $.25 12,500 12/15/97
$.50 12,500 12/15/97
Peter Medding $1.00 25,000 6/15/98
$3.00 12,500 6/15/98
Synergy $1.00 60,000 6/15/98
$3.00 30,000 6/15/98
MFC Group $.50 136,000 6/15/98
$1.00 13,500 6/15/98
Schedule I - Page 4
<PAGE>
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
- ---------------------- --------------- -------------- ---------------
MFC Group (cont'd) $1.50 79,332 6/15/98
$3.00 6,750 6/15/98
Schedule I - Page 5
<PAGE>
SCHEDULE II
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
THE TWELVE MONTHS ENDED DECEMBER 31, 1995
AND
AUGUST 1 (INCEPTION OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<PAGE>
Eads, Hunter & Company
Certified Public Accountants
2777 Stemmons Freeway, Suite 1659
Dallas, Texas 75207-2229
(214) 630-9177
Fax (214) 630-9283
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Optical Resource Management, Inc.
We have audited the accompanying balance sheets of OPTICAL RESOURCE MANAGEMENT,
INC. as of December 31, 1995 and 1994, and the related statements of income,
retained earnings, and cash flows for the twelve months ended December 31, 1995
and for the period from August 1, 1994 (inception of operations) through
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis
for our Opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OPTICAL RESOURCE MANAGEMENT,
INC. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the initial period then ended in conformity with generally
accepted accounting principles.
/s/ EADS, HUNTER & COMPANY, P.C.
April 1, 1996
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
CURRENT ASSETS
Cash $ 7,890 $ 0
Accounts receivable
Management fees 235,267 78,001
Other receivables 3,500 0
Development cost of future practice offices 0 16,559
Deferred tax asset 41,000 0
Prepaid assets 9,303 530
---------- --------
Total current assets 296,960 95,090
---------- --------
FIXED ASSETS
Equipment held under capital leases 185,389 62,746
Computer software 8,623 8,104
Office equipment 16,770 538
---------- --------
210,782 71,388
Less accumulated depreciation 45,905 3,598
---------- --------
Net fixed assets 164,877 67,790
---------- --------
OTHER ASSETS
Organization costs, net 3,010 3,850
Deposit 2,407 2,407
Notes receivable 1,595,000 0
---------- --------
Total other assets 1,600,417 6,257
---------- --------
$2,062,254 $169,137
=========== =========
See Notes to Financial Statements.
2
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDER'S EQUITY
1995 1994
CURRENT LIABILITIES
Accounts payable $ 23,545 $ 19,074
Obligations under capital leases
current portion 22,405 18,722
Notes payable - short term 102,500 0
Accrued expenses 92,840 34,067
Interest payable 1,342 0
Deferred tax liability 82,000 0
Income tax payable 1,500 4,481
---------- ----------
Total current liabilities 326,132 76,344
---------- ----------
LONG TERM LIABILITIES
Obligations under capital leases 130,283 40,723
Deferred tax liability 518,000 4,157
---------- ----------
Total long-term liabilities 648,283 44,880
---------- ----------
Total liabilities 974,415 121,224
---------- ----------
STOCKHOLDER'S EQUITY
Common stock - $.001 par value, 25,000,000
shares authorized, 1,000,000 shares
issued and outstanding 1,000 1,000
Paid-in capital 1,000 1,000
Retained Earnings 1,085,839 45,913
--------- --------
Total stockholder's equity 1,087,839 47,913
--------- --------
$2,062,254 $169,137
========== =========
See Notes to Financial Statements.
3
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 AND
AUGUST 1, 1994 (INCEPTION OF OPERATIONS)
THROUGH DECEMBER 31, 1994
1995 1994
REVENUES
Sale of practice offices - net $ 1,491,115 $ 0
Management fees 388,041 125,102
Cost reimbursements - leased personnel 628,388 235,756
Cost reimbursements - marketing and other 260,311 9,491
------------- -----------
Total revenues 2,767,855 370,349
------------- -----------
OPERATING EXPENSES
Compensation - leased personnel 572,841 207,418
Compensation - administrative personnel 152,479 45,697
Payroll taxes 71,400 20,963
Employee benefits 0 6,751
Rents 60,451 2,654
Communications 5,726 1,192
Supplies 18,564 2,338
Marketing 136,456 8,729
Professional fees 13,758 7,668
Outside services 63,219 4,996
Depreciation 42,307 3,598
Amortization 840 350
Taxes - other 0 125
Interest 13,657 1,909
Miscellaneous 24,369 1,410
------------ ----------
Total operating expenses 1,176,067 315,798
------------ ----------
INCOME BEFORE TAX 1,591,788 54,551
Provision for income tax 551,862 8,638
------------ ----------
NET INCOME 1,039,926 45,913
RETAINED EARNINGS, beginning of year 45,913 0
------------ ----------
RETAINED EARNINGS, end of year $ 1,085,839 $ 45,913
============ ==========
See Notes to Financial Statements.
4
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
THE TWELVE MONTHS ENDED DECEMBER 31, 1995 AND
AUGUST 1, 1994 (INCEPTION OF OPERATIONS) THROUGH DECEMBER 31, 1994
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,039,926 $ 45,913
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation and amortization 43,147 3,948
Deferred income tax provision 551,862 4,157
Changes in operating assets and liabilities
Accounts receivable ( 160,767) ( 78,001)
Notes receivable ( 1,595,000) 0
Development cost of practice offices 16,559 ( 16,559)
Prepaid assets ( 8,773) ( 530)
Accounts payable 3,141 20,404
Accrued expenses 61,446 32,737
Income tax payable 0 4,481
------------ ---------
Net cash used in operating activies ( 48,459) 16,550
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ( 139,394) ( 71,388)
Expenditures for other assets 0 ( 6,607)
------------ ---------
Net cash used in investing activies ( 139,394) ( 77,995)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 2,000
Proceeds from short-term debt 102,500 0
Proceeds from capital lease obligations 122,643 62,746
Payments on capital lease obligations ( 29,400) ( 3,301)
------------ ---------
Net cash provided by financing activities 195,743 61,445
------------ ---------
CHANGES IN CASH 7,890 0
CASH, beginning of year 0 0
------------ ---------
CASH, end of year $ 7,890 $ 0
============ =========
Interest paid $ 12,315 $ 1,909
============ =========
See Notes to Financial Statements
5
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS
The Company's operations generate revenue from two major activities:
(1) selling "stores" to doctors of optometry to be operated under the
Eyemakers trade name. Stores are defined as the furniture, fixtures,
finish out, equipment, and telephone number. Activities which precede
the sale of stores include identifying locations, negotiating and
obtaining facility leases; contracting for and overseeing the tenant
finish-out activities which furnish and equip the location to be a
retail eye-care "store" (defined above) for a doctor of optometry; and
sub-leasing and maintaining the physical location to a doctor of
optometry where a retail eye-care "store" (defined above) has been
established.
During the twelve months ended December 31, 1995, the Company generated
gross revenues of $1,595,000 for this activity (see note 6), and none during
the five months ended December 31, 1994.
(2) executing practice management agreements with licensed doctors of
optometry wherein the Company, among other things, makes available the
following:
* Administrative Functions
computer equipment and software, training of personnel, management and
control systems for inventory, purchasing agent services, communications
concerning new developments in optometric testing, products and
services, and obtaining malpractice/general liability insurance.
* Personnel Management
recruitment, employment, termination, and training of all personnel
necessary for the operation of the store, maintenance of incentive
programs, preparation and maintenance of a personnel manual, and
development of a system to monitor productivity of personnel.
6
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
* Marketing and Advertising
develop plans to promote the location and the store, its services and
products; use of the Eyemakers trade name; develop and maintain a
public relations program; act as purchasing agent to obtain advertising
in mass media; conduct market surveys; design and implement a telephone
marketing, referral and patient call-back program.
* Information Management
maintain patient files; design and implement procedures to ensure
compliance with applicable laws and regulations which govern the
practice of optometry; establish and maintain a post office address;
retain legal counsel to handle matters affecting the practice of
optometry; preparation of accounting records and financial reports;
design and implement a cash management system.
The doctors of optometry who sign the practice management agreements agree
to pay the Company 11% of gross sales for these services.
Since inception, the Company has entered into practice management agreements
(which expire as shown below) with the following persons/entity who had
existing practices as licensed doctors of optometry -
Eyemakers, Inc.,
George E. Orm III, O.D., President July 31, 2004
Dwight Allison, O.D., Proprietor August 23, 2004
Glennwood DeShaw, O.D., Proprietor September 14, 2004
George E. ORM, Inc. Jr. [sic], O D., Proprietor November 27, 2005
7
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
During the twelve and five months ended December 31, 1995 and 1994, the
Company generated revenue of $388,041 and $125,102, respectively, which was
based on the unaudited gross sales at each of the Eyemakers stores served by
the Company under existing practice management agreements as shown below:
Unaudited
-----------------------
1994
Locations Owner 1995 (5 months)
--------------------------------------------------------------------------
Mesquite, Town East Mall Eyemakers, Inc. $ 1,827,752 $ 691,006
Dallas, Montfort Rd. Eyemakers, Inc. 643,201 235,581
Garland, Belt Line Rd. DeShaw 298,732 74,472
Bedford, Airport Frwy Allison 258,789 70,293
Irving, Irving Mall Eyemakers, Inc. 368,508 65,947
Plano, Legacy Drive DeShaw 104,644 0
Richardson, Richardson Mall GE Orm, Jr. 26,017 0
----------- ----------
Total $ 3,527,643 $1,137,299
=========== ==========
Unaudited gross sales at these five locations for the twelve months ended
December 31 were as follows:
Unaudited
----------------------------------------
1995 1994 1993
----------- ------------ -----------
Mesquite, Town East Mall $1,827,752 $ 1,681,714 $1,539,424
Dallas, Montfort Rd. 643,201 432,714 587,695
Garland, Belt Line Rd 298,732 99,884 0
Bedford, Airport Frwy 258,789 73,158 0
Irving, Irving Mall 368,508 65,947 0
Plano, Legacy Drive 104,644 0 0
Richardson, Richardson Mall 26,017 0 0
----------- ------------ -----------
Total $3,527,643 $ 2,353,417 $2,127,119
The first four store locations were started by Eyemakers, Inc., prior to
the formation of the Company. (See Note 3) Eyemakers, Inc. sold Dr. Allison
and Dr. DeShaw their "stores" (as defined above) and received the proceeds
of those transactions. Consequently, the doctors own their locations and do
not pay rent to the Company.
8
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
In addition, the Company is reimbursed for the following costs -
* general and administrative expenses (e.g., supplies)
* salaries, bonuses, employment taxes, and benefit costs of the Company's
personnel which are leased to the doctor of optometry to manage the
store.
* specific marketing and advertising expenditures
2. SIGNIFICANT ACCOUNTING POLICIES
Income Tax - The provision for income tax is based on income recognition for
financial statement purposes and includes the effects of temporary
differences between book income and that recognized for tax return purposes.
Temporary differences at December 31, 1995 include note receivable from sale
of practice office, management receivable, trade payables and accrued
expenses.
Development Costs of Future Locations - All costs associated with
identifying, negotiating, and executing leases for future locations and
finish-out expenditures which become part of the real estate premises are
capitalized and amortized over the life of the leases. All costs associated
with the conversion of the empty lease space into a "store" are accumulated
and charged to cost of sales when the "store" is sold to the doctor.
Accounts Receivable - Receivables include unpaid fees for accounting,
marketing, purchasing and management information services provided to
doctors of optometry and for unpaid direct reimbursement of payroll,
marketing and other pass-through charges. Management of the Company believes
that no allowance for uncollectible accounts is necessary at year end.
Fixed Assets - Computer equipment and software under capital lease, as well
as other software, and office furniture are carried at cost. Book
depreciation is recorded on the straight-line basis over estimated useful
lives of three years.
Accounting Estimates - In preparing financial statement in conformity with
GAAP, management must make estimates based on future events that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could
differ from these estimates.
9
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
3. RELATED PARTIES
The Company's President and Chief Executive Officer, Dr. George E. Orm III,
is also the sole shareholder of the company. Dr. Orm is also the sole
shareholder of Eyemakers, Inc., a Texas corporation which operates Dr. Orm's
three eye-care stores at the locations identified in note 1.
Total receivables from Eyemakers, Inc. at December 31, 1995 and 1994, were
$204,263 and $54,414, respectively. Total revenues from Eyemakers, Inc.
recorded by the Company for the twelve and five-month periods ended December
31, were as follows:
1995 (12 months)
-----------------------------------------------------
Management Cost Total
Location Fees Reimbursements Revenues
------------------------------------------------------------------------
Mesquite $ 201,052 $ 411,396 $ 612,448
Dallas 71,152 128,982 200,134
Irving 40,578 103,446 144,024
--------- --------- ---------
Total $ 312,782 $ 643,824 $ 956,606
========= ========= =========
1994 (5 months)
----------------------------------------------------
Management Cost Total
Location Fees Reimbursements Revenues
-----------------------------------------------------------------------
Mesquite $ 86,477 $ 155,745 $ 242,222
Dallas 20,185 40,168 60,353
Irving 5,963 14,577 20,540
-------- --------- ---------
Total $112,625 $ 210,490 $ 323,115
======== ========= =========
In August 1995, Dr. George E. ORM, III purchased the Irving Mall location
from the Company for $1,100,000 (see note 6), and the Company sold Orm III's
father the Richardson location for $400,000.
10
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
4. LEASE COMMITMENTS
The Company has entered into capitalized lease obligations for computer and
medical equipment. Approximate future minimum lease payments for capitalized
lease obligations as of December 31, 1995 are as follows:
1996 $ 64,859
1997 57,450
1998 33,429
1999 28,644
2000 17,970
---------
Total 202,352
Less interest portion 49,664
---------
Total $ 152,688
=========
The Company has also entered into operating leases for the company's
corporate headquarters, the Plano location, and two new locations in Irving
and Richardson. The Company will sub-lease the space at the two new
locations to the doctors who acquired the "stores."
Approximate future minimum lease payments on non-cancelable operating leases
with initial or remaining non-cancelable lease terms in excess of one year
as of December 31, 1995 are as follows:
1996 $ 183,641
1997 183,941
1998 186,006
1999 188,685
2000 149,104
Thereafter 615,254
-----------
Total $ 1,506,631
===========
11
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. INCOME TAX
The net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes are reflected in deferred income taxes. Significant
components of the Company's deferred tax assets and liabilities as of
December 31, 1995 and 1994, are as follows:
1995 1994
------------------------
Deferred tax assets $ 41,000 $ 0
========================
Deferred tax liabilities $600,000 $ 4,157
========================
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
1995 1994
------------------------
Current $ 1,500 $ 4,481
Deferred 550,362 4,157
------------------------
Total income tax $551,862 $ 8,638
The reconciliation of income tax attributable to continuing operations
computed at the Federal statutory tax rate to income tax expense is:
1995 1994
------------------------
Tax at Federal statutory rate $ 557,126 $ 18,547
Surtax exemption (5,264) (9,909)
------------------------
Total $ 551,862 $ 8,638
========================
The deferred tax assets relate to accounts payable, while the tax
liabilities relate to accounts receivable and the gross profit in the
installment notes receivable.
12
<PAGE>
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
6. SALE OF PRACTICE OFFICES
During the twelve months ended December 31, 1995, the Company sold three
"stores" as defined in Note 1. Sales and costs of sales during the twelve
months were as follows:
Location Owner Sale Cost of Sale
-------------------------------------------------------------------------
May 27 Plano DeShaw $ 95,000 $ 49,053
Aug 3 Irving Eyemakers, Inc. 1,100,000 27,114
Nov 27 Richardson GE ORM, Jr. 400,000 27,718
---------------------------
Total 1,595,000 103,885
---------------------------
Net Sales $ 1,491,115
===========
The sales are financed by the Company over ten (10) years with initial
payments deferred 10 months. Each note bears interest at the following
rates; Plano 10%, Irving 6%, and Richardson 10%. The collateral by which
each note is secured includes all lease hold improvements, furniture and
equipment, and all business records.
7. COMMITMENTS AND CONTINGENCIES
As of the date of these financial statements, the Company determined that
its activities associated with identifying locations and sub-leasing them to
doctors of optometry constitute the sale of business opportunities (similar
to a franchise). However, no legal opinion has been obtained as to whether
the selling of "stores" constitutes the sale of a security. Management
intends to obtain legal opinions on these matters prior to the end of 1996.
8. SUBSEQUENT EVENTS
In January 1996, the Company reduced its management fee from 11% to 6% of
store gross sales, for all stores opened after January 1, 1996.
13
AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement") is dated the 22nd day of
August, 1997 by and among EYEMAKERS, INC., a Nevada corporation with its
principal place of business located at 4100 McEwen, Suite 160, Dallas,
Texas 75244 ("Eyemakers"), EYEMAQ, INC., a Texas corporation with its
principal place of business also located at 4100 McEwen, Suite 160, Dallas,
Texas 75244 (the "Company"), and BUDGET OPTICALS OF AMERICA, INC., a Texas
corporation with its principal place of business located at 905 South Amy
Lane, Harker Heights, Texas 76548 ("Budget Opticals").
RECITALS
A. Eyemakers owns all of the issued and outstanding shares of
capital stock of the Company.
B. The Board of Directors and the shareholders of the Company and
Budget Opticals, and the Board of Directors of Eyemakers, deem it advisable
and in the best interests of Company and Budget Opticals that Company merge
with and into Budget Opticals pursuant to this Agreement and a plan of
merger (the "Plan of Merger") in the form of Exhibit A attached hereto.
C. At the Closing (as defined in Section 1.4 hereof) hereunder,
Company and Budget Opticals shall enter into the Articles of Merger which
provide, among other things, for the merger of the Company with and into
Budget Opticals (the "Merger") and the conversion of all of the issued and
outstanding shares of Company Common Stock, no par value per share
("Company Common Stock"), into all of the issued and outstanding shares of
the common stock of Budget Opticals, no par value per share (the "Budget
Opticals Common Stock"), all as more fully described in Section 1.2 hereof
and the Plan of Merger. After the consummation of the Merger, the Company
shall have ceased to exist, and Budget Opticals shall have become a wholly-
owned subsidiary of Eyemakers.
D. The parties hereto desire to set forth herein the terms and
provisions of their understandings and agreements.
NOW, THEREFORE, in consideration of the premises, the provisions and
the respective agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. The Business Combination.
1.1 The Merger. At the Effective Time (as defined in Section
1.2 hereof), Company shall be merged with and into Budget Opticals in
accordance with the provisions of this Agreement and the Texas
Business Corporation Act, and the
1
<PAGE>
separate existence of Company shall cease, and Budget Opticals, as the
surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"), shall continue its corporate existence under
the laws of the State of Texas as a wholly-owned subsidiary of Eyemakers.
1.2 Effective Time of the Merger. As soon as practicable after
the Closing (as defined in Section 1.4 hereof), the Company and Budget
Opticals (collectively referred to as the "Constituent Corporations")
will cause appropriate Articles of Merger to be duly prepared,
executed and verified in accordance with the provisions of the Texas
Business Corporation Act, which Articles of Merger shall be duly filed
with the Secretary of State of the State of Texas. The Merger shall
become effective upon the issuance of the certificate of merger by the
Secretary of State of the State of Texas (the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as a private nature of each
Constituent Corporation; and all property, real, personal and mixed,
and all debts due on whatever account and all other choses in action
and every other interest of or belonging to or due to each Constituent
Corporation shall be deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to
any real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger. At the Effective Time, the Surviving
Corporation shall be responsible and liable for all the liabilities
and obligations of each Constituent Corporation; and any existing
claim, action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be
substituted in their place. Neither the rights of creditors nor any
liens on the property of either Constituent Corporation shall be
impaired by the Merger.
1.4 Closing. The closing of the Merger provided herein (the
"Closing") will be at the office of Eyemakers at 10:00 a.m., local
time, on August 22, 1997, or at such other place or at such other date
and time as Eyemakers, the Company and Budget Opticals may mutually
agree. Such date and time of Closing is herein referred to as the
"Closing Date".
2
<PAGE>
2. Conversion and Exchange of Shares; Additional Shares.
2.1 Conversion of Shares. At the Effective Time and without any
action on the part of Budget Opticals, Company or the holder of any of
the following securities:
2.1.1 Each outstanding share of Company Common Stock which
is outstanding immediately prior to the effective time of the
Merger shall be cancelled and shall cease to exist as shares of
the Company, except that each outstanding share of Company Common
Stock which shall be cancelled and shall cease to exist shall be
converted into the right to receive from the shareholders of the
Surviving Corporation its pro rata portion of the then issued and
outstanding shares of Budget Opticals Common Stock; provided,
however, that no Dissenting Shares (as defined in Section 2.3)
shall be exchanged but rather shall be subject to Section 2.3.
In consideration for the conversion of each share of Company
Common Stock into its pro rata portion of the then issued and
outstanding shares of Budget Opticals Common Stock, the
shareholders of Budget Opticals (the "Budget Opticals
Shareholders") shall receive, based upon their ownership interest
in the Budget Opticals Common Stock as set forth in Exhibit B,
their pro rata portion of (i) Fifty Thousand Dollars ($50,000.00)
to be transferred to the Budget Opticals Shareholders by
individual cashier's checks payable to the Budget Opticals
Shareholders, and (ii) Six Hundred Thousand (600,000) shares of
Eyemakers' non-voting Class B Preferred Stock, par value $0.001
per share, bearing a dividend rate of Five Percent (5%) per annum
payable annually on the anniversary date of the certificate
therefor, being convertible by the holders thereof into shares of
Eyemakers' common stock, no par value per share (the "Eyemakers
Common Stock"), at a conversion rate of $4.25 per share, and
being subject to redemption by Eyemakers at any time during the
two-year period commencing on the date of their issuance at a
redemption price of $7.50 per share (the "Class B Preferred").
Eyemakers hereby grants to each Budget Opticals Shareholder the
option, exercisable at any time after the expiration of Two (2)
years from the date of issuance thereof, to cause Eyemakers to
acquire any or all shares of Class B Preferred held by them at a
price equal to the conversion rate, or $4.25 per share. It is
the intention of the parties that the merger would qualify as a
nontaxable transaction to the Budget Opticals Shareholders except
to the extent of
3
<PAGE>
the cash received pursuant to the provisions of this paragraph.
Neither the Class B Preferred nor the Common Stock to be
issued upon conversion of the Class B Preferred by the Budget
Opticals Shareholders will be registered with either the
Securities and Exchange Commission ("SEC") or any regulatory
authority of any state. The Class B Preferred Stock and the
Common Stock could thus be sold by the Budget Opticals
Shareholders only pursuant to a subsequent registration statement
filed by Eyemakers with the SEC or pursuant to applicable
exemption from registration. The Class B Preferred and the
Common Stock would therefore be "Restricted Securities," as such
term in defined in Rule 144 as promulgated by the SEC.
2.1.2 Each share of Company Common Stock and Budget
Opticals Common Stock which are held in the treasuries of Company
and Budget Opticals, respectively, shall be automatically
cancelled and extinguished, and no consideration shall be
transferred in respect thereof.
2.2 Stock Options. At the Effective Time and without any action
on the part of the holder thereof, each option to purchase shares of
Budget Opticals Common Stock (the "Options") issued by Budget
Opticals, whether or not then exercisable, shall be converted into
issued and outstanding shares of Budget Opticals Common Stock.
2.3 Dissenting Shares.
2.3.1 Each outstanding share of Budget Opticals Common
Stock, the holder of which has demanded and perfected his or her
demand for appraisal of his or her shares in accordance with
Texas Business Corporation Act and has not effectively withdrawn
or lost his or her right to such appraisal as provided therein
("Dissenting Shares"), shall not be converted into or represent a
right to its pro rata portion of the consideration described in
Section 2.1 hereof, but the holder thereof shall be entitled only
to such rights as are granted by that law. Each holder of
Dissenting Shares who becomes entitled to consideration for his
Budget Opticals Common Stock pursuant to that law shall receive
consideration from Eyemakers in accordance with the provisions of
that law.
2.3.2 If any holder of Budget Opticals Common Stock who
demands appraisal of his shares under the Texas Business
Corporation Act shall effectively
4
<PAGE>
withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then each share of Budget Opticals Common Stock of such
holder shall automatically be converted into the right to receive its
pro rata portion of the consideration described in Section 2.1 above
without interest thereon.
2.3.3 Budget Opticals shall give Eyemakers (i) prompt
notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant
to the Texas Business Corporation Act and which are received by
Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the Texas
Business Corporation Act. Eyemakers will not voluntarily make
any payment with respect to any demands for appraisal and will
not settle or offer to settle such demands.
2.4 Stock Transfer Books. At the Effective Time, the stock
transfer books of Budget Opticals shall be closed and there shall be
no further registration of transfers of shares of Budget Opticals
Common Stock thereafter on the records of Budget Opticals.
2.5 Surrender and Exchange of Stock Certificates Representing
Budget Opticals Common Stock and Options to Purchase Shares of Budget
Opticals Common Stock. At the Effective Time, the holders of shares
of Budget Opticals Common Stock shall cease to have any rights as
shareholders of Budget Opticals, except such rights as they may have
pursuant to this Agreement and applicable law. After the Effective
Time, each Budget Opticals Shareholder shall be entitled, upon
surrender of certificates representing shares of Budget Opticals
Common Stock, to receive his or her pro rata portion of the
consideration described in Section 2.1 above and as set forth on
Exhibit B.
2.6 Supplementary Action. If at any time after the Effective
Time, any further assignments or assurances in law or any other things
are necessary or desirable to vest or to perfect or confirm of record
in the Surviving Corporation the title to any property or rights of
either of the Constituent Corporations, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of
the respective Constituent Corporations, in the name of and on behalf
of the appropriate Constituent Corporation, to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm
title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and
5
<PAGE>
provisions of this Agreement.
3. Articles of Incorporation; By-Laws; Directors and Officers.
3.1 Articles of Incorporation. Unless otherwise determined
prior to the Effective Time, in the discretion of Eyemakers, at the
Effective Time the Articles of Incorporation of Budget Opticals, as in
effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
3.2 By-Laws. The By-Laws of Budget Opticals, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by law, the
Articles of Incorporation of the Surviving Corporation and such By-Laws.
3.3 Directors. The directors of Budget Opticals immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation, to hold office until their successors have been elected
and shall qualify or as otherwise provided in the By-Laws of the
Surviving Corporation.
3.4 Officers. The officers of Budget Opticals immediately prior
to the Effective Time shall be the officers of the Surviving
Corporation, to hold office until their successors have been appointed
and shall qualify or as otherwise provided in the By-Laws of the
Surviving Corporation.
4. Representations and Warranties of Budget Opticals. Budget
Opticals represents and warrants to Eyemakers and the Company as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance
With Law. Budget Opticals is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation. Budget Opticals is duly licensed or qualified to
do business as a foreign corporation and is in good standing under the
laws of all other jurisdictions in which the character of the
properties owned or leased by it therein or in which the transaction
of its business makes such qualification necessary. Budget Opticals
has all requisite corporate power and authority to own its properties
and carry on its business as now conducted. Budget Opticals is not in
default with respect to any order of any court, governmental authority
or arbitration board or tribunal to which Budget
6
<PAGE>
Opticals is a party or is subject, and Budget Opticals is not in violation
of any laws, ordinances, governmental rules or regulations to which it is
subject. Budget Opticals has obtained all licenses, permits or other
authorizations and has taken all actions required by applicable law or
governmental regulation in connection with its business as now
conducted.
4.2 Affiliate Entities. Except as set forth in Schedule 4.2,
Budget Opticals does not own, directly or indirectly, a majority or
controlling interest in any corporation, business trust, joint stock
company, partnership or other business organization or association
relating to the business operations of Budget Opticals. As used in
this Article 4 (other than Sections 4.3, 4.7 and 4.11 hereof),
references to Budget Opticals shall include the affiliated entities
set forth in Schedule 4.2 hereof.
4.3 Capitalization. Budget Opticals has authorized capital
stock consisting solely of Five Hundred Thousand (500,000) shares of
common stock, no par value per share, of which Five Hundred Thousand
(500,000) shares and no more are presently issued and outstanding.
Except for rights granted pursuant to this Agreement and as set forth
in Schedule 4.3 hereto, there are no outstanding rights, warrants,
options, subscriptions, agreements or commitments giving anyone any
right to require Budget Opticals to sell or issue any capital stock or
other securities.
4.4 Jurisdictions. Schedule 4.4 contains a list of all
jurisdictions in which Budget Opticals is presently licensed or
qualified to do business. Budget Opticals has complied in all
material respects with all applicable laws of each such jurisdiction
and all applicable rules and regulations of each regulatory agency
therein. Budget Opticals has not been denied admission to conduct any
type of business in any jurisdiction in which it is not presently
admitted as set forth in such Schedule 4.4, has not had its license or
qualification to conduct business in any jurisdiction revoked or
suspended and has not been involved in any proceeding to revoke or su-
spend a license or qualification.
4.5 Records. The corporate minute books of Budget Opticals to
be delivered to Eyemakers at the Closing will contain true and
complete copies of the articles of incorporation and by-laws, as
amended to the Closing Date, the minutes of all meetings of directors
and shareholders and certificates reflecting all actions taken by the
directors or shareholders without a meeting from the date of
incorporation of Budget Opticals to the Closing Date.
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4.6 Officers and Directors; Bank Accounts; Powers of Attorney;
Insurance. The officers and directors of Budget Opticals are as set
forth in Schedule 4.6. Schedule 4.6 also sets forth (i) the name of
each bank, savings institution or other person with which Budget
Opticals has an account or safe deposit box and the names and
identification of all persons authorized to draw thereon or to have
access thereto, (ii) the names of all persons, if any, holding powers
of attorney from Budget Opticals and a summary statement of the terms
thereof, and (iii) a list of all insurance policies owned by Budget
Opticals (other than those required to be listed in Schedule 4.15.2
hereof), together with a brief statement of the coverage thereof.
4.7 Financial Statements. Budget Opticals has furnished to
Eyemakers (i) unaudited balance sheets and notes thereto of Budget
Opticals as of December 31, 1996 and December 31, 1995, respectively,
and for the three-month period ended March 31, 1997 (collectively the
"Unaudited Balance Sheets"), and (ii) unaudited statements of
operations of Budget Opticals for the calendar years ended December
31, 1996 and December 31, 1995, respectively, and for the three-month
period ended March 31, 1997, copies of which are attached hereto as
Exhibit C (collectively the "Financial Statements"). The Unaudited
Balance Sheets are sometimes hereinafter collectively referred to as
the "Balance Sheets." The Financial Statements fully and fairly set
forth the financial condition of Budget Opticals as of the dates
indicated, and the results of its operations for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied.
4.8 Undisclosed Liabilities. Budget Opticals has no liabilities
or obligations whatsoever, either accrued, absolute, contingent or
otherwise, which were not accrued in the liability section of the
Unaudited Balance Sheet except (i) those arising after the date of the
Unaudited Balance Sheet which are in the ordinary course of business,
in each case in normal amounts and none of which is materially
adverse, and (ii) as and to the extent specifically described in the
Schedules hereto.
4.9 Absence of Certain Changes or Events Since the Date of the
Unaudited Balance Sheets. Since the date of the Unaudited Balance
Sheets, Budget Opticals has not:
4.9.1 incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred
in the ordinary course of business and consistent with past
practice, none of which is materially adverse, and except in
connection with this Agreement and the transactions contemplated
hereby;
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4.9.2 discharged or satisfied any lien, security
interest or encumbrance or paid any obligation or liability
(fixed or contingent), other than in the ordinary course of
business and consistent with past practice;
4.9.3 mortgaged, pledged or subjected to any lien,
security interest or other encumbrance any of its assets or
properties (other than mechanic's, materialman's and similar
statutory liens arising in the ordinary course of business and
purchase money security interests arising as a matter of law
between the date of delivery and payment);
4.9.4 transferred, leased or otherwise disposed of any
of its assets or properties except for a fair consideration in
the ordinary course of business and consistent with past practice
or, except in the ordinary course of business and consistent with
past practice, acquired any assets or properties;
4.9.5 cancelled or compromised any debt or claim, except
in the ordinary course of business and consistent with past
practice;
4.9.6 waived or released any rights of material value;
4.9.7 except pursuant to those contracts listed on
Schedules 4.14 and 4.15 hereto, transferred or granted any rights
under any concessions, leases, licenses, agreements, patents,
inventions, trademarks, trade names, service marks or copyrights
or with respect to any know-how;
4.9.8 made or granted any wage or salary increase
applicable to any group or classification of employees generally,
entered into any employment contract with, or made any loan to,
or entered into any material transaction of any other nature
with, any officer or employee of Budget Opticals;
4.9.9 entered into any transaction, contract or
commitment, except (i) contracts listed on Schedules 4.14 and
4.15 hereto and (ii) this Agreement and the transactions
contemplated hereby;
4.9.10 suffered any casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance)
which affects in any material respect its ability to conduct
business; or
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4.9.11 declared any dividends or bonuses, or authorized
or affected any amendment or restatement of the articles of
incorporation or by-laws of Budget Opticals or taken any steps
looking toward the dissolution or liquidation of Budget Opticals.
Between the date of this Agreement and the Effective Time, Budget
Opticals will not, without the prior written consent of Eyemakers, do
any of the things listed in Sections 4.9.1 through 4.9.11 above.
4.10 Taxes. Budget Opticals (i) has duly and timely filed or
caused to be filed all federal, state, local and foreign tax returns
(including, without limitation, consolidated and/or combined tax
returns) required to be filed by it prior to the date of this
Agreement which relate to Budget Opticals or with respect to which
Budget Opticals or the assets or properties of Budget Opticals are
liable or otherwise in any way subject, (ii) has paid or fully accrued
for all taxes shown to be due and payable on such returns (which taxes
are all the taxes due and payable under the laws and regulations
pursuant to which such returns were filed), and (iii) has properly
accrued for all such taxes accrued in respect of Budget Opticals or
the assets and properties of Budget Opticals for periods subsequent to
the periods covered by such returns. No deficiency in payment of
taxes for any period has been asserted by any taxing body and remains
unsettled at the date of this Agreement. Copies of all federal and
state income (or franchise) tax returns of Budget Opticals have been
made available for inspection by Eyemakers.
4.11 Transferability of Budget Opticals Common Stock. The
issued and outstanding shares of Budget Opticals Common Stock are
subject to no restrictions with respect to transferability to
Eyemakers in accordance with the terms of this Agreement.
4.12 Title to Property and Assets. Budget Opticals has good and
marketable title to all of the properties and assets used by it in the
conduct of its business (including, without limitation, the properties
and assets reflected in the Balance Sheets except any thereof since
disposed of for value in the ordinary course of business), and none of
such properties or assets is, except as disclosed in said Balance She-
ets or the Schedules hereto, subject to a contract of sale not in the
ordinary course of business or to security interests, mortgages, en-
cumbrances, liens or charges of any kind or character.
4.13 Condition of Personal Property. All tangible personal
property, equipment, fixtures and inventories
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included within the assets of Budget Opticals or required to be used in the
ordinary course of business are in good, merchantable or in reasonably
repairable condition and are suitable for the purposes for which they
are used. No value in excess of applicable reserves has been given to
any inventory with respect to obsolete or discontinued products. All
of the inventories and equipment, including equipment leased to
others, are well maintained and in good operating condition.
4.14 Real Estate. Schedule 4.14 contains a list of all real
property owned by Budget Opticals or in which Budget Opticals has a
leasehold or other interest and of any lien, charge or encumbrance
thereupon. Such Schedule also contains a substantially accurate
description identifying all such real property and the significant
rental terms (including rents, termination dates and renewal condi-
tions). The improvements upon such properties and use thereof by
Budget Opticals conforms to all applicable lease restrictions, zoning
and other local ordinances.
4.15 List of Contracts and Other Data. Schedule 4.15 sets forth
the following:
4.15.1 (i) all computer software, patents and
registrations for trademarks, trade names, service marks and
copyrights which are unexpired as of the date hereof and are used
in connection with the operation of the business of Budget
Opticals, all applications pending on said date for patents or
for trademark, trade name, service mark or copyright
registrations, and all other proprietary rights, owned or held by
Budget Opticals and which are reasonably necessary to, or
primarily used in connection with, the business of Budget
Opticals, and (ii) all licenses granted by or to Budget Opticals
and all other agreements to which Budget Opticals is a party and
which relate, in whole or in part, to any items of the categories
mentioned in (i) above or to other proprietary rights of Budget
Opticals which are reasonably necessary to, or used in connection
with, the business of Budget Opticals;
4.15.2 all collective bargaining agreements, employment
and consulting agreements, executive compensation plans, bonus
plans, profit-sharing plans, deferred compensation agreements,
employee pension or retirement plans, employee stock purchase and
stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for benefits
to employees of Budget Opticals;
4.15.3 all contracts, understandings and
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commitments (including, without limitation, mortgages, indentures and
loan agreements) to which Budget Opticals is a party, or to which it
or any of its assets or properties are subject, and which are not
specifically referred to in Sections 4.15.1 or 4.15.2 above or in
Schedule 4.14 hereof; and
4.15.4 the names and current annual compensation rates of
all employees of Budget Opticals.
True and complete copies of all documents and complete
descriptions of all oral understandings, if any, referred to in
Schedule 4.14 and 4.15 have been provided or made available to
Eyemakers and its counsel.
4.16 Business Property Rights. The property referred to in
Section 4.15.1 above, together with (i) all designs, methods,
inventions and know-how related thereto, and (ii) all trademarks,
trade names, service marks and copyrights claimed or used by Budget
Opticals which have not been registered (collectively the "Business
Property Rights"), constitute all such proprietary rights owned or
held by Budget Opticals and which are reasonably necessary to, or used
in, the conduct of the business of Budget Opticals. The designs,
methods, inventions and know-how described in the preceding sentence
constitute trade secrets of Budget Opticals within the meaning of all
applicable laws, and Budget Opticals has taken all necessary steps
required by law to protect these trade secrets as such. Budget
Opticals owns or has valid rights to use all such Business Property
Rights without conflict with the rights of others. Except as set
forth in Schedule 4.19 hereto, no person or corporation has made or,
to the knowledge of Budget Opticals, threatened to make any claim that
the operation of the business of Budget Opticals or any Business
Property Right is in violation of or infringes any proprietary or
trade right of any third party. To the knowledge of Budget Opticals,
no third party is in violation of or is infringing upon any Business
Property Right.
4.17 No Breach or Default. Budget Opticals is not in default
under any contract to which it is a party or by which it is bound, nor
has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default under any such
contract. Budget Opticals has no reason to believe that the parties
to such contracts will not fulfill their obligations under such
contracts in all material respects or are threatened with insolvency.
4.18 Labor Controversies. Budget Opticals is not a party to any
collective bargaining agreement. There are not
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any controversies between Budget Opticals and any of its employees which
might reasonably be expected to materially adversely affect the conduct of
its business, or any unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending or, to the knowledge
of Budget Opticals, threatened relating to its business, and there are
not any organizational efforts presently being made or threatened
involving any of the employees of Budget Opticals. Budget Opticals
has not received notice of any claim that Budget Opticals has not
complied with any laws relating to the employment of labor, including
any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and employment
safety, or that Budget Opticals is liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the
foregoing.
4.19 Litigation. Except as set forth in Schedule 4.19, there
are no actions, suits or proceedings with respect to Budget Opticals
involving claims by or against Budget Opticals pending or threatened
against Budget Opticals, at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. No basis for
any action, suit or proceeding exists, and there are no orders, j-
udgments, injunctions or decrees of any court or governmental agency
with respect to Budget Opticals has been named or is a party which
apply, in whole or in part, to the business of Budget Opticals, the
assets or properties of Budget Opticals or the Budget Opticals Common
Stock or which would result in any material adverse change in the
business or prospects of Budget Opticals.
4.20 No Brokers. Budget Opticals has not entered into any
contract, arrangement or understanding with any person or firm which
may result in the obligation of Budget Opticals to pay any finder's
fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, and Budget
Opticals is unaware of any claim or basis for any claim for payment of
any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
4.21 Validity and Effect of Agreements. This Agreement
constitutes, and all agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Budget
Opticals enforceable
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in accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The consummation of the transactions contemplated hereby
does not require the consent of any third party not obtained, will not
result in the material breach of any term or provision of, or constitute
a default under, any order, judgment, injunction, decree, indenture,
mortgage, lease, lien, other agreement or instrument to which Budget
Opticals is a party or by which it is bound, and will not violate or
conflict with any provision of the by-laws or articles of incorporation
of Budget Opticals.
4.22 No Misrepresentation or Omission. No representation or
warranty by Budget Opticals in this Article 4 or in any other Article
or Section of this Agreement, or in any certificate or other document
furnished or to be furnished by Budget Opticals pursuant hereto,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained therein not misleading or will omit to state a
material fact necessary in order to provide Eyemakers with accurate
information as to Budget Opticals.
4.23 Authorization of Agreements. The execution and delivery of
this Agreement and all agreements and documents contemplated hereby by
Budget Opticals, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all requisite
corporate action.
5. Representations and Warranties of Eyemakers and the Company.
Eyemakers and the Company, jointly and severally, represent and warrant to
Budget Opticals as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance
With Law. Eyemakers and the Company are corporations duly incor-
porated, validly existing and in good standing under the laws of the
respective jurisdictions of their incorporation. Eyemakers and the
Company are duly licensed or qualified to do business as foreign
corporations and are in good standing under the laws of all other
jurisdictions in which the character of the properties owned or leased
by them therein or in which the transaction of their business makes
such qualification necessary. Eyemakers and the Company have all
requisite corporate power and authority to own their properties and
carry on their businesses as now conducted. Neither Eyemakers nor the
Company is in default with respect to any order of any court, govern-
mental authority or arbitration board or tribunal to which either is a
party or is subject, and
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neither Eyemakers nor the Company is in violation of any laws, ordinances,
governmental rules or regulations to which it is subject. Eyemakers and
the Company have obtained all licenses, permits or other authorizations
and have taken all actions required by applicable law or governmental
regulation in connection with their respective businesses as now conducted.
5.2 Affiliate Entities. Except as set forth in Schedule 5.2,
neither Eyemakers nor the Company owns, directly or indirectly, a
majority or controlling interest in any corporation, business trust,
joint stock company, partnership or other business organization or
association relating to the business operations of Budget Opticals.
As used in this Article 5 (other than Sections 5.3 and 5.6 hereof),
references to Eyemakers and the Company shall include the affiliated
entities set forth in Schedule 5.2 hereof.
5.3 Capitalization. Eyemakers has authorized capital stock
consisting solely of Twenty Million (20,000,000) shares of common
stock, $0.001 par value per share, of which Five Million Three Hundred
Eleven Thousand Two Hundred Thirty-Four (5,311,234) shares and no more
are presently issued and outstanding. Except for rights granted
pursuant to this Agreement and as set forth in Schedule 5.3 hereto,
there are no outstanding rights, warrants, options, subscriptions,
agreements or commitments giving anyone any right to require the
Company to sell or issue any capital stock or other securities. The
Company has authorized capital stock consisting solely of Five Hundred
Thousand (500,000) shares of common stock, no par value per share, of
which Five Hundred Thousand (500,000) shares and no more are presently
issued and outstanding. Except for rights granted pursuant to this
Agreement and as set forth in Schedule 5.3 hereto, there are no
outstanding rights, warrants, options, subscriptions, agreements or
commitments giving anyone any right to require the Company to sell or
issue any capital stock or other securities.
5.4 Jurisdictions. Schedule 5.4 contains a list of all
jurisdictions in which Eyemakers and the Company are presently
licensed or qualified to do business. Eyemakers and the Company have
complied in all material respects with all applicable laws of each
such jurisdiction and all applicable rules and regulations of each
regulatory agency therein. Neither Eyemakers nor the Company has been
denied admission to conduct any type of business in any jurisdiction
in which it is not presently admitted as set forth in such Schedule
5.4, has not had its license or qualification to conduct business in
any jurisdiction revoked or suspended and has not been involved in any
proceeding to revoke or su-
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spend a license or qualification.
5.5 Taxes. Eyemakers and the Company (i) have duly and timely
filed or caused to be filed all federal, state, local and foreign tax
returns (including, without limitation, consolidated and/or combined
tax returns) required to be filed by either of them prior to the date
of this Agreement which relate to Eyemakers or the Company or with
respect to which either of them or the assets or properties of
Eyemakers or the Company are liable or otherwise in any way subject,
(ii) have paid or fully accrued for all taxes shown to be due and
payable on such returns (which taxes are all the taxes due and payable
under the laws and regulations pursuant to which such returns were
filed), and (iii) have properly accrued for all such taxes accrued in
respect of Eyemakers and the Company or the assets and properties of
either of them for periods subsequent to the periods covered by such
returns. No deficiency in payment of taxes for any period has been
asserted by any taxing body and remains unsettled at the date of this
Agreement. Copies of all federal and state income (or franchise) tax
returns of Eyemakers and the Company have been made available for
inspection by Budget Opticals.
5.6 Transferability of Eyemakers Preferred and Common Stock.
The Class B Preferred, and the Eyemakers Common Stock into which such
Class B Preferred is convertible, are subject to no restrictions with
respect to transferability to the Budget Opticals Shareholders in
accordance with the terms of this Agreement.
5.7 No Breach or Default. Neither Eyemakers nor the Company is
in default under any contract to which either is a party or by which
either is bound, nor has any event occurred which, after the giving of
notice or the passage of time or both, would constitute a default
under any such contract. Neither Eyemakers nor the Company has any
reason to believe that the parties to such contracts will not fulfill
their obligations under such contracts in all material respects or are
threatened with insolvency.
5.8 Labor Controversies. Neither Eyemakers nor the Company is a
party to any collective bargaining agreement. There are not any
controversies between Eyemakers, the Company or any of their
respective employees which might reasonably be expected to materially
adversely affect the conduct of their respective businesses, or any
unresolved labor union grievances or unfair labor practice or labor
arbitration proceedings pending or, to the knowledge of Eyemakers or
the Company, threatened relating to their respective businesses, and
there are not any organizational efforts presently being made or
threatened involving any of
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the employees of Eyemakers or the Company. Neither Eyemakers nor the
Company has received notice of any claim that either has not complied
with any laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining, the
payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that
either is liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing.
5.9 Litigation. Except as set forth in Schedule 5.9, there are
no actions, suits or proceedings with respect to Eyemakers or the
Company involving claims by or against Eyemakers or the Company
pending or threatened against either Eyemakers or the Company, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrum-
entality. No basis for any action, suit or proceeding exists, and
there are no orders, judgments, injunctions or decrees of any court or
governmental agency with respect to Eyemakers or the Company has been
named or is a party which apply, in whole or in part, to the business
of Eyemakers or the Company, the assets or properties of Eyemakers or
the Company, the Class B Preferred or the Eyemakers Common Stock or
which would result in any material adverse change in the business or
prospects of Eyemakers or the Company.
5.10 Validity and Effect of Agreements. This Agreement
constitutes, and all agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Eyemakers and
the Company, enforceable in accordance with their terms, subject as to
enforcement to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles. The consummation of the
transactions contemplated hereby does not require the consent of any
third party not obtained, will not result in the material breach of
any term or provision of, or constitute a default under, any order,
judgment, injunction, decree, indenture, mortgage, lease, lien, other
agreement or instrument to which either is a party or by which either
is bound, and will not violate or conflict with any provision of the
by-laws or articles of incorporation of Eyemakers or the Company.
5.11 No Misrepresentation or Omission. No representation or
warranty by Eyemakers or the Company in this Article 5 or in any other
Article or Section of this Agreement, or in any certificate or other
document furnished
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or to be furnished by Eyemakers or the Company pursuant hereto, contains
or will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements contained
therein not misleading or will omit to state a material fact necessary in
order to provide Budget Opticals with accurate information as to Eyemakers
and the Company.
5.12 Authorization of Agreements. The execution and delivery of
this Agreement and all agreements and documents contemplated hereby by
Eyemakers and the Company, and the consummation by both of them of the
transactions contemplated hereby, have been duly authorized by all
requisite corporate action.
6. Conditions of Merger.
6.1 General Conditions. The obligations of each party hereto to
effect the Merger shall be subject to fulfillment at or prior to the
Effective Time of the following conditions:
6.1.1 The Board of Directors and shareholders of Budget
Opticals shall have duly approved the Merger in accordance with
the Texas Business Corporation Act.
6.1.2 The Boards of Directors of Eyemakers and the Company,
and Eyemakers, in its capacity as sole shareholder of the
Company, shall have duly approved the Merger in accordance with
the Texas Business Corporation Act.
6.1.3 No injunction, restraining order or other order
issued by a court of competent jurisdiction which prohibits the
consummation of the Merger shall be in effect (each party
agreeing to use its best efforts to have any such injunction
lifted), and no governmental action or proceeding shall have been
commenced or threatened in writing seeking any injunction,
restraining order or other order which seeks to prohibit,
restrain, invalidate or set aside consummation of the Merger.
6.1.4 There shall not have been taken any action, and no
statute, rule or regulation shall have been enacted, by any state
or federal government or governmental agency which would render
the consummation of the Merger illegal.
6.2 Conditions to Obligation of Budget Opticals to Effect the
Merger. The obligation of Budget Opticals to effect the Merger shall
be subject to the fulfillment at or
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prior to the Effective Time of the following additional conditions:
6.2.1 Eyemakers and the Company shall have performed in all
material respects their agreements contained in this Agreement
required to be performed on or prior to the Effective Time, and
Eyemakers and the Company shall have delivered to Budget Opticals
certificates in the name of Eyemakers and the Company,
respectively, to that effect, dated as of the Closing Date and
signed by its respective Chairman or President and its respective
Secretary or any Assistant Secretary.
6.2.2 The representations and warranties of Eyemakers and
the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as if made
on and as of such date, except as contemplated or permitted by
this Agreement, and Eyemakers and the Company shall have
delivered to Budget Opticals certificates in the names of
Eyemakers and the Company, respectively, to that effect, dated as
of the Closing Date and signed by its respective Chairman or
President and its respective Secretary or any Assistant
Secretary.
6.2.3 All corporate proceedings, including appropriate
action by the Boards of Directors of Eyemakers and the Company
and Eyemakers in its capacity as the sole shareholder of the
Company, necessary to authorize the execution and delivery by
Eyemakers and the Company of this Agreement and their performance
of their respective obligations hereunder, have been duly and
validly taken.
6.2.4 Eyemakers shall have executed and delivered to
Budget Opticals employment agreements in the form attached hereto
as Exhibit D between Eyemakers and James C. Mellon, Karen Zabcik,
Ted Karibian and Chris Mellon, respectively.
6.2.5 Eyemakers shall have executed and delivered to
Budget Opticals non-qualified stock option agreements in the form
attached hereto as Exhibit E which are in such amounts, and which
have been duly executed by those employees of Budget Opticals, as
are set forth in Exhibit F attached hereto.
6.3 Conditions to Obligation of Eyemakers and the Company to
Effect the Merger. The obligation of Eyemakers and the Company to
effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the
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following additional conditions:
6.3.1 Budget Opticals shall have performed in all material
respects its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, and Budget Opticals
shall have delivered to Eyemakers a certificate to that effect,
dated as of the Closing Date and signed by the Chairman or
President of Budget Opticals and its Secretary or any Assistant
Secretary.
6.3.2 The representations and warranties of Budget Opticals
contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date, except as contemplated or permitted by this
Agreement, and Budget Opticals shall have delivered to Eyemakers
and the Company a certificate to that effect, dated as of the
Closing Date and signed by the Chairman or President of Budget
Opticals and its Secretary or any Assistant Secretary.
6.3.3 The Company shall have received, all in form and
substance satisfactory in the judgment of Budget Opticals
reasonably exercised, all consents, approvals and waivers
required pursuant to the contracts listed in Schedule 4.15, the
debt instruments of Budget Opticals and all filings and
registrations with, and notifications to, all federal, state and
local authorities, required for consummation of the transactions
contemplated by this Agreement (other than the filing and
recordation of appropriate merger documents required by the laws
of the State of Texas) shall have been made by Budget Opticals,
and all approvals and authorizations of all federal, state and
local and such foreign authorities required for consummation of
the transactions contemplated by this Agreement shall have been
received and shall be in full force and effect.
6.3.4 Budget Opticals shall have delivered to Eyemakers
employment agreements in the form attached hereto as Exhibit D
duly executed by James C. Mellon, Karen Zabcik, Ted Karibian and
Chris Mellon, respectively.
6.3.5 Budget Opticals shall have delivered to Eyemakers
non-qualified stock option agreements in the form attached hereto
as Exhibit E which are in such amounts, and which have been duly
executed by those employees of Budget Opticals, as are set forth
in Exhibit F attached hereto.
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6.3.6 All shareholders of Budget Opticals have executed and
delivered to Eyemakers the Indemnity and Guaranty Agreement in
the form attached as Exhibit G hereto.
6.3.7 Shareholders James C. Mellon, Chris Mellon, Karen
Zabcik and Ted Karibian shall each have executed and delivered to
Eyemakers a Noncompetition and Nondisclosure Agreement in the
form attached hereto as Exhibit H.
6.3.8 Budget Opticals shall have delivered to Eyemakers
such additional certificates, opinions of counsel and other
documents as Eyemakers may request.
6.3.9 Budget Opticals shall have delivered to Eyemakers
the resignations of all of the members of its Board of Directors,
such resignations to be effective as of the close of business on
the date of the Effective Time.
7. Termination, Amendment and Waiver.
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Budget Opticals:
7.1.1 by mutual consent of the Boards of Directors of
Budget Opticals, Eyemakers and the Company;
7.1.2 by either Budget Opticals, Eyemakers or the Company
if the Merger shall not have been consummated on or before July
31, 1997.
7.1.3 by Budget Opticals if there is a material breach of
any of the representations and warranties of Eyemakers or the
Company or if Eyemakers or the Company fails to comply with any
of their respective covenants or agreements contained herein or
if any of the conditions specified in Sections 6.1 or 6.2 has not
been met, waived or has become impossible to satisfy;
7.1.4 by Eyemakers or the Company if there is a material
breach of any of the representations and warranties of Budget
Opticals or if Budget Opticals fails to comply with any of its
covenants or agreements contained herein or if any of the
conditions specified in Sections 6.1 or 6.2 has not been met,
waived or has become impossible to satisfy;
The date on which this Agreement is terminated
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<PAGE>
pursuant to any of the foregoing subsections of this Section 7.1 is
herein referred to as the "Termination Date."
7.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 7.1 hereof, this Agreement shall
forthwith become null and void, except that nothing herein shall
relieve any party from liability for any breach of this Agreement
prior to such termination.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Boards of Directors of Budget Opticals,
Eyemakers and the Company at any time before or after approval hereof
by the shareholders of Budget Opticals, but after any such approval no
amendment shall be made which in any other way materially adversely
affects the rights of the shareholders of Budget Opticals (other than
a termination of this Agreement) without the further approval of such
shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
7.4 Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by the Boards of Directors of Budget
Opticals, Eyemakers and the Company, may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party.
8. General Provisions.
8.1 Notice. All notices, requests or other communications
required hereunder shall be in writing and shall be given by personal
delivery, national overnight courier, facsimile transmission, or
certified or registered mail, to any party at the respective addresses
set forth in the first paragraph of this Agreement, or to such other
address as shall be specified in writing by such party to the other
party in accordance with the terms and conditions of this Section.
All notices, requests or other communications shall be deemed
effective (i) immediately if delivered personally or by facsimile
transmission, (ii) the next business day if delivered by national
overnight courier, or (iii) Three (3) business days after deposit with
the United States Postal Service, postage prepaid, if delivered by
certified or registered mail.
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<PAGE>
8.2 Expenses. Each party hereto will pay its own costs and
expenses incident to its negotiation and preparation of this Agreement
and to its performance of the transactions contemplated hereby.
8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
8.4 Survival. For purposes of the Indemnity and Guaranty
Agreement, all of the terms, conditions, warranties and
representations contained in this Agreement shall survive, in
accordance with their terms, the Effective Time.
8.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
8.6 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be
given no substantive or interpretive effect whatsoever.
8.7 Merger of Documents. This Agreement and all agreements and
documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects.
8.8 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules attached hereto are by this reference incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
8.9. Severability. If for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid as applied to any particular
case or in all cases, such circumstances shall not have the effect of
rendering such provision invalid in any other case or of rendering any
of the provisions of this Agreement inoperative, unenforceable or inv-
alid.
8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto
without the prior written consent of the other parties hereto.
8.11 Entire Agreement. This Agreement, together with the
Exhibits, Schedules, and other documents contemplated hereby,
constitutes the final written expression of all of the agreements
between the parties, and is a complete and
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<PAGE>
exclusive statement of those terms. It supersedes all understandings and
negotiations concerning the matters specified herein. Any representations,
promises, warranties or statements made by any party that differ in
any way from the terms of this written Agreement and the Exhibits,
Schedules and other documents contemplated hereby, shall be given no
force or effect. The parties specifically represent, each to the
other, that there are no additional or supplemental agreements between
them related in any way to the matters herein contained unless
specifically included or referred to herein. No addition to or
modification of any provision of this Agreement shall be binding upon
any party unless made in writing and signed by all parties.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year
hereinabove first set forth.
EYEMAKERS: EYEMAKERS, INC.
By: /s/ GEORGE E. ORM, III
George E. Orm III, O.D.
Chairman of the Board
COMPANY: EYEMAQ, INC.
By: /s/ GEORGE E. ORM, III
George E. Orm III, O.D.
President
BUDGET OPTICALS: BUDGET OPTICALS OF AMERICA, INC.
By: /s/ JAMES C. MELLON
James C. Mellon
President
24
<PAGE>
LIST OF EXHIBITS
AND SCHEDULES
Exhibits
A Plan and Agreement of Reorganization
B Ownership of Budget Opticals of America, Inc.
C Financial Statements
D Employment Agreement
E Non-Qualified Stock Option Agreement
F Option Distribution
G Indemnity and Guaranty Agreement
H Noncompetition and Nondisclosure Agreement
Schedules
4.2 Affiliate Entities
4.3 Capitalization
4.4 List of Jurisdictions
4.6 Officers and Directors; Bank Accounts; Powers of Attorney;
Insurance
4.9 Absence of Certain Changes
4.14 Real Estate
4.15 List of Contracts and Other Data
4.19 Litigation
5.2 Affiliate Entities
5.3 Capitalization
5.4 Jurisdictions
FIRST AMENDMENT TO AGREEMENT OF MERGER
This First Amendment to Agreement of Merger is executed as of the
day of January, 1998 by and between EYEMAKERS, INC., a Nevada corporation
with its principal place of business located at 4100 McEwen, Suite 160,
Dallas, Texas 75244 ("Eyemakers"), and BUDGET OPTICALS OF AMERICA, INC., a
Texas corporation with its principal place of business located at 905 South
Amy Lane, Harker Heights, Texas 76548 ("Budget Opticals").
RECITALS
A. On August 22, 1997, Eyemakers, Budget Opticals and EYEMAQ, INC., a
Texas corporation with its principal place of business also located at 4100
McEwen, Suite 160, Dallas, Texas 75244 (the "Company"), executed an Agreement
of Merger (the "Merger Agreement") pursuant to which the Company merged with
and into Budget Opticals, with Budget Opticals remaining as the surviving
corporation and the wholly-owned subsidiary of Eyemakers. The separate
existence of the Company ceased as of December 31, 1997, the date on which
Articles of Merger were filed with the Secretary of State of Texas. The
Company is therefore not a party to this First Amendment to Agreement of
Merger, and all of its rights, duties and obligations have by operation of
law been vested in Budget Opticals as the surviving corporation in such
merger.
B. Eyemakers and Budget Opticals desire to amend the Merger Agreement
to clarify certain attributes of the Eyemakers Class B Preferred Stock, par
value $0.001 per share, to be received by the shareholders of Budget Opticals
pursuant to the merger.
NOW, THEREFORE, in consideration of the premises, the provisions and the
respective agreements hereinafter set forth, the parties hereto hereby agree
as follows:
AGREEMENTS
1. The second paragraph of Section 2.1.1 of the Merger Agreement is
hereby amended to read in its entirety as follows:
In consideration for the conversion of each share of Company
Common Stock into its pro rata portion of the then issued and
outstanding shares of Budget Opticals Common Stock, the
shareholders of Budget Opticals (the "Budget Opticals
Shareholders") shall receive, based upon their ownership interest
in the Budget Opticals Common Stock as set forth in Exhibit B,
their pro rata portion of (i) Fifty Thousand Dollars ($50,000.00)
to be transferred to the Budget Opticals Shareholders by individual
cashier's checks payable to the Budget Opticals Shareholders, and
(ii) Six Hundred Thousand (600,000) shares of Eyemakers' non-voting
Class B Preferred Stock, par value $0.001 per share, bearing a
dividend of Twenty-One and One-Fourth Cents ($0.2125) cents per
share per annum payable annually on the anniversary date of the
certificate therefor, being convertible by the holders thereof into
an equivalent number of shares of Eyemakers' common stock, par
value $0.001 per share (the "Eyemakers Common Stock"), and being
subject to redemption by Eyemakers at any time during the two-year
period commencing on the date of their issuance at a redemption
price of $7.50 per share (the "Class B Preferred"). Eyemakers
hereby grants to each Budget Opticals Shareholder the option,
exercisable at any time after the expiration of Two (2) years from
the date of issuance thereof, to cause Eyemakers to acquire any or
all shares of Class B Preferred held by them at a price of $4.25
per share. Notwithstanding the rights, privileges and attributes
of the Class B Preferred as described above, Budget Opticals
acknowledges that the Class B Preferred is subordinated in all
respects to Eyemakers' Series A Preferred Stock. It is the
intention of the parties that the merger would qualify as a
nontaxable transaction to the Budget Opticals Shareholders except
to the extent of the cash received pursuant to the provisions of
this paragraph.
2. This First Amendment shall be governed by the laws of the State of
Texas.
3. This First Amendment constitutes the final written expression of
this First Amendment to the Merger Agreement and is a complete and exclusive
statement of those terms. It supersedes all understandings and negotiations
concerning the matters specified herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment and
caused the same to be duly delivered on their behalf on the day and year
hereinabove first set forth.
EYEMAKERS: EYEMAKERS, INC.
By: /s/ GEORGE E. ORM III
George E. Orm III, O.D.
Chairman of the Board
BUDGET OPTICALS: BUDGET OPTICALS OF AMERICA, INC.
By: /s/ JAMES C. MELLON
James C. Mellon
President
SECRETARY OF STATE
STATE OF NEVADA
CORPORATE CHARTER
I, Dean Heller, Secretary of State of the State of Nevada, do hereby
certify that 21st Century Vision, Inc. did on the Twenty-Third day of March,
1995 file in this office the original Articles of Incorporation; that said
Articles are now on file and of record in the office of the Secretary of State
of the State of Nevada, and further, that said Articles contain all the
provisions required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal
of State, at my office, in Carson City, Nevada, this Twenty-Third day of March,
1995.
/s/ DEAN HELLER
Secretary of State
/s/ (illegible signature)
Certification Clerk
<PAGE>
[Filed stamped as follows: "Filed in the office of the Secretary of State of
the State of Nevada, March 23, 1995"]
ARTICLES OF INCORPORATION
OF
21ST CENTURY VISION, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a Corporation under and pursuant to the
laws of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
21st Century Vision, Inc.
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for
which this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all other
things incidental thereto which are not forbidden by law or by these
Articles of Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers
granted by 78.060 and 78.070 of the Nevada Revised Statutes under which this
corporation is formed. In addition, the Corporation shall have the following
specific powers:
(a) To elect or appoint officers and agents of the Corporation and to fix
their compensation;
<PAGE>
(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose of,
shares or other interests in, or obligations of, individuals,
associations, partnerships, corporations, or governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of
shares of the corporation, but such shares may only be purchased,
directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of war,
to make donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 shares of Common Stock at
$.001 par value per share.
Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be issued
for such consideration, as shall be fixed from time to time by the Board
of Directors. In the absence of fraud, the judgment of the Directors as
to the value of any property for shares shall be conclusive. When shares
are issued upon payment of the consideration fixed by the Board of
Directors, such shares shall be taken to be fully paid stock and shall be
non-assessable. The Articles shall not be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided by
the Board of Directors, no holder of any shares of the stock of the
Corporation, shall have any preemptive right to purchase, subscribe for,
or otherwise acquire any shares of stock of the Corporation of any class
now or hereafter authorized, or any securities exchangeable for or
convertible into such shares, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase, or otherwise
acquire such shares.
2
<PAGE>
Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its capital
stock of any class or classes, upon such terms and conditions and at such
times and prices as the Board of Directors may provide, which terms and
conditions shall be incorporated in an instrument or instruments
evidencing such rights. In the absence of fraud, the judgment of the
Directors as to the adequacy of consideration for the issuance of such
rights or options and the sufficiency thereof shall be conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation,
after the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid up shall ever be
assessable or assessed. The holders of such stock shall not be individually
responsible for the debts, contracts, or liabilities of the Corporation and
shall not be liable for assessments to restore impairments in the capital of
the Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business,and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board of the
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, terms of office, manner of election,
time and place of meeting, and powers and duties shall be such as are
prescribed by statute and in the by-laws of the Corporation. The name and
post office address of the directors constituting the first board of
directors, which shall be One (1) in number are:
NAME ADDRESS
Max C. Tanner 2951 E. Flamingo Rd., Suite G
Las Vegas, NV 89212
3
<PAGE>
Section 2. Powers of Board. In furtherance and not in limitation of the
powers conferred by the laws of the State of Nevada, the Board of
Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the power of
the shareholders to alter or repeal the By-Laws made by the Board of
Directors.
(b) Subject to the applicable provisions of the ByLaws then in effect, to
determine, from time to time, whether and to what extent, and at what
times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open
to shareholder inspection. No shareholder shall have any right to
inspect any of the accounts, books or documents of the Corporation,
except as permitted by law, unless and until authorized to do so by
resolution of the Board of Directors or of the Shareholders of the
Corporation;
(c) To issue stock of the Corporation for money, property,services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with the
action of the board of directors without vote or consent of the
shareholders and the judgment of the board of directors as to value
received and in return therefore shall be conclusive and said stock,
when issued, shall be fully-paid and non-assessable.
(d) To authorize and issue, without shareholder consent, obligations of
the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine, and
to pledge or mortgage, as security therefore, any real or personal
property of the Corporation, including after-acquired property;
(e) To determine whether any and, if so, what part, of the earned surplus
of the Corporation shall be paid in dividends to the shareholders,
and to direct and determine other use and disposition of any such
earned surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other lawful
purpose;
(g) To establish bonus, profit-sharing, stock option, or other types of
incentive compensation plans for the employees, including officers
and directors, of the Corporation, and to fix the amount of profits
to be
4
<PAGE>
shared or distributed, and to determine the persons to participate in
any such plans and the amount of their respective participations.
(h) To designate, by resolution or resolutions passed by a majority of
the whole Board, one or more committees, each consisting of two or
more directors, which, to the extent permitted by law and authorized
by the resolution or the By-Laws, shall have and may exercise the
powers of the Board;
(i) To provide for the reasonable compensation of its own members by By-
Law, and to fix the terms and conditions upon which such compensation
will be paid;
(j) In addition to the powers and authority herein before, or by statute,
expressly conferred upon it, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of
the laws of the State of Nevada, of these Articles of Incorporation,
and of the By-Laws of the Corporation.
Section 3. Interested Directors. No contract or transaction between this
Corporation and any of its directors, or between this Corporation and any
other corporation, firm, association, or other legal entity shall be
invalidated by reason of the fact that the director of the Corporation has
a direct or indirect interest, pecuniary or otherwise, in such
corporation, firm, association, or legal entity, or because the interested
director was present at the meeting of the Board of Directors which acted
upon or in reference to such contract or transaction, or because he
participated in such action, provided that: (1) the interest of each such
director shall have been disclosed to or known by the Board and a disin-
terested majority of the Board shall have nonetheless ratified and
approved such contract or transaction (such interested director or
directors may be counted in determining whether a quorum is present for
the meeting at which such ratification or approval is given); or (2) the
conditions of N.R.S. 78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal
liability of a director or officer of the corporation to the corporation or the
Shareholders for damages for breach of fiduciary duty as a director or officer
shall be limited to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law.
5
<PAGE>
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit or
proceeding, if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suite or proceeding, by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, does not of itself create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was
unlawful.
(b) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation, to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses including amounts
paid in settlement and attorneys' fees actually and reasonably
incurred by him in connection with the defense or settlement of the
action or suit, if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals
there from, to be liable to the corporation or for amounts paid in
settlement to the
6
<PAGE>
corporation, unless and only to the extent that the court in which
the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this Article, or in defense of any claim, issue or matter
therein, he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense.
(d) Any indemnification under subsections (a) and (b) unless ordered by a
court or advanced pursuant to subsection (e), must be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(e) Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation
as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses
to which corporate personnel other than directors or officers may
be entitled under any contract or otherwise by law.
7
<PAGE>
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the certificate or articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to sub-
section (b) or for the advancement of expenses made pursuant to
subsection (e) may not be made to or on behalf of any director
or officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(ii) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the
State of Nevada, the shareholders and the Directors shall have power to hold
their meetings, and the Directors shall have power to have an office or offices
and to maintain the books of the Corporation outside the State of Nevada, at
such place or places as may from time to time be designated in the By-Laws or
by appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be
added. All rights herein conferred on the directors, officers and shareholders
are granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
8
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 23rd day of March, 1995.
/s/ MAX C. TANNER
Max C. Tanner
STATE OF NEVADA )
)ss:
COUNTY OF CLARK )
On March 23, 1995, personally appeared before me, a Notary Public, Max C.
Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for 21st Century Vision, Inc., a Nevada corporation.
/s/ WENDY J. PULLMAN
Notary Public
[Notary stamped as follows: Notary Public - State of Nevada, County of Clark,
Wendy J. Pullman, my commission expires March 1, 1999]
[File stamped as follows: Received, March 23, 1995, Secretary of State]
9
<PAGE>
[Filed stamped as follows: "Filed in the office of the Secretary of State of
the State of Nevada, March 23, 1995"]
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
IN THE MATTER OF 21ST CENTURY VISION, INC.
We, The Law Offices of Max C. Tanner, do hereby certify that on the 23rd
day of March, 1995, we accepted the appointment as Resident Agent of the above-
entitled corporation in accordance with Sec. 78.090, NRS 1957.
Furthermore, that the principal office in this state is located at The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, City of Las Vegas
89121, County of Clark, State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March,
1995.
THE LAW OFFICES OF MAX C. TANNER
By: /s/ MAX C. TANNER
Max C. Tanner, Esq.
Resident Agent
[File stamped as follows: Received, March 23, 1995, Secretary of State]
10
THE STATE OF TEXAS
SECRETARY OF STATE
JULY 26, 1994
DAVID W. HAMMER, ATTY
17300 DALLAS PKWY STE 3010
DALLAS, TX 75248
RE:
OPTICAL RESOURCE MANAGEMENT, INC.
CHARTER NUMBER 01320605-00
IT HAS BEEN OUR PLEASURE TO APPROVE AND PLACE ON RECORD THE
ARTICLES OF
INCORPORATION THAT CREATED YOUR CORPORATION. WE EXTEND OUR BEST
WISHES FOR
SUCCESS IN YOUR NEW VENTURE.
AS A CORPORATION, YOU ARE SUBJECT TO STATE TAX LAWS. SOME
NON-PROFIT
CORPORATIONS ARE EXEMPT FROM THE PAYMENT OF FRANCHISE TAXES AND
MAY ALSO BE
EXEMPT FROM THE PAYMENT OF SALES AND USE TAX ON THE PURCHASE OF
TAXABLE ITEMS.
IF YOU FEEL THAT UNDER THE LAW YOUR CORPORATION IS ENTITLED TO BE
EXEMPT YOU
MUST APPLY TO THE COMPTROLLER OF PUBLIC ACCOUNTS FOR THE
EXEMPTION. THE
SECRETARY OF STATE CANNOT MAKE SUCH DETERMINATION FOR YOUR
CORPORATION.
IF WE CAN BE OF FURTHER SERVICE AT ANY TIME, PLEASE LET US KNOW.
VERY TRULY YOURS,
/s/ RONALD KIRK
Secretary of State
<PAGE>
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
OPTICAL RESOURCE MANAGEMENT. INC.
CHARTER NUMBER 01320605
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES
THAT THE ATTACHED ARTICLES OF INCORPORATION FOR THE ABOVE NAMED
CORPORATION
HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY, THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE
OF THE
AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS
CERTIFICATE OF
INCORPORATION.
ISSUANCE OF THIS CERTIFICATE OF INCORPORATION DOES NOT AUTHORIZE THE
USE OF A
CORPORATE NAME IN THIS STATE IN VIOLATION OF THE RIGHTS OF ANOTHER
UNDER THE
FEDERAL TRADEMARK ACT OF 1946, THE TEXAS TRADEMARK LAW, THE
ASSUMED BUSINESS OR
PROFESSIONAL NAME ACT OR THE COMMON LAW.
DATED JULY 22, 1994
EFFECTIVE JULY 22, 1994
/s/ RONALD KIRK
Secretary of State
<PAGE>
[file stamped as follows: FILED, In the Office of the Secretary of State of
Texas, JUL 22 1994, Corporations Section]
OPTICAL RESOURCE MANAGEMENT
ARTICLES OF INCORPORATION
ARTICLE ONE
The name of the corporation is OPTICAL RESOURCE MANAGEMENT, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is the transaction of any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority to
issue is Twenty-Five Million (25,000,000) shares of the par value of $0.001
each.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of shares consideration of the value of One Thousand Dollars ($1,000)
consisting of money, labor done, or property actually received.
ARTICLE SIX
The street address of its initial registered office is 10124 Brentridge Court,
Dallas, Texas 75243, and the name of its initial registered agent at such
address is George E. Orm III, O.D.
ARTICLE SEVEN
The number of directors constituting the initial board of directors is One (1),
and the name and address of the person who is to serve as director until the
first annual meeting of the shareholders or until his successor is elected and
qualified is:
George E. Orm III, O.D.
10124 Brentridge Court
Dallas, Texas 75243
<PAGE>
ARTICLE EIGHT
The name and address of the incorporator is:
George E. Orm III, O.D.
10124 Brentridge Court
Dallas, Texas 75243
/s/ GEORGE E. ORM III, O.D.
George E. Orm III, O.D.
Incorporator
STATE OF TEXAS }
COUNTY OF DALLAS }
Before me, a notary public, on this day personally appeared GEORGE E. ORM III,
O.D., known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
therein contained are true and correct.
Given under my and seal of office this ______ day of July, A.D., 1994.
_____________________________
(Printed or stamped name)
Notarial Seal Notary Public, State of Texas
My commission expires:
_________________ ______, 19_____.
BY-LAWS OF
21st CENTURY VISION, INC.,
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders shall
be held at such date and time as shall be designated by the board of directors
and stated in the notice of the meeting or in a duly-executed waiver of notice
thereof. If the corporation shall fail to provide notice of the annual meeting
of the shareholders as set forth above, the annual meeting of the shareholders
of the corporation shall be held during the month of November or December of
each year as determined by the Board of Directors, for the purpose of electing
directors of the corporation to serve during the ensuing year and for the
transaction of such other business as may properly come before the meeting. If
the election of the directors is not held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the
president shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may
be called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be trans-
acted at any special meeting at any adjournment thereof. However, no business
shall be acted upon at a special meeting, except that referred to in the notice
calling the meeting, unless all of the outstanding capital stock of the
corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
<PAGE>
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders of
record written or printed notice of any meeting at least ten (10) days,
but not more than sixty (60) days, before the date of such meeting; which
notice shall state the place, date and time of the meeting, the general
nature of the business to be transacted, and, in the case of any meeting
at which directors are to be elected, the names of nominees, if any, to be
presented for election.
(b) In the case of any meeting, any proper business may be presented
for action, except that the following items shall be valid only if the
general nature of the proposal is stated in the notice or written waiver
of notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or another firm,
association, or corporation in which one or more of its directors has
a material financial interest;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution of
the corporation.
(c) The notice shall be personally delivered or mailed by first
class mail to each shareholder of record at the last known address
thereof, as the same appears on the books of the corporation, and the
giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address of
any shareholder does not appear upon the books of the corporation, it will
be sufficient to address any notice to such shareholder at the principal
office of the corporation.
(d) The written certificate of the person calling any meeting, duly
sworn, setting forth the substance of the notice, the time and place the
notice was mailed or personally delivered to the several shareholders, and
the addresses to which the notice was mailed shall be prima facie evidence
of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in
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person or by proxy, such meeting shall be valid for all purposes without call
or notice, and at such meeting any corporate action may be taken.
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date as a
record date for the determination of the shareholders entitled to notice
of any meeting or to vote or entitled to receive payment of any dividend
or other distribution or allotment of any rights or entitled to exercise
any rights in respect of any other lawful action. The record date so
fixed shall not be more than sixty (60) days prior to the date of such
meeting nor more than sixty (60) days prior to any other action. When a
record date is so fixed, only shareholders of record on that date are
entitled to notice of and to vote at the meeting or to receive the
dividend, distribution or allotment of rights, or to exercise their
rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then (1)
the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining share-
holders entitled to give consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which written consent is given; and (3) the record
date for determining shareholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date
of such other action, whichever is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the issued and
outstanding shares of the corporation represented in person or by proxy,
shall constitute a quorum.
(b) If less than a majority of the issued and outstanding shares are
represented, a majority of shares so represented may adjourn from time to
time at the meeting, until holders of the amount of stock required to
constitute a quorum shall be in attendance. At any such adjourned meeting
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at which a quorum shall be present, any business may be transacted which
might have been transacted as originally called. When a shareholders'
meeting is adjourned to another time or place, 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 the adjournment is for
more than ten (10) days in which event notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly authorized
proxy or attorney-in-fact shall be entitled to one (1) vote for each share
of stock standing registered in such shareholder's name on the books of
the corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's
duly authorized proxy or attorney-in-fact. With respect to shares held by
a representative of the estate of a deceased shareholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon
proof of capacity, even though the shares do not stand in the name of such
holder. In the case of shares under the control of a receiver, the
receiver may cast votes carried by such shares even though the shares do
not stand in the name of the receiver provided that the order of the court
of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the
name of a minor, votes may be cast only by the duly-appointed guardian of
the estate of such minor if such guardian has provided the corporation
with written notice and proof of such appointment.
(c) With respect to shares standing in the name of a corporation on
the record date, votes may be cast by such officer or agents as the by-
laws of such corporation prescribe or, in the absence of an applicable
by-law provision, by such person as may be appointed by resolution of the
Board of Directors of such corporation. In the event no person is so
appointed, such votes of the corporation may be cast by any person
(including the officer making the authorization) authorized to do so by
the Chairman of the Board of Directors, President or any Vice President of
such corporation.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast by shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if
any, in a
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fiduciary capacity, no votes shall be cast with respect thereto on any
matter except to the extent that the beneficial owner thereof possesses
and exercises either a right to vote or to give the corporation holding
the same binding instructions on how to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise and shares held by two or more persons
(including proxy holders) having the same fiduciary relationship respect
in the same shares, votes may be cast in the following manner:
(1) If only one such person votes, the votes of such person
binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast pro-
portionately as split.
(f) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case
of elections of directors. If such holder entitled to vote fails to
specify the number of affirmative votes, it will be conclusively presumed
that the holder is casting affirmative votes with respect to all shares
held.
(g) If a quorum is present, the affirmative vote of holders of a
majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the shareholders, unless a vote of greater
number or voting by classes is required by the laws of the State of
Nevada, the Articles of Incorporation and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by
proxy with respect to the shares held by an instrument in writing and
subscribed to by the holder of such shares entitled to vote. No proxy shall be
valid after the expiration of six (6) months from the date of execution
thereof, unless coupled with an interest or unless otherwise specified in the
proxy. In no event shall the term of a proxy exceed seven (7) years from the
date of its execution. Every proxy shall continue
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<PAGE>
in full force and effect until its expiration or revocation. Revocation may be
effected by filing an instrument revoking the same or a duly-executed proxy
bearing a later date with the secretary of the corporation.
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and existence of
quorum;
(2) Reading and approval of the minutes of the previous meeting
or meetings;
(3) Reports of the Board of Directors, the president, treasurer
and secretary of the corporation, in the order named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting
of the shareholders are as valid as though had at a meeting duly-held after
regular call and notice if a quorum is present, either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any
business because the meeting has not been lawfully called or convened or
expressly object at the meeting to the consideration of matters not included in
the notice which are legally required to be included therein), signs a written
waiver of notice and/or consent to the holding of the meeting or an approval of
the minutes thereof. All such waivers, consents, and approvals shall be filed
with the corporate records and made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters not included in the notice if such
objection is expressly made at the beginning. Neither the business to be
transacted at nor the purpose of any regular or special
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<PAGE>
meeting of shareholders need be specified in any written waiver of notice,
except as otherwise provided in Section 1.04(b) of these By-Laws.
Section 1.12 Action Without Meeting. Any action which may be taken by
the vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or
such greater proportion as may be required by the laws of the State of Nevada,
the Articles of Incorporation, or these ByLaws. Whenever action is taken by
written consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of at
least one (1) but no more than nine (9) persons, who shall be elected at the
annual meeting of the shareholders of the corporation and who shall hold office
for one (1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board
or the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of
directors shall have the effect of removing any director prior to the
expiration of his term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the corporation,
by a majority vote, may declare vacant the office of a director who has
been declared incompetent by an order of a court of competent jurisdiction
or convicted of a felony.
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<PAGE>
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death,
resignation, removal, change in number of directors, or otherwise may be
filled by the shareholders at any regular or special meeting or any
adjourned meeting thereof or the remaining director(s) by the affirmative
vote of a majority thereof. A Board of Directors consisting of less than
the maximum number authorized in Section 2.01 of ARTICLE II constitutes
vacancies on the Board of Directors for purposes of this paragraph and may
be filled as set forth above including by the election of a majority of
the remaining directors. Each successor so elected shall hold office
until the next annual meeting of shareholders or until a successor shall
have been duly-elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders shall
constitute less than a majority of the directors then in office, any
holder or holders of an aggregate of five percent (5%) or more of the
total number of shares entitled to vote may call a special meeting of
shareholders to be held to elect the entire Board of Directors. The term
of office of any director shall terminate upon such election of a
successor.
Section 2.06 Regular Meetings. Immediately following the adjournment of,
and at the same place as, the annual meeting of the shareholders, the Board of
Directors, including directors newly elected, shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman and shall be called by the chairman upon the
request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
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<PAGE>
Section 2.09 Notice of Meetings. Except as otherwise provided in Section
2.06, the chairman shall deliver to all directors written or printed notice of
any special meeting, at least three (3) days before the date of such meeting,
by delivery of such notice personally or mailing such notice first class mail,
or by telegram. If mailed, the notice shall be deemed delivered two (2)
business days following the date the same is deposited in the United States
mail, postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, unless such attendance is for the express purpose of objecting to
the transaction of business threat because the meeting is not properly called
or convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall constitute
a quorum.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until
a quorum is present, and no notice of such adjournment shall be required.
At any adjourned meeting where a quorum is present, any business may be
transacted which could have been transacted at the meeting originally
called.
Section 2.11 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a written consent thereto is signed by all of
the members of the Board of Directors or of such committee. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board of Directors or committee. Such action by written consent shall have
the same force and effect as the unanimous vote of the Board of Directors or
committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may
be held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting
constitutes presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
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Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of Incorporation or
the laws of the State of Nevada, the Board of Directors is invested with
the complete and unrestrained authority to manage the affairs of the
corporation, and is authorized to exercise for such purpose as the general
agent of the corporation, its entire corporate authority in such manner as
it sees fit. The Board of Directors may delegate any of its authority to
manage, control or conduct the current business of the corporation to any
standing or special committee or to any officer or agent and to appoint
any persons to be agents of the corporation with such powers, including
the power to sub-delegate, and upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders at
annual meetings of the shareholders, and when called for by a majority
vote of the shareholders at a special meeting of the shareholders, a full
and clear statement of the condition of the corporation, and shall, at
request, furnish each of the shareholders with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of the
shareholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present. The
contract or act shall be valid and binding upon the corporation and upon
all the shareholders thereof, if approved and ratified by the affirmative
vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers conferred by
the laws of the State of Nevada, the Board of Directors is expressly
authorized and empowered to issue stock of the Corporation for money,
property, services rendered, labor performed, cash advanced, acquisitions
for other corporations or for any other assets of value in accordance
with the action of the Board of Directors without vote or consent of the
shareholders and the judgment of the Board of Directors as to the value
received and in return therefore shall be conclusive and said stock, when
issued, shall be fully-paid and non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board, but shall
not receive any compensation for their services as directors until such time as
the corporation is able to declare and pay dividends on its capital stock.
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Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect, from
among its members, a chairman to preside at the meetings of the Board of
Directors. The Board of Directors may also elect such other board
officers and for such term as it may, from time to time, determine
advisable.
(b) Any vacancy in any board office because of death, resignation,
removal or otherwise may be filled by the Board of Directors for the
unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting of
the Board of Directors shall be as follows:
(1) Determination of members present and existence of quorum;
(2) Reading and approval of the minutes of any previous meeting
or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it may deem advisable; prescribe their
duties; and fix their compensation.
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Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all
the duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed
by the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
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corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general perform all duties incident to the
office of the secretary. All corporate books kept by the secretary shall be
open for examination by any director at any reasonable time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may
be prescribed for him by the secretary of the corporation or by the Board of
Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf
of the corporation for collection checks, notes and other obligations, and
shall deposit all monies to the credit of the corporation in such bank or banks
or other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the
president all bills of exchange and promissory notes of the corporation, shall
also have the care and custody of the stocks, bonds, certificates, vouchers,
evidence of debts, securities and such other property belonging to the
corporation as the Board of Directors shall designate, and shall sign all
papers required by law, by these By-laws or by the Board of Directors to be
signed by the treasurer. The treasurer shall enter regularly in the books of
the corporation, to be kept for that purpose, full and accurate accounts of all
monies received and paid on account of the corporation and whenever required by
the Board of Directors, the treasurer shall render a statement of any or all
accounts. The treasurer shall at all reasonable times exhibit the books of
account to any directors of the corporation and shall perform all acts incident
to the position of treasurer subject to the control of the Board of Directors.
The treasurer shall, if required by the Board of Directors,give a bond to the
corporation in such sum and with such security as shall be approved by the
Board of Directors for the faithful performance of all the duties of the
treasurer and for restoration to the corporation in the event of the
treasurer's death, resignation, retirement, or removal from office, of all
books, records, papers, vouchers, money and other property belonging to the
corporation. The expense of such bond shall be borne by the corporation.
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Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may
be prescribed by the treasurer of the corporation or by the Board of Directors,
and the Board of Directors may require the assistant treasurer to give a bond
to the corporation in such sum and with such security as it may approve,for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's
death, resignation, retirement or removal from office, of all books, records,
papers, vouchers, money and other property belonging to the corporation. The
expense of such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall
be issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the
corporation and shall be signed by the president or the vice president and also
by the secretary or an assistant secretary. Each certificate shall contain the
name of the record holder, the number, designation, if any, class or series of
shares represented, a statement of summary of any applicable rights,
preferences, privileges, or restrictions thereon, and a statement that the
shares are assessable, if applicable. All certificates shall be consecutively
numbered. The name and address of the shareholder, the number of shares, and
the date of issue shall be entered on the stock transfer books of the
corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been canceled, except
that in case of a lost, stolen, destroyed or mutilated certificate, a new one
may be issued therefor. However, any shareholder applying for the issuance of
a stock certificate in lieu of one alleged to have been lost, stolen, destroyed
or mutilated shall, prior to the issuance of a replacement, provide the
corporation with his, her or its affidavit of the facts surrounding the loss,
theft, destruction or mutilation and an indemnity bond in an amount and upon
such terms
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as the treasurer, or the Board of Directors, shall require. In no case shall
the bond be in amount less than twice the current market value of the stock and
it shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue
a new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time
to be fixed by the Board of Directors. The order may provide that a holder of
any certificate(s) ordered to be surrendered shall not be entitled to vote,
receive dividends or exercise any other rights of shareholders until the holder
has complied with the order provided that such order operates to suspend such
rights only after notice and until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all
certificates for shares of stock to bear the signature of such transfer agent
and such registrar of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period of ten (10) days prior to all meetings of the shareholders
and shall be closed for the payment of dividends as provided in Article V
hereof and during such periods as, from time to time, may be fixed by the Board
of Directors, and, during such periods, no stock shall be transferable.
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Section 4.08 Miscellaneous. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of the
laws of the State of Nevada and the Articles of Incorporation, by the Board of
Directors at any regular or special meeting and may be paid in cash, property,
shares of corporate stock, or any other medium. The Board of Directors may fix
in advance a record date, as provided in Section 1.06 of these By-laws, prior
to the dividend payment for the purpose of determining shareholders entitled to
receive payment of any dividend. The Board of Directors may close the stock
transfer books for such purpose for a period of not more than ten (10) days
prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation
in the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the corporation may have
an office in any other state or territory as the Board of Directors may
designate.
Section 6.02 Records. The stock transfer books and a certified copy of
the By-laws, Articles of Incorporation, any amendments thereto, and the minutes
of the proceedings of the shareholders, the Board of Directors, and committees
of the Board of Directors shall be kept at the principal office of the
corporation for the inspection of all who have the right to see the same and
for the transfer of stock. All other books of the corporation shall be kept at
such places as may be prescribed by the Board of Directors.
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Section 6.03 Financial Report on Request. Any shareholder or share-
holders holding at least five percent (5%) of the outstanding shares of any
class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period of
the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such
period. In addition, if no annual report for the last fiscal year has been
sent to shareholders, such shareholder or shareholders may make a request for a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year. The statement
shall be delivered or mailed to the person making the request within thirty
(30) days thereafter. A copy of the statements shall be kept on file in the
principal office of the corporation for twelve (12) months, and such copies
shall be exhibited at all reasonable times to any shareholder demanding an
examination of them or a copy shall be mailed to each shareholder. Upon
request by any shareholder, there shall be mailed to the shareholder a copy of
the last annual, semiannual or quarterly income statement which it has prepared
and a balance sheet as of the end of the period. The financial statements
referred to in this Section 6.03 shall be accompanied by the report thereon, if
any, of any independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that such financial
statements were prepared without audit from the books and records of the
corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of proceedings of
the shareholders and the Board of Directors and committees of the Board of
Directors shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to such
holder's interest as a shareholder or as the holder of such voting trust
certificate. This right of inspection shall extend to the records of the
subsidiaries, if any, of the corporation. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
(b) Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records and documents of every kind
and to inspect the physical properties of the corporation and/or its
subsidiary corporations. Such inspection may be made in person or by
agent or attorney, and the right of inspection includes the right to copy
and make extracts.
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Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall
be the calendar year or such other term as may be fixed by resolution of the
Board of Directors.
Section 6.07 Reserves. The Board of Directors may create, by resolution,
out of the earned surplus of the corporation such reserves as the directors
may, from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends or to repair or maintain any property
of the corporation, or for such other purpose as the Board of Directors may
deem beneficial to the corporation, and the directors may modify or abolish any
such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited
by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be so involved in any threatened, pending or completed action
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its
favor (collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan or other entity or enterprise, against all Expenses and Liabilities
actually and reasonably incurred by him in connection with such Proceeding.
The right to indemnification conferred in this Article shall be presumed to
have been relied upon by the directors, officers, employees and agents of the
corporation and shall be enforceable as a contract right and inure to the
benefit of heirs, executors and administrators of such individuals.
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Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide
(i) that the Expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding, must be paid by the corporation as they
are incurred and in advance of the final disposition of any such action, suit
or proceeding provided that, if required by Nevada Law at the time of such
advance, the officer or director provides an undertaking to repay such amounts
if it is ultimately determined by a court of competent jurisdiction that such
individual is not entitled to be indemnified against such expenses, (iii) that
the Indemnitee shall be presumed to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out
of his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred, paid
or accrued, (ii) all attorneys' fees, retainers, court costs, transcripts,
fees of experts, witness fees, travel expenses, food and lodging expenses
while traveling, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service, freight or other transportation fees
and expenses, (iii) all other
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disbursements and out-of-pocket expenses, (iv) amounts paid in settlement,
to the extent permitted by Nevada Law, and (v) reasonable compensation for
time spent by the Indemnitee for which he is otherwise not compensated by
the corporation or any third party, actually and reasonably incurred in
connection with either the appearance at or investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a right
to indemnification under any agreement or arrangement, this Article, the
Nevada Law or otherwise; provided, however, that "Expenses" shall not
include any judgments or fines or excise taxes or penalties imposed under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type whatsoever,
including, but not limited to, judgments or fines, ERISA or other excise
taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised
Statutes as amended and in effect from time to time or any successor or
other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through 7.04 of
these bylaws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including this
Paragraph, of these Bylaws may be amended by the stockholders only by vote
of the holders of sixty-six and two-thirds percent (66 2/3%) of the entire
number of shares of each class, voting separately, of the outstanding
capital stock of the corporation (even though the right of any class to
vote is otherwise restricted or denied); provided, however, no amendment
or repeal of this Article shall adversely affect any right of any
Indemnitee existing at the time such amendment or repeal becomes
effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph
of these Bylaws may be amended or repealed by the Board of Directors only
by vote of eighty percent (80%) of the total number of Directors and the
holders of sixty-six and two-thirds percent (66 2/3) of the entire number
of shares of each class, voting separately, of the outstanding capital
stock of the corporation (even though the right of any class to vote is
otherwise restricted or denied); provided, however, no amendment or repeal
of this Article shall adversely affect any right of any Indemnitee
existing at the time such amendment or repeal becomes effective.
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ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may be
made at any regular or special meeting of the Board of Directors by a vote of
not less than all of the entire Board, or may be made by a vote of, or a
consent in writing signed by the holders of a majority of the issued and
outstanding capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board
of Directors at which a quorum is present by an affirmative vote of a majority
of the directors present or by the unanimous consent of the Board of Directors
in accordance with Section 2.11 of these By-laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the Corporation,
do hereby certify that the foregoing By-laws were adopted by the Board of
Directors on the 23rd day of March, 1995.
/s/ GARY BOHALL, SECRETARY
Gary Bohall, Secretary
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BYLAWS
OF
OPTICAL RESOURCE MANAGEMENT, INC.
TABLE OF CONTENTS
Art. 1: Offices
1.01 Registered Office & Agent
1.02 Other Offices
Art. 2: Shareholders
2.01 Place of Meetings
2.02 Annual Meetings
2.03 Voting List
2.04 Special Meetings
2.05 Notice
2.06 Quorum
2.07 Majority Vote; Withdrawal of Quorum
2.08 Method of Voting
2.09 Record Date; Closing Transfer Books
2.10 Action Without Meeting
2.11 Order of Business at Meetings
Art. 3: Directors
3.01 Management
3.02 Number; Qualification; Election; Term
3.03 Change in Number
3.04 Removal
3.05 Vacancies
3.06 Election of Directors
3.07 Place of Meetings
3.08 First Meetings
3.09 Regular Meetings
3.10 Special Meetings
3.11 Quorum; Majority Vote
3.12 Compensation
3.13 Procedure
3.14 Action Without Meeting
3.15 Interested Directors, Officers and
Shareholders
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Art. 4: Executive Committee
4.01 Designation
4.02 Number; Qualification; Term
4.03 Authority
4.04 Change in Number
4.05 Removal
4.06 Vacancies
4.07 Meetings
4.08 Quorum; Majority Vote
4.09 Compensation
4.10 Procedure
4.11 Action Without Meeting
4.12 Responsibility
Art. 5: Notice
5.01 Method
5.02 Waiver
Art. 6: Officers & Agents
6.01 Number; Qualification, Election; Term
6.02 Removal
6.03 Vacancies
6.04 Authority
6.05 Compensation
6.06 President
6.07 Vice-President
6.08 Secretary
6.09 Assistant Secretary
6.10 Treasurer
6.11 Assistant Treasurer
Art. 7: Certificates and Shareholders
7.01 Certificates
7.02 Issuance
7.03 Payment for Shares
7.04 Subscriptions
7.05 Lien
7.06 Lost, Stolen or Destroyed Certificates
7.07 Registration of Transfer
7.08 Registered Owner
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Art. 8: General Provisions
8.01 Dividends and Reserves
8.02 Books and Records
8.03 Annual Statement
8.04 Checks and Notes
8.05 Fiscal Year
8.06 Seal
8.07 Indemnification
8.08 Resignation
8.09 Amendment of Bylaws
8.10 Action Without Meeting by Use of a
Conference Telephone
8.11 Construction
8.12 Table of Contents; Headings
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Article 1: Offices
1.01 Registered Office & Agent. The registered office of the corporation shall
be at 10124 Brentridge Court, Dallas, Texas 75243. The name of the registered
agent at such address is George E. Orm III, O.D.
1.02 Other Offices. The corporation may also have offices at such other places
both within and without the State of Texas as the board of directors may from
time to time determine or the business of the corporation may require.
Article 2: Shareholders
2.01 Place of Meetings. All meetings of the shareholders for the election of
directors shall be held at such time and place, within or without the State of
Texas, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.02 Annual Meeting. An annual meeting of the shareholders, commencing with
the year 1995, shall be held each year on such date and at such time and place
as may be selected by the board of directors. If such a day is a legal holiday,
then the meeting shall be on the next secular day following. At the meeting,
the shareholders shall elect directors and transact such other business as may
properly be brought before the meeting.
2.03 Voting List. At least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, with the address of each and the number of voting shares
held by each, shall be prepared by the officer or agent having charge of
the stock transfer books. The list, for the period of ten days prior to the
meeting, shall be kept on file at the registered office of the corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. The list shall also be produced and kept open at the time and
place of the meeting during the whole time thereof, and shall be subject to the
inspection of any shareholder during the whole time of the meeting.
2.04 Special Meetings. Special meetings of the shareholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, or by these Bylaws, may be called by the president, the
secretary, the board of directors, or the holders of not less than one-tenth
of all the shares entitled to vote at the meetings. Business transacted at a
special meeting shall be confined to the objects stated in the notice of the
meeting.
2.05 Notice. Written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, the
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purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the president, the secretary,
or the officer or person calling the meeting, to each shareholder of record
entitled to vote at the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at his address as it appears on the stock transfer books of the corporation,
with postage thereon paid.
2.06 Quorum. The holders of a majority of the shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be required and shall constitute a quorum at all meetings of the shareholders
for the transaction of business except as otherwise provided by statute, by the
Articles of Incorporation or by these Bylaws. If a quorum is not present or
represented at a meeting of the shareholders, the shareholders entitled to
vote, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum is presented or represented. At an adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
2.07 Majority Vote; Withdrawal of Quorum. When a quorum is present at any
meeting, the vote of the holders of a majority of the shares having voting
power, present in person or represented by proxy, shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of the statutes or of the Articles of Incorporation or of these
Bylaws, a different vote is required in which case such express provision shall
govern and control the decision of such question. The shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
2.08 Method of Voting. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation. At
any meeting of the shareholders, every shareholder having the right to vote may
vote either in person, or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
Each proxy shall be revocable unless expressly provided therein to be
irrevocable and unless otherwise made irrevocable by law. Each proxy shall be
filed with the secretary of the corporation prior to or at the time of the
meeting. Voting for directors shall be in accordance with Section 3.06 of these
Bylaws. Any vote may be taken via voice or by show of hands unless someone
entitled to vote objects, in which
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case, written ballots shall be used.
2.09 Record Date; Closing Transfer Books. The board of directors may fix in
advance a record date for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of the shareholders, the record date to be
not less than ten nor more than fifty days prior to the meeting; or the board
of directors may close the stock transfer books for such purpose for a period
of not less than ten nor more than fifty days prior to such meeting. In the
absence of any action by the board of directors, the date upon which the
notice of the meeting is mailed shall be the record date.
2.10 Action Without Meeting. Any action required by statute to be taken at a
meeting of the shareholders, or any action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof and such consent
shall have the same force and effect as a unanimous vote of the shareholders.
The signed consent, or a signed copy, shall be placed in the minute book.
2.11 Order of Business at Meetings. The order of business at annual meetings
and so far as practicable at other meetings of shareholders shall be as follows
unless changed by the board of directors:
( 1) call to order;
( 2) proof of due notice of meeting;
( 3) determination of quorum and examination of proxies;
( 4) announcement of availability of voting list (see Bylaw 2.03);
( 5) announcement of distribution of annual statement, if any (see
Bylaw 8.03);
( 6) reading and disposing of minutes of last meeting of shareholders;
( 7) reports of officers and committees;
( 8) appointment of voting inspectors;
( 9) unfinished business;
(10) new business
(11) nomination of directors;
(12) opening of polls for voting;
(13) recess;
(14) reconvening; closing of polls;
(15) report of voting inspectors;
(16) other business;
(17) adjournment.
Article 3: Directors
3.01 Management. The business and affairs of the
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corporation shall be managed by the board of directors who may exercise all
such powers of the corporation and do all lawful acts and things as are not (by
statute or by the Articles of Incorporation or by these Bylaws) directed or
required to be exercised or done by the shareholders.
3.02 Number; Qualification; Election; Term. The board of directors shall
consist of Four (4) directors, none of whom need be shareholders or residents
of any particular state. The directors shall be elected at the annual meeting
of the shareholders, except as provided in Bylaws 3.03 and 3.05. Each director
elected shall hold office until his successor shall be elected and shall
qualify.
3.03 Change in Number. The number of directors may be increased or decreased
from time to time by amendment to these bylaws but no decrease shall have the
effect of shortening the term of any incumbent director. Any directorship to
be filled by reason of an increase in the number of directors shall be filled
by election at an annual meeting or at a special meeting of shareholders called
for that purpose.
3.04 Removal. Any director may be removed either for or without cause at any
special or annual meeting of shareholders, by the affirmative vote of a
majority in number of shares of the shareholders present in person or by proxy
at such meeting and entitled to vote for the election of such director if
notice of intention to act upon such matter shall have been given in the notice
calling such meeting.
3.05 Vacancies. Any vacancy occurring in the board of directors (by death,
resignation, removal or otherwise) may be filled by an affirmative vote of a
majority of the remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
3.06 Election of Directors. Directors shall be elected by plurality vote.
3.07 Place of Meetings. Meetings of the board of directors, regular or
special, may be held either within or without the State of Texas.
3.08 First Meetings. The first meeting of each newly elected board shall be
held without further notice immediately following the annual meeting of share-
holders, and at the same place, unless (by unanimous consent of the directors
then elected and serving) such time or place shall be changed.
3.09 Regular Meetings. Regular meetings of the board of directors may be-held
without notice at such time and place as
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shall from time to time be determined by the board.
3.10 Special Meetings. Special meetings of the board of directors may be
called by the president or the secretary, on three days' notice to each
director, either personally or by mail or by telegram. Special meetings shall
be called by the president or secretary in like manner and on like notice on
the written request of two directors. Except as otherwise expressly provided by
statute, or by the Articles of Incorporation, or by these Bylaws, neither the
business to be transacted at, nor the purpose of, any special meeting need
be specified in a notice or waiver of notice.
3.11 Quorum; Majority Vote. At all meetings of the board of directors a
majority of the number of directors fixed by these Bylaws shall constitute a
quorum for the transaction of business. The act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
board of directors, except as otherwise specifically provided by statute, or by
the Articles of Incorporation or by these Bylaws. If a quorum is not present at
a meeting of the board of directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
3.12 Compensation. By resolution of the board of directors, the directors may
be paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of the executive committee or of
special or standing committees may, by resolution of the board of directors,
be allowed like compensation for attending committee meetings.
3.13 Procedure. The board of directors shall keep regular minutes of its
proceedings. The minutes shall be placed in the minute book of the corporation.
3.14 Action Without Meeting. Any action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all the members of
the board of directors. Such consent shall have the same force and effect as a
unanimous vote at a meeting. The signed consent, or a signed copy, shall be
placed in the minute book.
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3.15 Interested Directors, Officers and Shareholders.
(a) Validity. If paragraph (b) below is satisfied, no contract or other
transaction between the corporation and any of its directors, officers or
shareholders (or any corporation or firm which any of them are directly or
indirectly interested) shall be invalid solely because of this relationship
or because of the presence of such director, officer or shareholder at the
meeting authorizing such contract or transaction, or his participation in
such meeting or authorization.
(b) Disclosure; Approval; Fairness. Paragraph (a) above shall apply only
if:
(1) The material facts of the relationship or interest of each such
director, officer or shareholder are known or disclosed:
a. to the board of directors and it nevertheless authorizes
or ratifies the contract or transaction by a majority of
the directors present, each such interested director to be
counted in determining whether a quorum is present but not
in calculating the majority necessary to carry the vote; or
b. to the shareholders and they nevertheless authorize or
ratify the contract or transaction by a majority of the
shares present, each such interested person to be counted
for quorum and voting purposes; or
(2) the contract or transaction is fair to the corporation as of
the time it is authorized or ratified by the board of directors, a
committee of the board, or the shareholders.
(c) Non-Exclusive This provision shall not be construed to invalidate a
contract or transaction which would be valid in the absence of this
provision.
Article 4: Executive Committee
4.01 Designation. The board of directors may, by resolution adopted by a
majority of the whole board, designate an executive committee.
4.02 Number; Qualification; Term. The executive committee
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shall consist of one or more directors, one of whom shall be the president. The
executive committee shall serve at the pleasure of the board of directors.
4.03 Authority. The executive committee, to the extent provided in such
resolution, shall have and may exercise all of the authority of the board of
directors in the management of the business and affairs of the corporation,
except where action of the full board of directors is required by statute
or by the Articles of Incorporation, and shall have power to authorize the seal
of the corporation to be affixed to all papers which may require it.
4.04 Change in Number. The number of executive committee members may be
increased or decreased from time to time by resolution adopted by a majority of
the whole board of directors.
4.05 Removal. Any member of the executive committee may be removed by the
board of directors by the affirmative vote of a majority of the whole board,
whenever in its judgment the best interests of the corporation will be served
thereby.
4.06 Vacancies. A vacancy occurring in the executive committee (by death,
resignation, removal or otherwise) may be filled by the board of directors in
the manner provided for original designation in paragraph 4.01.
4.07 Meetings. Time, place and notice (if any) of executive committee meetings
shall be determined by the executive committee.
4.08 Quorum, Majority Vote. At meetings of the executive committee, a majority
of the number of members designated by the board of directors shall constitute
a quorum for the transaction of business. The act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
executive committee, except as otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws. If a quorum is not present
at a meeting of the executive committee, the members present thereat may
adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present.
4.09 Compensation. See paragraph 3.12.
4.10 Procedure. The executive committee shall keep regular minutes of its
proceedings and report the same to the board of directors when required. The
minutes of the proceedings of the executive committee shall be placed in the
minute book of the corporation.
4.11 Action Without Meeting. Any action required or permitted to be taken at a
meeting of the executive committee may be taken without a meeting if a consent
in writing, setting forth the action
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so taken, is signed by all the members of the executive committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting. The
signed consent, or a signed copy, shall be placed in the minute book.
4.12 Responsibility. The designation of an executive committee and the
delegation of authority to it shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed upon it or him
by law.
Article 5: Notice
5.01 Method. Whenever, by statute or the Articles of Incorporation or these
Bylaws, notice is required to be given to a director or a shareholder, and no
provision is made as to how the notice shall be given, it shall not be
construed to mean personal notice, but any such notice may be given (a) in
writing, by mail, postage prepaid, addressed to the director or shareholder at
the address appearing on the books of the corporation, or (b) in any other
method permitted by law. Any notice required or permitted to be given by mail
shall be deemed given at the time when the same is thus deposited in the United
States mails.
5.02 Waiver. Whenever, by statute or the Articles of Incorporation or these
Bylaws, notice is required to be given to a shareholder or a director, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stamped in such notice, shall be equivalent to
the giving of such notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Article 6: Officers and Agents
6.01 Number: Qualification; Election: Term.
(a) The corporation shall have:
(1) a president, a vice-president, a secretary and a treasurer; and
(2) Such other officers (including a chairman of the board and
additional vice-presidents) and assistant officers and agents as the
board of directors may think necessary.
(b) No officer or agent need be a shareholder, a director or a resident
of any particular state.
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(c) Officers named in Sec. 6.01(a)(1) shall be elected by the board of
directors on the expiration of an officer's term or whenever a vacancy
exists. Officers and agents named in Sec. 6.01(a)(2) may be elected by the
board at any meeting.
(d) Unless otherwise specified by the board at the time of election or
appointment, or in an employment contract approved by the board, each
officer's and agent's term shall end at the first meeting of directors
after the next annual meeting of shareholders. He shall serve until the end
of his term, or, if earlier, his death, resignation, or removal.
(e) Any two or more offices may be held by the same person.
6.02 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.03 Vacancies. Any vacancy occurring in any office of the corporation (by
death, resignation, removal or otherwise) may be filled by the board of
directors.
6.04 Authority. Officers and agents shall have such authority and perform such
duties in the management of the corporation as are provided in these Bylaws or
as may be determined by resolution of the board of directors not inconsistent
with these Bylaws.
6.05 Compensation. The compensation of officers and agents shall be fixed from
time to time by the board of directors.
6.06 President. The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the shareholders and the board
of directors, shall have general and active management of the business and
affairs of the corporation, shall see that all orders and resolutions of the
board are carried into effect. He shall perform such other duties and have such
other authority and powers as the board of directors may from time to time
prescribe.
6.07 Vice-President. The vice-presidents in the order of their seniority
unless otherwise determined by the board of directors, shall, in the absence or
disability of the president, perform the duties and have the authority and
exercise the powers of the president. They shall perform such other duties and
have
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such other authority and powers as the board of directors may from time to time
prescribe or as the president may from time to time delegate.
6.08 Secretary.
(a) The secretary shall attend all meetings of the board of directors and
all meetings of the shareholders and record all votes and the minutes of
all proceedings in a book to be kept for the purpose and shall perform like
duties for the executive committee when required.
(b) He shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the board of directors.
(c) He shall keep in safe custody the seal of the corporation and, when
authorized by the board of directors or the executive committee, affix the
same to any instrument requiring it, and when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an
assistant secretary.
(d) He shall be under the supervision of the president. He shall perform
such other duties and have such other authority and powers as the board of
directors may from time to time prescribe or as the president may from time
to time delegate.
6.09 Assistant Secretary. The assistant secretaries in the order of their
seniority, unless otherwise determined by the board of directors, shall, in the
absence or disability of the secretary, perform the duties and have the
authority and exercise the powers of the secretary. They shall perform such
other duties and have such other powers as the board of directors may from time
to time prescribe or as the president may from time to time delegate.
6.10 Treasurer.
(a) The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements of the corporation and shall deposit all monies and other
valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
(b) He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and
shall
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render to the president and directors, at the regular meetings of the
board, or whenever they may require it, an account of all his transactions
as treasurer and of the financial condition of the corporation.
(c) If required by the board of directors, he shall give the corporation
a bond in such form, in such sum, and with such surety or sureties as
shall be satisfactory to the board for the faithful performance of the
duties of his office in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging
to the corporation.
(d) He shall perform such other duties and have such other authority and
powers as the board of directors may from time to time prescribe or as the
president may from time to time delegate.
6.11 Assistant Treasurer. The assistant treasurers in the order of their
seniority, unless otherwise determined by the board of directors, shall, in the
absence or disability of the treasurer, perform the duties and have the
authority and exercise the powers of the treasurer. They shall perform such
other duties and have such other powers as the board of directors may from
time to time prescribe or the president may from time to time delegate.
Article 7: Certificates and Shareholders
7.01 Certificates. Certificates in the form determined by the board of
directors shall be delivered representing all shares to which shareholders are
entitled. Certificates shall be consecutively numbered and shall be entered in
the books of the corporation as they are issued. Each certificate shall state
on the face thereof the holder's name, the number and class of shares, the par
value of shares or a statement that such shares are without par value, and such
other matters as may be required by law. They shall be signed by the president
or a vice-president and such other officer or officers as the board of
directors shall designate and may be sealed with the seal of the corporation or
a facsimile thereof. If a certificate is countersigned by a transfer agent, or
an assistant transfer agent or registered by a registrar (either of which is
other than the corporation or an employee of the corporation), the signature of
any such officer may be a facsimile.
7.02 Issuance. Shares (both treasury and authorized but unissued) may be
issued for such consideration (not less than par value) and to such persons as
the board of directors may determine from time to time. Shares may not be
issued until the full amount of the consideration, fixed as provided by law,
has been paid.
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7.03 Payment for Shares.
(a) Kind. The consideration for the issuance of shares shall consist of
money paid, labor done (including services actually performed for the
corporation), or property, (tangible or intangible) actually received.
Neither promissory notes nor the promise of future services shall
constitute payment for shares.
(b) Valuation. In the absence of fraud in the transaction, the judgment
of the board of directors as to the value of consideration received shall
be conclusive.
(c) Effect. When consideration, fixed as provided by law, has been paid,
the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
(d) Allocation of Consideration. The consideration received for shares
shall be allocated by the board of directors, in accordance with law,
between stated capital and capital surplus accounts.
7.04 Subscriptions. Unless otherwise provided in the subscription agreement,
subscriptions of shares, whether made before or after organization of the
corporation, shall be paid in full at such time or in such installments and at
such times as shall be determined by the board of directors. Any call made by
the board of directors for payment on subscriptions shall be uniform as to all
shares of the same series, as the case may be. In case of default in the
payment on any installment or call when payment is due, the corporation may
proceed to collect the amount due in the same manner as any debt due to the
corporation.
7.05 Lien. For any indebtedness of a shareholder to the corporation, the
corporation shall have a first and prior lien on all shares of its stock owned
by him and on all dividends or other distributions declared thereon.
7.06 Lost, Stolen or Destroyed Certificates. The corporation shall issue a new
certificate in place of any certificate for shares previously issued if the
registered owner of the certificate:
(a) Claim. Makes proof in affidavit form that it has been lost,
destroyed or wrongfully taken; and
(b) Timely Request. Requests the issuance of a new certificate before
the corporation has notice that the certificate has been acquired by a
purchaser
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for value in good faith and without notice of an adverse claim; and
(c) Bond. Gives a bond in such form, and with such surety or sureties,
with fixed or open penalty, as the corporation may direct, to indemnify
the corporation (and its transfer agent and registrar, if any) against any
claim that may be made on account of the alleged loss, destruction, or
theft of the certificate; and
(d) Other Requirements. Satisfies any other reasonable requirements
imposed by the corporation. When a certificate has been lost, apparently
destroyed or wrongfully taken, and the holder of record fails to notify
the corporation within a reasonable time after he has notice of it, and
the corporation registers a transfer of the shares represented by the
certificate before receiving such notification, the holder of record is
precluded from making any claim against the corporation for the transfer
or for a new certificate.
7.07 Registration of Transfer. The corporation shall register the transfer of
a certificate for shares presented to it for transfer, if:
(a) Endorsement. The certificate is properly endorsed by the registered
owner or by his duly authorized agent; and
(b) Guaranty and Effectiveness of Signature. The signature of such
person has been guaranteed by a national banking association or member of
the New York Stock Exchange, and reasonable assurance is given that such
endorsements are effective; and
(c) Adverse Claims. The corporation has no notice of an adverse claim or
has discharged any duty to inquire into any such a claim; and
(d) Collection of Taxes. Any applicable law relating to the collection
of taxes has been complied with.
7.08 Registered Owner. Prior to due presentment for registration of transfer
of a certificate for shares, the corporation may treat the registered owner as
the person exclusively entitled to vote, to receive notices and otherwise to
exercise all the rights and powers of a shareholder.
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Article 8: General Provisions
8.01 Dividends and Reserves.
(a) Declaration and Payment. Subject to statute and the Articles of
Incorporation, dividends may be declared by the board of directors at any
regular or special meeting and may be paid in cash, in property, or in
shares of the corporation. The declaration and payment shall be at the
discretion of the board of directors.
(b) Record Date. The board of directors may fix in advance a record date
for the purpose of determining shareholder entitled to receive payment of
any dividend, the record date to be not more than fifty days prior to the
payment date of such dividend, or the board of directors may close the
stock transfer books for such purpose for a period of not more than fifty
days prior to the payment date of such dividend. In the absence of any
action by the board of directors, the date upon which the board of
directors adopts the resolution declaring the dividend shall be the record
date.
(c) Reserves. By resolution, the board of directors may create such
reserve or reserves out of the earned surplus of the corporation as the
directors from time to time, in their discretion, think proper to provide
for contingencies, or to equalize dividends, or to repair or maintain any
property of the corporation, or for any other purpose they think
beneficial to the corporation. The directors may modify or abolish any
such reserve in the manner in which it was created.
8.02 Books and Records. The corporation shall keep correct and complete books
and records of accounts and shall keep minutes of the proceedings of its share-
holders and board of directors, and shall keep at its registered office or
principal place of business or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of shares held by each.
8.03 Annual Statement. The board of directors shall mail to each shareholder
of record, at least ten days before each annual meeting a full and clear
statement of the business and condition of the corporation, including a
reasonably detailed balance sheet, income statement, and surplus statement.
8.04 Checks and Notes. All checks or demands for money and notes of the
corporation shall be signed by such officer or
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officers or such other person or persons as the board of directors may from
time to time designate.
8.05 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
8.06 Seal. The corporate seal (of which there may be one or more exemplars)
shall contain the name of the corporation and the name of the state of
incorporation. The seal may be used by impressing it or reproducing a facsimile
of it, or otherwise.
8.07 Indemnification: Insurance.
(a) Standard. The corporation may indemnify any person who was, is, or
is threatened to be made, a named defendant or respondent in a proceeding
because such person is or was a director of the corporation if such
person:
(1) conducted himself in good faith;
(2) reasonably believed:
a. in the case of conduct in his official capacity as a director
of the corporation, that his conduct was in the corporation's best
interest; and
b. in all other cases that his conduct was at least not opposed to
the corporation's best interest; and
(3) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.
(b) Determination. A determination of indemnification under paragraph
(a) must be made:
(1) by a majority vote of a quorum of the board of directors
consisting of directors who at the time of the vote are not named
defendants or respondents in the proceeding; or
(2) if such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated to act in the matter by a
majority vote of all the directors, which committee shall consist of two
or more directors who at the time of the vote are not named defendants
or respondents in the proceeding; or
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(3) by special legal counsel selected by the board of directors, or by
a committee of the board, by a vote as set forth in the immediately
preceding subparagraphs (1) or (2), or, if such a quorum cannot be
obtained, or such a committee cannot be established, by a majority vote
of all directors; or
(4) by the shareholders in a vote or by written consent that excludes
the shares held by directors who are named defendants or respondents in
the proceeding.
(c) Personal Benefit or Liability to the Corporation. A director may not
be indemnified under paragraph (a) for obligations resulting from a
proceeding:
(1) in which a person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(2) in which the person is found liable to the corporation.
(d) Expenses. A person may be indemnified under paragraph (a) against
judgments, penalties (including excise and similar taxes), fines,
settlements, and reasonable expenses actually incurred by the person in
connection with the proceeding; but if the proceeding was brought by or in
behalf of the corporation, then indemnification shall be limited to
reasonable expenses actually incurred by the person in connection with the
proceeding.
(e) Authorization of Indemnification. Authorization of indemnification
and determination as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is permissible,
except that if the determination that indemnification is permissible is
made by special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses must be made in the manner
specified by subparagraph 3 of paragraph (b) for the selection of special
legal counsel.
(f) Directors. The corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding in
which he is a party because he is a director if he has been
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wholly successful, on the merits or otherwise, in the defense of the
proceeding or if a court determines that a director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he has met any of the requirements set forth
herein.
(g) Payment or Reimbursement. Reasonable expenses incurred by a director
who was, is, or is threatened to be made a named defendant or respondent
in the proceeding may be paid or reimbursed by the corporation in advance
of the final disposition of the proceeding after:
(1) The corporation receives a written affirmation by the director of
his good faith belief that he has met the standard of conduct necessary
for indemnification and written undertaking by or on behalf of the
director to repay the amount paid or reimbursed if it is ultimately
determined that he has not met such standard; and
(2) A determination that the facts then known to those making the
determination would not preclude indemnification. Determinations and
authorizations of payments shall be made in the manner specified in
paragraph (b) for determining if indemnification is permissible.
(h) Witness. The corporation may pay or reimburse expenses incurred by a
director in connection with his appearance as a witness or other
participation in a proceeding at a time when he is not a named defendant
or respondent in the proceeding.
(i) Officers. An officer of the corporation shall be indemnified as, and
to the same extent, provided by paragraph (f) for a director and is
entitled to seek indemnification under that paragraph to the same extent
as a director. The corporation may indemnify and advance expenses to an
officer, employee or agent of the corporation to the same extent that it
may indemnify and advance expenses to directors.
(j) Nominees and Designees. The corporation may indemnify and advance
expenses to nominees and designees who are not or were not officers,
employees or agents of the corporation who are or were serving at the
request of the corporation as a director, officer, partner, venturer,
proprietor,
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trustee, employee, agent, or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole proprietorship,
trust, other enterprise, or employee benefit plan to the same extent that
it may indemnify and advance expenses to directors.
(k) Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation or who is or was serving in such capacity at the
request of the corporation, against any liability asserted against him and
incurred by him in such a capacity or arising out of his status as such a
person, whether or not the corporation would have the power to indemnify
him against such liability.
(l) Notice to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Section 8.07 shall be
reported in writing to the shareholders with or before the notice of the
next shareholders' meeting and within the 12 month period immediately
following the date of the indemnification or advance.
8.08 Resignation. A director, committee member, officer or agent may resign by
giving written notice to the president or the secretary. The resignation shall
take effect at the time specified therein, or immediately if no time is
specified therein. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
8.09 Amendment of Bylaws. These Bylaws may be altered, amended, or repealed at
any meeting of the board of directors or of the shareholders at which a quorum
is present, by the affirmative vote of a majority of the directors (at board
meetings) or a majority of the voting shares (at shareholders meetings) present
at such meeting, provided notice of the proposed alteration, amendment or
repeal is contained in the notice of such meeting.
8.10 Action Without Meeting By Use of A Conference Telephone. Unless otherwise
restricted by the Articles of Incorporation or Bylaws, shareholders, members of
the board of directors, or members of any committee designated by such board,
may participate in and hold a meeting of such shareholders, board, or committee
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute; presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business of the ground that the
meeting is
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not lawfully called or convened.
8.11 Construction. Whenever the context so requires, the masculine shall
include the feminine and neuter, and the singular shall include the plural, and
conversely. If any portion of these Bylaws shall be invalid or inoperative,
then, so far as is reasonable and possible:
(a) The remainder of these Bylaws shall be considered valid and
operative; and
(b) Effect shall be given to the intent manifested by the portion held
invalid or inoperative.
8.12 Table of Contents; Headings. The table of contents and headings are for
organization, convenience and clarity. In interpreting these Bylaws, they shall
be subordinated in importance to other written material.
22
[File stamped as follows: Filed in the office of the Secretary of State of the
State of Nevada, Aug 26, 1996, C4743-95]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
21ST CENTURY VISION, INC.
Pursuant to NRS 78.385 and 78.390, the undersigned President and Secretary
of 21st Century Vision, Inc. do hereby certify:
That the following amendments to the articles of incorporation were
unanimously approved by the Board of Directors of said corporation by written
consent in lieu of a special meeting of the Board of Directors dated August 19,
1996 and by a majority of the outstanding shares entitled to vote.
Article I is hereby amended to read as follows:
The exact name of this Corporation is Eyemakers, Inc.
/s/ WAYNE ALLISON
Wayne Allison, President
/s/ DARRELL R. JOLLEY
Darrell R. Jolley, Secretary
State of Texas )
)ss.
County of Dallas )
On the 22 day of August, 1996, personally appeared before me, a Notary Public,
Wayne Allison, President of the above mentioned Corporation, who acknowledged
that he executed the above instrument.
/s/ LISA M. JONES
Signature of Notary
(Notary stamp or seal)
[Notary stamped as follows: Notary Public, State of Texas, Lisa M. Jones, My
commission expires April 26, 2000]
State of Texas )
)ss.
County of Dallas )
On the 22 day of August, 1996, personally appeared before me, a Notary Public,
Darrell R. Jolley, Secretary of the above mentioned Corporation, who
acknowledged that he executed the above instrument.
/s/ LISA M. JONES
Signature of Notary
(Notary stamp or seal)
[Notary stamped as follows: Notary Public, State of Texas, Lisa M. Jones, My
commission expires April 26, 2000]
The State of Texas
Secretary of State
Certificate of Incorporation
of
Budget Opticals of America, Inc.
Charter Number 01045999
The undersigned, as Secretary of State of the State of Texas, hereby certifies
that articles of incorporation for the above corporation, duly signed and
verified have been received in this office and are found to conform to law.
Accordingly the undersigned, as such Secretary of State, and by virtue of the
authority vested in the Secretary by law, hereby issues this certificate of
incorporation and attaches hereto a copy of the articles of incorporation.
Issuance of this certificate of incorporation does not authorize the use of the
corporate name in this state in violation of the rights of another under the
Federal Trademark Act of 1946, the Texas Trademark Law, the Assumed Business or
Professional Name Act or the common law.
Dated July 29, 1987
/s/ SECRETARY OF STATE
Secretary of State
<PAGE>
[file-stamped as follows: Filed in the Office of the Secretary of State of
Texas, Jul 29, 1987, Clerk I-B, Corporations Section]
ARTICLES OF INCORPORATION
OF
BUDGET OPTICALS OF AMERICA, INC.
JAMES C MELLON, the undersigned, natural person of the age of eighteen
(18) years or more, a citizen of the State of Texas, acting as incorporator of
a corporation under the Texas Business Corporation Act, do hereby adopt the
following Articles of Incorporation for such corporation.
ARTICLE ONE
The name of the corporation is BUDGET OPTICALS OF AMERICA, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The corporation is organized for any lawful purpose.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is 500,000 shares with no par value.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of one thousand ($100,000)
dollars, consisting of money, labor done or property actually received.
ARTICLE SIX
The post office address of its initial registered office is 504 Stewart,
Killeen, Texas 76541, and the name of its registered agent is JAMES C. MELLON.
ARTICLE SEVEN
The number of persons who will perform the functions required to be
performed by the initial board of directors is ONE, and the name and address of
such person is as follows:
JAMES C. MELLON
504 Stewart
Killeen, Texas 76541
If the corporation loses its status as a closed corporation as defined by
the Texas Business Corporation Act, a special meeting of shareholders shall be
called in the manner provided in the Texas Business Corporation Act for the
election of directors. The number of directors to be elected shall be fixed by
the shareholder's agreement of the corporation, and until changed in the manner
provided therein, shall be ONE.
ARTICLE EIGHT
Subject to the corporation's remaining a closed corporation as defined by
the Texas Business Corporation Act:
<PAGE>
The business and affairs of the corporation shall be managed by the
shareholders of the corporation rather than by a board of directors as provided
for in the Texas Business Corporation Act. Provided, however, that the
shareholders may, at any time by unanimous vote, agree to elect a board of
directors to manage the business and affairs of the corporation.
ARTICLE NINE
The following provisions are subject to the corporation's remaining a
closed corporation as defined by the Texas Business Corporation Act:
The corporation is a closed corporation; no shares and no securities
evidencing the right to acquire shares shall be issued by means of public
offering, solicitation or advertisement. All such shares and securities shall
be subject to restrictions on transfer as permitted by such Act. All issued
shares, excluding treasury shares of the corporation shall be held of record by
no more than 35 persons in the aggregate.
ARTICLE TEN
The name and address of the incorporator is:
JAMES C. MELLON, 504 Stewart, Killeen, Texas 76541
The incorporator includes all of the initial subscribers, if any, to the
corporation's shares and securities evidencing the right to acquire its shares.
IN WITNESS WHEREOF, I, JAMES C. MELLON, have executed these Articles of
Incorporation on this 28th day of July, 1987.
/s/ JAMES C. MELLON
James C. Mellon
STATE OF TEXAS
COUNTY OF BELL
I, the undersigned, a Notary Public, do hereby certify that on this 28th
day of July, 1987, personally appeared before me JAMES C. MELLON, who being by
me first duly sworn, declared that he is the person who signed the foregoing
document as incorporator and the statements therein contained are true.
/s/ LINDA WHITTAKER
Notary Public, State of Texas
My commission expires:
11/20/89
THE STATE OF TEXAS
SECRETARY OF STATE
Certificate of Merger
Budget Opticals of America, Inc.
The undersigned, as Secretary of State of the State of Texas,
hereby certifies that the attached articles of merger of
Eyemaq, Inc.
a Texas corporation
with
Budget Opticals of America, Inc.
a Texas corporation
have been received in this office and are found to conform to law.
Accordingly, the undersigned, as such Secretary of State, and by
virtue of the authority vested in the Secretary by law, hereby issues this
Certificate of Merger.
Dated Dec. 31, 1997
Effective Dec. 31, 1997
/s/ ALBERTO R. GONZALES
Alberto R. Gonzales, Secretary of State
<PAGE>
[file-stamped as follows: FILED in the Office of the Secretary of State of
Texas, Dec 31, 1997, Corporations Section]
ARTICLES OF MERGER
OF DOMESTIC CORPORATIONS
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned domestic corporations adopt the
following Articles of Merger for the purpose of merging them into one of
such corporations:
1. The Plan of Merger attached hereto, and the performance
of its terms, were duly authorized and approved by the boards of
directors and the shareholders of each of the undersigned corporations in
the manner prescribed by the Texas Business Corporation Act and the
Plan's constituent documents, which authorizations, approvals and
documents constitute all action required by the laws of the State of
Texas.
2. As to each of the undersigned corporations, the number
of shares outstanding are as follows:
Number of
Name of Shares
Corporation Outstanding Description of Shares
____________________________________________________________
Eyemaq, Inc. 500,000 Common
Budget Opticals
of America, Inc. 500,000 Common
Neither corporation has shares outstanding which are entitled to
vote as a class on such Plan.
3. As to each of the undersigned corporations, the total
number of shares voted for and against such Plan, respectively, are as
follows:
Number of Shares
---------------------------
Total Total
Name of Voted Voted
Corporation For Against
_______________________________________________
Eyemaq, Inc. 500,000 -0-
Budget Opticals
of America, Inc. 500,000 -0-
Neither corporation has shares outstanding which are either
entitled to or did as a class for or against such Plan.
1
<PAGE>
Dated August 22, 1997 EYEMAQ, INC.
By: /s/ GEORGE E. ORM III
George E. Orm, III, O.D.
Chairman of the Board
BUDGET OPTICALS OF AMERICA, INC.
By: /s/ JAMES C. MELLON
James C. Mellon
Its President
2
<PAGE>
STATE OF TEXAS )
COUNTY OF DALLAS )
Before me, a notary public, on this day personally appeared
GEORGE E. ORM III, O.D., known to me to be the person whose name
is subscribed to the foregoing document and, being by me first duly
sworn, declared that the statements therein contained are true and
correct.
Given under my and seal of office this 22nd day of August, A.D.,
1997.
/s/ KATHY CRABB
(printed or stamped name)
Notary Public, State of
Texas
(Notarial Seal)
My commission expires:
8-1, 2000
STATE OF TEXAS )
COUNTY OF DALLAS )
Before me, a notary public, on this day personally appeared
JAMES C. MELLON, known to me to be the person whose name is
subscribed to the foregoing document and, being by me first duly sworn,
declared that the statements therein contained are true and correct.
Given under my and seal of office this 22nd day of August, A.D.,
1997.
/s/ KATHY CRABB
(printed or stamped name)
Notary Public, State of
Texas
(Notarial Seal)
My commission expires:
8-1, 2000
3
<PAGE>
PLAN AND AGREEMENT OF REORGANIZATION
BY MERGER OF
EYEMAQ, INC.
WITH AND INTO
BUDGET OPTICALS OF AMERICA, INC.
UNDER THE NAME OF
BUDGET OPTICALS OF AMERICA, INC.
EYEMAQ, INC., a Texas corporation (the "Company"), and
BUDGET OPTICALS OF AMERICA, INC., a Texas corporation
("Budget Opticals"), agree as follows:
ARTICLE l
PLAN OF REORGANIZATION
1.01 A plan of reorganization of the Company and Budget
Opticals, pursuant to the provisions of Articles 5.01 through 5.13 of the
Texas Business Corporation Act and Section 368(a)(1)(A) of the
Internal Revenue Code, is adopted as follows:
(1) The Company shall be merged with and into Budget
Opticals, to exist and be governed by the laws of the State of
Texas.
(2) The name of the Surviving Corporation shall be
Budget Opticals of America, Inc.
(3) When this agreement shall become effective, the
separate existence of the Company shall cease and the Surviving
Corporation, Budget Opticals, shall succeed, without other
transfer, to all the rights and properties of the Company and shall
be subject to all the debts and liabilities of such corporation in the
same manner as if the Surviving Corporation had itself incurred
them. All rights of creditors and all liens upon the property of
each constituent corporation shall be preserved unimpaired,
limited in lien to the property affected by such liens immediately
prior to the merger.
(4) The Surviving Corporation will carry on business with
the assets of the Company, as well as with the assets of Budget
Opticals.
1
<PAGE>
(5) Eyemakers, Inc., a Nevada corporation with its
principal place of business located at 4100 McEwen, Suite 160,
Dallas, Texas 75244 ("Eyemakers"), in its capacity as the sole
shareholder of the Company, will surrender for cancellation all of
its shares in the Company in the manner hereinafter set forth.
(6) In exchange for consideration to be provided by
Eyemakers to the shareholders of Budget Opticals (the "Budget
Opticals Shareholders") and for the shares of the Company
surrendered for cancellation by Eyemakers, the Budget Opticals
Shareholders will transfer to Eyemakers, on the basis hereinafter
set forth, all of the issued and outstanding shares of the common
stock of Budget Opticals.
1.02 The effective date of the merger, hereinafter referred to as
the "Effective Date", shall be the date on which the certificate of merger
is issued by the Secretary of State of Texas.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF CONSTITUENT CORPORATIONS
2.01 As a material inducement to the Surviving Corporation to
execute this Agreement and perform its obligations hereunder, the
Company represents and warrants to the Surviving Corporation as
follows:
(1) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Texas, with corporate power and authority to own property and
carry on its business as it is now being conducted. The Company
is not required to be qualified as a foreign corporation to transact
business in any other jurisdiction.
(2) The Company has an authorized capitalization of Five
Hundred Thousand (500,000) shares of common stock, no par
value per share, of which on the date hereof, Five Hundred
Thousand (500,000) shares are validly issued and outstanding,
fully paid, and nonassessable.
(3) All required federal, state, and local tax returns of the
Company have been accurately prepared and duly and timely
filed, and all federal, state, and local taxes required to be paid
with respect to the periods covered by such returns, have been
paid. The Company has not been delinquent in the payment of
any tax, assessment, or governmental charge. The Company has
never had any tax deficiency proposed or assessed against it and
has not executed any waiver of any
2
<PAGE>
statute of limitations on the assessment or collection of any tax.
Neither the Company's federal income tax returns nor state
franchise tax returns have ever been audited by governmental
authorities.
(4) The books of account, minute books, stock certificate
books and stock transfer ledgers of the Company are complete
and correct, and there have been no transactions involving the
business of the Company which properly should have been set
forth in said respective books, other than those set forth therein.
2.02 As a material inducement to the Company to execute this
Agreement and perform its obligations hereunder, Budget Opticals
represents and warrants to the Company as follows:
(1) Budget Opticals is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Texas, with corporate power and authority to own property
and carry on its business as it is now being conducted. Budget
Opticals is not required to be qualified as a foreign corporation to
transact business in any other jurisdiction.
(2) Budget Opticals has an authorized capitalization of
Five Hundred Thousand (500,000) shares of common stock, no
par value par value each. As of the date of this Agreement, Five
Hundred Thousand (500,000) shares of the common stock are
validly issued and outstanding, fully paid, and nonassessable.
ARTICLE 3
COVENANTS, ACTIONS, AND OBLIGATIONS
PRIOR TO THE EFFECTIVE DATE
3.01 (1) Except as limited by-Subparagraph (2) of this Paragraph
3.01, pending consummation of the merger, each of the
constituent corporations will carry on its business in substantially
the same manner as heretofore and will use its best efforts to
maintain its business organization intact, to retain its present
employees, and to maintain its relationships with suppliers and
others having business relationships with it.
(2) Except with the prior consent in writing of
Eyemakers, pending consummation of the merger, Budget
Opticals shall not:
(a) Declare or pay any dividend or make any other
distribution on its shares.
3
<PAGE>
(b) Create or issue any indebtedness for borrowed
money.
(c) Enter into any transaction other than those
involved in carrying on its business in the ordinary course
of business.
3.02 This Agreement shall be submitted separately to the
shareholders of the constituent corporations in the manner provided by
the laws of the State of Texas for approval.
3.03 Except as may be expressly waived in writing by Budget
Opticals, all of the obligations of the Company are subject to the
satisfaction, prior to or on the Effective Date, of each of the following
conditions:
(1) The representations and warranties made by the
Company to Budget Opticals in Article 2 hereof shall be deemed
to have been made again on the Effective Date and shall then be
true and correct in all material respects, and Budget Opticals shall
not have discovered any material error, misstatement, or omission
therein.
(2) The Company shall have performed and complied
with all agreements and conditions required by this Agreement to
be performed and complied with by it prior to or on the Effective
Date.
(3) No action or proceeding by any governmental body or
agency shall have been threatened, asserted, or instituted to
restrain or prohibit the carrying out of the transactions
contemplated by this Agreement.
3.04 Except as may be waived in writing by the Company, all of
the obligations of Budget Opticals hereunder are subject to fulfillment,
prior to or at the Effective Date, of each of the following conditions:
(1) The representations and warranties of Budget Opticals
in this Agreement and in any document delivered pursuant hereto
shall be deemed to have been made again on the Effective Date
and shall then be true and correct, and Budget Opticals shall not
have discovered any material error, misstatement, or omission
therein.
(2) Budget Opticals shall have performed and complied
with all agreements or conditions required by this Agreement to
be performed and complied with by it prior to or on the Effective
Date.
(3) No action or proceeding by any governmental body
4
<PAGE>
or agency shall have be.en threatened, asserted or instituted to
restrain or prohibit the carrying out of the transactions
contemplated by this Agreement.
ARTICLE 4
MANNER AND BASIS OF CONVERTING SHARES
4.01 On the Effective Date, Eyemakers, in its capacity as the sole
shareholder of the shares of the common stock of the Company, shall
surrender its shares of the Company to the Company's Secretary in
exchange for shares of Budget Opticals to which Eyamakers is entitled.
4.02 Eyemakers shall be entitled to receive all of the issued and
outstanding shares of common stock of Budget Opticals, no par value
per share, in exchange for:
(i) Fifty Thousand Dollars ($50,000.00) to be transferred
to the Budget Opticals Shareholders by wire transfer to accounts
to be designated by the Budget Opticals Shareholders to
Eyemakers not less than Twenty-Four (24) hours prior to the
Closing Date; and
(ii) Six Hundred Thousand (600,000) shares of
Eyemakers' nonvoting Class B Preferred Stock to the Budget
Opticals Shareholders, having a par value $0.001 per share,
bearing a dividend rate of Five Percent (5%) per annum, being
convertible by the holders thereof into shares of Eyemakers'
common stock, $0.001 par value per share (the "Eyemakers
Common Stock"), at a conversion rate of $4.25 per share, and
being subject to redemption by Eyemakers at any time during the
two-year period commencing on the date of their issuance at a
redemption price of $4.25 per share (the "Class B Preferred").
(iii) Eyemakers hereby grants to each shareholder of
Budget Opticals the option, exercisable at any time after the
expiration of Two (2) years from the date of issuance thereof, to
cause Eyemakers to acquire any or all shares of Class B Preferred
held by them at a price equal to the par value of such shares, or
$7.50 per share.
Neither the Class B Preferred nor the Eyemakers
Common Stock to be issued upon conversion of the Class B
Preferred by the Budget Opticals Shareholders will be registered
with either the Securities and Exchange Commission ("SEC") or
any regulatory authority of any state. The Class B Preferred
Stock, the Class C Preferred and the Common Stock could thus
be sold by the Budget Opticals Shareholders only pursuant to a
subsequent registration statement filed by Eyemakers with
5
<PAGE>
the SEC or pursuant to applicable exemption from registration.
The Class B Preferred and the Eyemakers Common Stock would
therefore be "Restricted Securities," as such term in defined in
Rule 144 as promulgated by the SEC.
4.03 The presently outstanding Five Hundred Thousand
(500,000) shares of common stock of Budget Opticals, each of no par
value, shall remain outstanding as the common stock of the Surviving
Corporation and shall after the Effective Date be owned by Eyemakers.
ARTICLE 5
DIRECTORS AND OFFICERS
5.01 (1) The present Board of Directors of Budget Opticals
shall continue to serve as the Board of Directors of the Surviving
Corporation until the next annual meeting or until such time as
their successors have been elected and qualified.
(2) If a vacancy shall exist on the Board of Directors of
the Surviving Corporation on the Effective Date of the merger,
such vacancy may be filled by the Board of Directors as provided
in the bylaws of the Surviving Corporation.
(3) All persons who at the Effective Date of the merger
shall be executive or administrative officers of Budget Opticals,
shall remain as officers of the Surviving Corporation until the
Board of Directors of the Surviving Corporation shall otherwise
determine. The Board of Directors of the Surviving Corporation
may elect or appoint such additional officers as it may determine.
ARTICLE SIX
6.01 The Articles of Incorporation of Budget Opticals, as
existing on the Effective Date of the merger, shall continue in full force
as the Articles of the Surviving Corporation until altered, amended, or
repealed as provided therein or as provided by law.
ARTICLE 7
BYLAWS
7.01 The Bylaws of the Budget Opticals, as existing on the
Effective Date of the merger, shall continue in full force as the Bylaws of
the Surviving Corporation until altered, amended, or repealed as
provided therein or as provided by law.
6
<PAGE>
ARTICLE 8
NATURE AND SURVIVAL OF WARRANTIES
8.01 All statements contained in any memorandum, certificate,
letter, document, or other instrument delivered by or on behalf of the
Company, Budget Opticals or the shareholders of either pursuant to this
Agreement shall be deemed representations and warranties made by such
parties, respectively, to each other under this Agreement. The covenants,
representations and warranties of the parties and the shareholders shall
survive the Effective Date and all inspections, examinations or audits on
behalf of the parties and the shareholders for a period of three years
following the Effective Date.
ARTICLE 9
TERMINATION
9.01. This Agreement may be terminaced and the merger herein
provided for may be abandoned at any time prior to the Effective Date of
the merger:
(1) By mutual consent of the Board of Directors of the
constituent corporations.
(2) At the election of the Boards of Directors of either
constituent corporation if:
(a) The number of shareholders of either
constituent corporation, or of both, dissenting from the
merger shall be so large-as to make the merger, in the
opinion of either such Board of Directors, inadvisable or
undesirable.
(b) Any material litigation or proceeding shall be
instituted or threatened against either of the constituent
corporations, or any of its assets, which in the opinion of
either such Board of Directors, renders the merger
inadvisable or undesirable.
(c) Any legislation shall be enacted which, in the
opinion of either such Board of Directors, renders the
merger inadvisable or undesirable.
(d) Between the date of this Agreement and the
Effective Date of the merger, there shall have been, in the
opinion of either such Board of Directors, any materially
adverse change in the business or condition, financial or
otherwise, of either constituent corporation.
7
<PAGE>
9.02 In the event an. election is made to terminate this
Agreement and abandon the merger provided for herein:
(1) The President or Vice President of the constituent
corporation whose Board of Directors has made such election
shall give written notice thereof to the other constituent
corporation.
(2) Upon the giving of such notice as provided in
Subsection (1), this Agreement shall terminate and the proposed
merger be abandoned and, except for payment of its own costs
and expenses incident to this Agreement, there shall be no
liability on the part of either constituent corporation as a result of
such termination and abandonment.
ARTICLE 10
INTERPRETATION AND ENFORCEMENT
10.01 The Company hereby agrees that from time to time, as and
when requested by the Surviving Corporation or by its successors or
assigns, it will execute and deliver or cause to be executed and delivered,
all such deeds and other instruments, and will take or cause to be taken
such further or other actions as the Surviving Corporation may deem
necessary or desirable in order to vest or perfect in, or conform of record
or otherwise to, the Surviving Corporation title to and possession of all
the property, rights, privileges, powers and franchises referred to in
Article 1 hereof, and otherwise to carry out the intent and purposes of
this Agreement.
10.02 Any notice or other communication required or permitted
hereunder shall be properly given when deposited in the United States
mails for transmittal by certified or registered mail, postage prepaid, or
when deposited with a public telegraph company for transmittal, charges
prepaid, addressed:
(1) In the case of the Company, to such person and
address as the Company may furnish to Budget Opticals.
(2) In the case of Budget Opticals, to such person and
address as Budget Opticals may furnish to the Company.
10.03 This instrument and the exhibits hereto contain the entire
agreement between the parties with respect to the transaction
contemplated hereby. It may be executed in any number of counterparts,
each of which shall be deemed an original, but such counterparts
together constitute only one and the same instrument.
10.04 The validity, interpretation, and performance of this
Agreement shall be controlled by and construed under the laws of
8
<PAGE>
the State of Texas, the state in which this Agreement is being executed.
Executed on August 22, 1997 at Dallas, Texas.
COMPANY: EYEMAQ, INC.
By: /s/ GEORGE E. ORM, III
George E. Orm III, O.D.
President
BUDGET OPTICALS: BUDGET OPTICALS OF AMERICA, INC.
By: /s/ JAMES C. MELLON
James C. Mellon
President
9
BY-LAWS
ARTICLE I OFFICES
1. The registered office of the corporation shall be at 504 Stewart,
Killeen, Texas 76541 and the registered agent at such address is James C.
Mellon
2. The corporation may also have offices at such other places as the
Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II SEAL
1. The corporation seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Texas".
ARTICLE III SHAREHOLDERS' MEETING
1. Meetings of the shareholders shall be held at the registered office of
the corporation or at such other place or places, either within or without the
State of Texas, as may from time to time be selected.
2. The annual meeting of the shareholders shall be held on the 30th day of
July in each year if not a legal holiday, and if a legal holiday, then on the
next secular day following at 10 o'clock A.M., when they shall elect a Board of
Directors, and transact such other business may properly be brought before the
meeting. If the annual meeting is not held within any 13-month period, any
court of competent jurisdiction in the county in which the principal office of
the corporation is located may, on the application of any shareholder,
summarily order a meeting to be held. Failure to hold the annual meeting at
the designated time shall not work a dissolution of the
<PAGE>
corporation.
3. The presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are entitled to cast on
the particular matter shall constitute a quorum for the purpose of considering
such matter, and, unless otherwise provided by statute the acts, at a duly
organized meeting, of the shareholders present, in person or by proxy, entitled
to cast at least a majority of the votes which all shareholders present are
entitled to cast shall be the acts of the shareholders. The shareholders
present at a duly organized meeting can continue to do business until
adjournment, not-withstanding the withdrawal of enough shareholders to leave
less than a quorum.
4. Every shareholder entitled to vote at a meeting of shareholders, or to
express consent or dissent to corporate action in writing without a meeting,
may authorize another person or persons to act for him by proxy. Every proxy
shall be executed in writing by the shareholders, or by his duly authorized
attorney in fact, and filed with the Secretary of the corporation. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. A proxy shall be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by
law. Elections for directors need not be by ballot, except upon demand made by
a shareholder who intends to cumulate his votes shall give written notice of
such intention to the secretary of the corporation on or before the day
preceding the election at which such shareholder intends to cumulate his votes.
All shareholders may cumulate their votes if any shareholder gives the written
notice provided for herein. No share shall be voted at any meeting upon which
any installment is due and unpaid.
<PAGE>
5. Written notice of the annual meeting shall be given to each shareholder
entitled to vote thereat, at least ten days prior to the meeting.
6. In advance of any meeting of shareholders, the Board of Directors, may
appoint judges of elections, who need not be shareholders, to act at such
meeting or any adjournment thereof. If judges of election be not so appointed,
the chairman of any such meeting may, and on the request of any shareholder or
his proxy shall, make such appointment at any meeting. The number of judges
shall be one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares present and entitled to vote
shall determine whether one or three judges are to be appointed. On request of
the chairman of the meeting, or of any shareholder or his proxy, the judges
shall make a report in writing of any challenge or question or matter
determined by them, and execute a certificate of any fact found by them. No
person who is a candidate for office shall act as a judge.
7. Special meetings of the shareholders may be called at any time by the
President, or the Board of Directors, or shareholders entitled to cast at least
one-tenth of the votes which all shareholders are entitled to cast at the
particular meeting. At any time, upon written request of any person or persons
who have duly called a special meeting, it shall be the duty of the Secretary
to fix the date of the meeting, to be held not more than fifty days after the
receipt of the request, and to give due notice thereof.
8. Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all shareholders
entitled to vote are present and consent.
9. Written notice of a special meeting of the shareholders stating the
time and place and object thereof, shall be given to
<PAGE>
each shareholder entitled to vote thereat at least ten days before such
meeting, unless a greater period of notice is required by statute in a
particular case.
10. The officer or agent having charge of the transfer books shall make at
least ten days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
with the address of and the number of shares held by each, which list shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting, and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original share ledger or transfer book,
shall be prima facie evidence as to who are the shareholders entitled to
examine such list or share ledger or transfer book, or to vote at any meeting
of shareholders.
ARTICLE IV DIRECTORS
1. The business of this corporation shall be managed by its Board of
Directors, one in number. The directors need not be resident of this State or
shareholders in the corporation. They shall be elected by the shareholders at
the annual meeting of shareholders of the corporation, and each director shall
be elected for the term of one year, and until his successor shall be elected
and shall qualify. The Board of Directors of this corporation shall consist of
one or more members.
2. In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Bard may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
or by these By-Laws directed or required to be exercised or done by the
shareholders.
The full Board of Directors may designate from among its members an
executive committee and one or more other committees, each of which, to the
extent provided in resolution, shall have and may exercise all of the authority
of the Board of Directors, except that no such committee shall have the
authority of the Board of Directors in reference to amending the Articles of
<PAGE>
Incorporation, approving a plan of merger or consolidation, recommending to the
shareholders the sale, lease, or exchange of all or substantially all of the
property and assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, amending, altering, or
repealing the By-Laws of the corporation or adopting new By-Laws for the
corporation, filling vacancies in the Board of Directors or any such committee,
electing or removing officers or members of any such committee, fixing the
compensation of any member of such committee, or altering or repealing any
resolution of the Board of Directors which by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution or the Articles
of Incorporation, of the corporation expressly so provide, no such committee
shall have power of authority to declare a dividend or to authorize the
issuance of shares of the corporation. The designation of such committee and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
3. The meeting of the Board of Directors may be held at such place within
this State, or elsewhere, as a majority of the directors may from time to time
appoint, or as may be designated in the notice calling the meeting.
4. Each newly elected Board may meet at such place and time as shall be
fixed by the shareholders at the meeting at which such directors are elected
and no notice shall be necessary to the newly elected directors in order
legally to constitute the meeting, or they may meet at such place and time as
may be fixed by the consent in writing of all the directors.
5. Regular meetings of the Board shall be held without notice at the
registered office of the corporation, or at such other time and place as shall
be determined by the Board.
6. Special meetings of the Board may be called by the President on two
days' notice to each director, either personally or by mail or by telegram;
special meetings shall be
<PAGE>
called by the President or Secretary in like manner and on like notice on the
written request of a majority of the directors in office.
7. A majority of the directors in office shall be necessary to constitute
a quorum for the transaction of business, and the acts of a majority of the
directors present at a meeting at which a quorum is present shall be the acts
of the Board of Directors. Any action which may be taken at a meeting of the
directors may be taken without a meeting if a consent or consents in writing,
setting forth the action so taken, shall be signed by all the directors and
shall be filed with the Secretary of the corporation.
8. A director of a corporation who is present at a meeting of its Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
9. Directors as such, shall not receive any stated salary for their
services, buy by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board PROVIDED, that nothing herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
ARTICLE V OFFICERS
1. The executive officers of the corporation shall be chosen by the
directors and shall be a President, Secretary and
<PAGE>
Treasurer. The Board of Directors may also choose a Vice President, and such
other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall have such authority and shall perform such
duties as from time to time to time shall be prescribed by the Board. Any
number of offices may be held by the same person except that the President and
Secretary shall not be the same person. It shall not be necessary for the
officers to be directors.
2. The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
3. The officers of the corporation shall hold office for one year and
until their successors are chosen and have qualified. Any officer or agent
elected or appointed by the Board may be removed by the Board of Directors
whenever in its judgment the best interests of the corporation will be served
thereby.
4. The President shall be the chief executive officer of the corporation;
he shall preside at all meetings of the shareholders and directors; he shall
have general and active management of the business of the corporation, shall
see that all orders and resolutions of the Board are carried into effect,
subject, however, to the right of the directors to delegate any specific
powers, except such as may be by statute exclusively conferred on the
President, to any other officer or officers of the corporation. He shall
execute bonds, mortgages and other contracts requiring a seal, under the seal
of the corporation. He shall be EX-OFFICIO a member of all committees and
shall have the general powers and duties of supervision and management usually
vested in the office of the President of a corporation.
5. The Secretary shall attend all sessions of the Board and all meetings
of the shareholders and act as clerk thereof, and record all the votes of the
corporation and the minutes of all its transactions in a book to be kept for
that purpose; and
<PAGE>
shall perform like duties for all committees of Board of Directors when
required. He shall give, or cause to be given notice of all meetings of the
shareholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, and under whose
supervision he shall be. He shall keep in safe custody the corporate seal of
the corporation, and when authorized by the Board, affix the same to any
instrument requiring it.
6. The Treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the corporation, and shall keep the moneys of the
corporation in a separate account to the credit of the corporation. He shall
disburse the funds of the corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
directors, at the regular meeting of the Board, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the corporation.
ARTICLE VI VACANCIES
1. If the office of any officer or agent, one or more, becomes vacant for
any reason, the Board of Directors may choose a successor or successors, who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
2. Any officer or agent or member of a committee elected or appointed by
the Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, buy such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent or member of
a committee shall not of itself create contract rights.
3. Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining
<PAGE>
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose.
ARTICLE VII CORPORATE RECORDS
1. There shall be kept at the registered office or principal place of
business of the corporation an original or duplicate record of the proceedings
of the shareholders and of the directors, and the original or a copy of its
By-Laws, including all amendments or alterations thereto to date, certified by
the Secretary of the corporation. An original or duplicate share register
shall also be kept at the registered office or principal place of business or
at the office of a transfer agent of registrar, giving the names of the
shareholders, their respective addresses and the number and classes of shares
held by each.
2. Any person who shall have been a holder of record of shares for at
least six (6) months immediately preceding his demand or shall be the holder of
record of at least five percent (5%) of all the outstanding shares of a
corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent, accountant or attorney, at any
reasonable time or times, for any proper purpose, its relevant books and
records of account, minutes, and record of shareholders, and to make extracts
therefrom.
ARTICLE VIII SHARE CERTIFICATES, DIVIDENDS, ETC.
1. The share certificates of the corporation shall be numbered and
registered in the share ledger and transfer books of the corporation as they
are issue. They shall bear the corporate seal and shall be signed by the
<PAGE>
2. Transfer of shares shall be made on the books of the corporation upon
surrender of the certificates therefor, endorsed by the person named in the
certificate or by attorney, lawfully constituted in writing. No transfer shall
be made which is inconsistent with law.
3. The Board of Directors may fix a time, not more than fifty days, prior
to the date of any meeting of shareholders, or the date fixed for the payment
of any dividend or distribution, or the date for the allotment of rights, or
the date when any change or conversion or exchange of shares will be made or go
into effect, as a record date for the determination of the shareholders
entitled to notice of, or to vote at, any such meeting, or entitled to receive
payment of any such dividend or distribution, or to receive any such allotment
of rights, or to exercise the rights in respect to any such change, conversion,
or exchange or shares. In such case, only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to notice of, or
to vote at, such meeting or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after any record date fixed as aforesaid. The Board of Directors may close the
books of the corporation against transfers of shares during the whole or any
part of such period, and in such case, written or printed notice thereof shall
be mailed at least ten days before the closing thereof to each shareholder of
record at the address appearing on the records of the corporation or supplied
by him to the corporation for the purpose of notice. While the stock
transfer books of the corporation are closed, no transfer of shares shall be
made thereon. If the stock transfer books are not closed and on record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the
<PAGE>
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholdes
entitled to vote at any meeting of shareholders has been made as provided in
this article, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of stock transfer
books and the stated period of closing has expired.
4. In the event that a share certificate shall be lost, destroyed or
mutilated, a new certificate may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
5. The Board of Directors may declare and pay dividends upon the
outstanding shares of the corporation, from time to time and to such extent as
they deem advisable, in the manner and upon the terms and conditions provided
by statute and the Articles of Incorporation.
6. Before payment of any dividend there may be set aside out of the net
profits of the corporation such sum or sums as the directors, from time to
time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for repairing or maintaining any property of
the corporation, or for such other purpose as the directors shall think
conducive to the interests of the corporation, and the directors may abolish
any such reserve in the manner in which it was created.
ARTICLE IX MISCELLANEOUS PROVISIONS
1. All checks or demands for money and notes of the corporation shall be
signed by such officer or officers as the Board of directors may from time to
time designate.
2. The fiscal year of the corporation shall begin on the first day of
[sic]
3. Whenever written notice is required to be given to
<PAGE>
any person, it may be given to such person, either personally or by sending a
copy thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the
corporation for the purpose of notice. If the notice is sent by mail or by
telegraph, it shall be deemed to have been given to the person entitled thereto
when deposited in the United States mail or with a telegraph office for
transmission to such person. Such notice shall specify the place, day and hour
of the meeting and, in the case of a special meeting of shareholders, the
general nature of the business to be transacted.
4. Whenever any written notice is required by statute, or by the Articles
or By-Laws of this corporation, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Except
in the case of a special meeting of shareholders, neither the business to be
transacted at nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of a person, either in person or by proxy,
at any meeting shall constitute a waiver of notice of such meeting, except
where a person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
5. Shareholders, members of the Board of Directors, or members of any
committee designated by such Board, may participate in and hold a meeting of
such shareholders, Board, or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this section shall constitute presence in person at such meeting, except where
a person participates in the meeting for the express purpose of objecting to
the transaction of any business on the
<PAGE>
ground that the meeting is not lawfully called or convened.
6. Except as otherwise provided in the Articles or By-Laws of this
corporation, any action which may be taken at a meeting of the shareholders or
of a class of shareholders may be taken without a meeting, if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
of the shareholders who would be entitled to vote at a meeting for such purpose
and shall be filed with the Secretary of the corporation.
7. Any payments made to an officer or employee of the corporation such as
a salary, commission, bonus, interest, rent, travel or entertainment expenses
incurred by him, which shall be disallowed in whole or in part as a deductible
expense by the Internal Revenue Service, shall be reimbursed by such officer or
employee to the corporation to the full extent of such disallowance. It shall
be the duty of the directors, as a Board, to enforce payment of each such
amount disallowed. In lieu of payment by the officer or employee, subject to
the determination of the directors, proportionate amounts may be withheld from
his future compensation payments until the amount owed to the corporation has
been recovered.
8. The Board of Directors must, when requested by the holders of at least
one-third of the outstanding shares of the corporation, present written reports
of the situation and amount of business of the corporation and, subject to
limitations on the authority of the Board of Directors by provisions of law, or
the Articles of Incorporation, the Board shall declare and provide for payment
of such dividends of the profits from the business of the corporation as such
Board shall deem expedient.
ARTICLE X ANNUAL STATEMENT
1. The President and Board of Directors shall present at each annual
meeting a full and complete statement of the business
<PAGE>
and affairs of the corporation for the preceding year. Such statement shall be
prepared and presented in whatever manner the Board of Directors shall deem
advisable and need not be verified by a certified public accountant.
2. Upon the written request of any holder of record of shares of a
corporation, the corporation shall mail to such holder its annual statements
for its last fiscal year showing in reasonable detail its assets and
liabilities and the results of its operations and the most recent interim
statements, if any, which have been filed in a public record or otherwise
published. The corporation shall be allowed a reasonable time to prepare such
annual statements.
ARTICLE XI AMENDMENTS
1. The initial By-Laws of this corporation shall be adopted by its Board
of Directors. The power to alter, amend, or repeal the By-Laws or adopt new
By-Laws, subject to repeal or change by action of the shareholders, shall be
vested in the Board of Directors unless reserved to the shareholders by the
Articles of Incorporation.
(in form of certificate, two-sided)
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
Number _____________
Shares ______________
CUSIP NO. 301955 10 0
EYE MAKERS, INC.
25,000,000 Authorized Shares
$.001 Par Value
Non-Assessable
THIS CERTIFIES THAT ________________________________
IS THE RECORD HOLDER OF __________________________________
Shares of EYE MAKERS, INC. Common Stock transferrable on the books of
the Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated: __________________
(seal as follows: "Eye Makers, Inc., Corporate Seal, Nevada")
/s/ DARRELL R. JOLLEY /s/ WAYNE ALLISON
Secretary President
Countersigned and Registered
Silver State Registrar
P.O. Box 17985
Salt Lake City, Utah 84117
By:_____________________
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, _________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
________________
---------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
____________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint ___________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated______________________
___________________________________________________
NOTICE: Signature must correspond to the name as written upon the face of this
certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank, broker or any other
eligible guarantor institution that is authorized to do so under the Securities
Transfer Agents Medallion Program (STAMP) under rules promulgated by the U.S.
Securities and Exchange Commission.
[file-stamped as follows: FILED in the office of the Secretary of State of the
State of Nevada, Dec 04 1996, Dean Heller, Secretary of State, No. C4743-95]
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
OF
EYEMAKERS, INC.
Pursuant to Section 78.195 of the Nevada Revised Statutes, we the
undersigned officers of Eyemakers, Inc., a Nevada Corporation (the "Company"),
do hereby certify that 1,000,000 shares of the 5,000,000 Shares of Preferred
Stock, $.001 par value per Share, authorized by the Amended Articles of
Incorporation which shall be filed with the Nevada Secretary of State which
shall be designated Series A Preferred Stock (the "Shares") and shall contain
the following designations and preferences:
Series A Preferred Stock
The Series A Preferred Stock has been authorized by the Board of Directors
of the Company as a new series of Preferred Stock. So long as any Series A
Preferred Stock is outstanding, the Company is prohibited from issuing any
series of stock having rights senior to the Series A Preferred Stock ("Senior
Stock") without the approval of the holders of 66 2/3% of the outstanding
Series A Preferred Stock. Additionally, so long as any Series A Preferred
Stock is outstanding, the Company may not, without the approval of the holders
of at least 50% of the outstanding Series A Preferred Stock, issue any series
of stock ranking on parity with the Series A Preferred Stock ("Parity Stock")
as to dividend or liquidation rights, or having a right to vote on matters as
to which the Series A Preferred Stock is not entitled to vote, or if the
Company's stockholder equity (as defined) is less than the total liquidation
preferences of all outstanding Series A Preferred Stock.
Dividends. Holders of shares of Series A Preferred Stock will be entitled
to receive, when, as, and if declared by the Board of Directors out of funds at
the time legally available therefor, cash dividends at an annual rate of 8% and
no more, payable annually in arrears, commencing January 1, 1999. Dividends
will accrue and be cumulative from the date of first issuance of the Series A
Preferred Stock and will be payable to holders of record as they appear on the
stock books of the Company on such record dates as are fixed by the Board of
Directors.
Unless a class or series of Senior Stock or Parity Stock is authorized as
described above, the Series A Preferred Stock will be senior as to dividends to
any series or class of the Company's stock hereafter issued, and if at any time
the Company has failed to pay or declare and set apart for payment accrued and
unpaid dividends on the Series A Preferred Stock, the Company may not pay any
other dividends. The Series A Preferred Stock will have priority as to
dividends over the Common Stock and any series or class of the Company's stock
hereafter issued, and no dividend (other than dividends payable solely in
Common Stock or any other series or class of the Company's stock hereafter
issued that ranks junior as to dividends to the Series A Preferred Stock) may
be declared, paid or set apart for payment on, and no purchase, redemption or
other acquisition may be made by the Company of, any Common Stock or other
stock unless all accrued and unpaid dividends on the Series A Preferred Stock
have been paid or declared and set
Page 1
<PAGE>
apart for payment, or contemporaneously pays or declares and sets apart for
payment, all accrued and unpaid dividends for all prior periods on the Series A
Preferred Stock; and the Company may not pay dividends on the Preferred Stock
unless it has paid or declared and set apart for payment, or contemporaneously
pays or declares and sets apart for payment, all accrued and unpaid dividends
for all prior periods on any outstanding Parity Stock. Whenever all accrued
dividends are not paid in full on the Preferred Stock or any Parity Stock, all
dividends declared on the Preferred Stock and any such Parity Stock will be
declared or made pro rata so that the amount of dividends declared per share on
the Preferred Stock and any such Parity Stock will bear the same ratio amount
of dividends declared per share on the Preferred Stock and any such Parity
Stock will bear the same ratio that accrued and unpaid dividends per share on
the Preferred Stock and such Parity Stock bear to each other.
The amount of dividends payable for the initial dividend period and any
period shorter than a full dividend period will be computed on the basis of a
360 day year. No interest will be payable in respect of any dividend payment
on the Series A Preferred Stock which may be in arrears.
Preference
On the dissolution, liquidation, or winding up of the Company, the holders
of the Series A Preferred Stock shall be entitled to receive, before any
payment shall be made to the holders of Common Stock, the sum of one dollar and
eighty seven one-half cents ($1.875) per share together with, in all cases, all
past accumulated and unpaid dividends. The consolidation or merger of the
Company at any time, or from time to time, with any other corporation or
corporations, or a sale of all or substantially all of the assets of the
Company, shall not be construed as a dissolution, liquidation, or winding up of
the Company within the meaning of these provisions.
After payment of the full preferential amounts previously mentioned, the
holders of the Series A Preferred Stock shall not be entitled to any further
participation in any distribution of the assets or funds of the Company, and
the remaining assets and funds of the Company shall be divided and distributed
among the holders of the Common Shares then outstanding according to their
respective interest.
Redemption Clause
The Company, at the option of the Board of Directors, may at any time
after December 31, 1998 redeem the whole or any part, of the Series A Preferred
Shares outstanding by paying in cash the sum of $1.875 per Share, plus all
dividends accrued, unpaid, and accumulated as provided in these provisions to
and including the date of redemption ("redemption price") and by giving to each
Series A Preferred shareholder of record at his or her last known address, as
shown on the records of the Company, at least thirty but not more than sixty
days prior notice personally or in writing, by mail, postage prepaid, stating
the class or series or part of any class or series of shares to be redeemed and
the date and plan of redemption, the redemption price, and the place where each
shareholder may obtain payment of the redemption price on surrender of his or
her
Page 2
<PAGE>
respective Share certificates ("redemption notice"). Should only a part of
the outstanding Series A Preferred Shares be redeemed, the redemption shall be
affected by lot, or pro rata, as prescribed by the Board of Directors. On or
after the date fixed for redemption, each holder of Shares called for
redemption shall surrender his or her certificate for those Shares to the
Company at the place designated in the redemption notice and shall then be
entitled to receive payment of the redemption price. Should less than all the
Shares represented by any surrender certificate be redeemed, a new certificate
for the unredeemed Shares shall be issued. If the redemption notice is duly
given and if sufficient funds for the redemption are available on the date
fixed for redemption, then, whether or not the certificates that evidence the
Shares to be redeemed are surrendered, all rights with respect to the Shares
shall terminate on the date fixed for redemption, except for the right of the
holders to receive the redemption price, without interest, on surrender of
their certificate for the Shares.
If, on or prior to any date fixed for redemption of Series A Preferred
Shares as provided in this provision, the Company deposits with an escrow agent
of its choice to and as transfer agent for the Company, as a trust fund, a sum
sufficient to redeem, on the date fixed for redemption of Series A Preferred
Shares, the Shares called for redemption, with irrevocable instructions and
authority to the bank or trust company to publish the notice of redemption of
Series A Preferred Shares, or to complete the publication if previously
commenced, and to pay, or and after the date fixed for redemption or prior to
that date, the redemption price of the Shares to their respective holders on
surrender of their Share certificates, then from and after the date of the
deposit, even though that date may be prior to the date fixed for redemption,
the Shares so called be deemed to be redeemed and dividends on those Shares
shall cease to accrue after the date fixed for redemption. The deposit shall
be deemed to constitute full payment of the Shares to their holders and from
and after the date of the deposit the Shares shall be deemed to be no longer
outstanding, and the holders of those Shares shall cease to be shareholders
with respect to those Shares and shall have no rights with respect to them,
except the right to receive from the bank or trust company payment of the
redemption price of the Shares, without interest, on surrender of their
certificates for the Shares.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of shares of Series A Preferred Stock are
entitled to receive the liquidation preference of $1.875 per share, plus an
amount equal to any accrued and unpaid dividends to the payment date, and no
more, before any payment or distribution is made to the holders of Common
Stock, or any series or class of the Company's stock hereafter issued that
ranks junior as to liquidation rights to the Series A Preferred Stock. The
holders of Preferred Stock and any Parity Stock hereafter issued that rank on
a parity as to liquidation rights with the Series A Preferred Stock will be
entitled to share ratably, in accordance with the respective preferential
amounts payable on such stock, in any distribution which is not sufficient to
pay in full the aggregate of the amounts payable thereon. After payment in
full of the liquidation preference of the shares of Series A Preferred Stock,
the holders of such shares will not be entitled to any further participation in
any distribution of assets by the Company. Neither a consolidation, merger or
other business combination of the Company with or into another corporation or
other entity nor a sale or transfer of all or part of the Company's assets
for cash, securities or other property will be
Page 3
<PAGE>
considered a liquidation, dissolution or winding up of the Company.
Conversion Rights of Series A Preferred Stock.
Automatic Conversion. If at any time after the initial issuance thereof
the closing price of the Common Stock is reported on the NASD Bulletin Board
(or the closing sale price as reported on any national securities exchange on
which the Common Stock is then listed), shall, for a period of 10 consecutive
trading days, exceed $5.00, then effective as of the closing of business on the
tenth such trading day, all shares of Series A Preferred Stock then outstanding
and all accrued and undeclared dividends thereon shall immediately and
automatically without further notice be converted into shares of Common Stock
at a rate of $1.875 per share.
Optional Conversion. At any time after the initial issuance of the Series
A Preferred Stock and prior to the redemption thereof, the holder of any shares
of Series A Preferred Stock will have the right, at the holder's option, to
convert any or all such shares and all accrued and undeclared dividends thereon
into shares of Common Stock which Conversion Price may be decreased as
described below. The amount which shall be convertible at the Conversion Price
shall be the total of the liquidation preference ($1.875 per share of Series A
Preferred Stock) plus all accrued and undeclared dividends through the end of
the calendar month in which the conversion is effected. If the Series A
Preferred Stock has been called for redemption, the conversion right shall
terminate at the close of business on the last business day prior to the date
fixed for redemption (unless the Company defaults in the payment of the
redemption price.)
Fractional shares of common stock will be rounded to the nearest full
share upon conversion. The Conversion Price will be subject to adjustment in
certain events, including: subdivisions or combinations of the Common Stock; or
the distribution to all holders of Common Stock of evidences of indebtedness of
the Company, cash (excluding ordinary cash dividends), other assets or rights
or Warrants to subscribe for or purchase any securities. No adjustment in the
Conversion Price will be required to be made until cumulative adjustments
amount to 1% or more of the Conversion Price as last adjusted; however, any
adjustment not made shall be carried forward.
The Company from time to time may decrease the Conversion Price by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days notice of such decrease. The Company may, at its option, make
such decreases in the Conversion Price, in addition to those set forth above,
as the Board of Directors of the Company deems advisable to avoid or diminish
any income tax to holders of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or
subscribe for Common Stock or from any event treated as such for income tax
purposes.
In case of any reclassification of the Common Stock, any consolidation of
the Company
Page 4
<PAGE>
with, or merger of the Company into, any other person, any merger of any person
into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), any sale or transfer of all or substantially all of the assets
of the Company or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other properties, then provisions
shall be made that the holder of such share of Preferred Stock then outstanding
shall have the right thereafter, during the period such share of Preferred
Stock shall be convertible, to convert such share into the kind and amount of
securities, cash or other property receivable upon such reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock into which such share of Preferred Stock might
have been converted immediately prior to such reclassification, consolidation,
merger, sale transfer or share exchange.
Other Provisions. The shares of Series A Preferred Stock, when issued as
described in this Certificate of Designations will be duly and validly issued,
fully paid and nonassessable.
Voting Rights. The holders of the Series A Preferred Stock will have no
voting rights except as described below or as required by law. In exercising
any such vote, each outstanding share of Series A Preferred Stock will be
entitled to one vote, excluding shares held by the Company or any entity
controlled by the Company, which shares shall have no voting rights.
So long as any Series A Preferred Stock is outstanding, the Company shall
not, without the affirmative vote of the holders of at least 66 2/3% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) amend, alter or repeal any provision of the Certificate or the Bylaws of
the Company so as to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series A Preferred Stock,
(ii) authorize or issue, or increase the authorized amount of, any additional
class or series of stock, or any security convertible into stock of such class
or series, ranking senior to the Series A Preferred Stock as to dividends or
upon liquidation, dissolution or winding up of the Company or (iii) effect any
reclassification of the Series A Preferred Stock.
So long as any Series A Preferred Stock is outstanding, the Company shall
not, without the affirmative vote of the holders of at least 50% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) authorize, issue, or increase the authorized amount of any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividends or
liquidation and having superior voting rights, or (ii) incur indebtedness or
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividend or
liquidation rights if, immediately following such event, Adjusted Stockholder's
Equity is less than the aggregate liquidation preferences of all Series A
Preferred Stock and stock ranking senior to or on parity with the Series A
Preferred Stock as to liquidation. Adjusted Stockholder's Equity is the
Company's stockholder's equity as shown on its most recent balance sheet,
increased by (a) any amount of any liability or other reduction in
stockholder's equity attributable to the Series A Preferred Stock and each
series of stock senior to or on with parity with the Series A Preferred
Page 5
<PAGE>
Stock as to liquidation and (b) the net proceeds of any equity financing since
the date of the balance sheet, reduced by any reduction in stockholder's equity
resulting from certain dispositions of assets since the date of the balance
sheet.
/s/ WAYNE ALLISON
Wayne Allison, President
/s/ DARRELL R. JOLLEY
Darrell R. Jolley, Secretary
Page 6
<PAGE>
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 4th day of December, 1996, before me, the undersigned Notary
Public, personally appeared Wayne Allison, known to me to be the President of
Eyemakers, Inc., a Nevada Corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ LISA M. JONES
Notary Public
[notary stamp as follows: Lisa M. Jones, my commission expires April 26, 2000]
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 4th day of December, 1996, before me, the undersigned Notary
Public, personally appeared Darrell R. Jolley, known to me to be the Secretary
of Eyemakers, Inc., a Nevada corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ LISA M. JONES
Notary Public
[notary stamp as follows: Lisa M. Jones, my commission expires April 26, 2000]
Page 7
[file-stamped as follows: FILED in the office of the Secretary of State of the
State of Nevada, LLC 71-1997, Apr 08 1997]
FIRST AMENDMENT TO THE
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
OF
EYEMAKERS, INC.
March 28, 1997
Pursuant to Section 78.195 of the Nevada Revised Statutes, we the
undersigned officers of Eyemakers, Inc., a Nevada Corporation (the
"Company"), do hereby certify that 1,000,000 shares of the 5,000,000 Shares
of Preferred Stock, $.001 par value per Share, authorized by the Amended
Articles of Incorporation which was filed with the Nevada Secretary of State
on December 4, 1996 and which which was designated Series A Preferred
Stock (the "Shares") and which shall be amended to contain the following
designations and preferences:
Series A Preferred Stock
The Series A Preferred Stock has been authorized by the Board of
Directors of the Company as a new series of Preferred Stock. So long as any
Series A Preferred Stock is outstanding, the Company is prohibited from
issuing any series of stock having rights senior to the Series A Preferred
Stock ("Senior Stock") without the approval of the holders of 66 2/3% of the
outstanding Series A Preferred Stock. Additionally, so long as any Series A
Preferred Stock is outstanding, the Company may not, without the approval
of the holders of at least 50% of the outstanding Series A Preferred Stock,
issue any series of stock ranking on parity with the Series A Preferred Stock
("Parity Stock") as to dividend or liquidation rights, or having a right to
vote on matters as to which the Series A Preferred Stock is not entitled to
vote, or if the Company's stockholder equity (as defined) is less than the
total liquidation preferences of all outstanding Series A Preferred Stock.
Dividends. Holders of shares of Series A Preferred Stock will be
entitled to receive, when, as, and if declared by the Board of Directors out of
funds at the time legally available therefor, cash dividends at an annual rate
of 8% and no more, payable annually in arrears, commencing January 1, 1999.
Dividends will accrue and be cumulative from the date of first issuance of the
Series A Preferred Stock and will be payable to holders of record as they
appear on the stock books of the Company on such record dates as are fixed
by the Board of Directors.
Unless a class or series of Senior Stock or Parity Stock is authorized
as described above, the Series A Preferred Stock will be senior as to dividends
to any series or class of the Company's stock hereafter issued, and if at any
time the Company has failed to pay or declare and set apart for payment
accrued and unpaid dividends on the Series A Preferred Stock, the Company
may not pay any other dividends. The Series A Preferred Stock will have
priority as to dividends over the Common Stock and any series or class of the
Company's stock hereafter issued, and no dividend (other than dividends
payable solely in Common Stock or any other series or class of the Company's
stock hereafter issued that ranks junior as to dividends to the Series A
Preferred Stock) may be declared, paid or set apart for payment on, and no
purchase, redemption or other acquisition may be made by the Company of,
any Common Stock or other stock unless all accrued and unpaid dividends on
the Series A Preferred
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<PAGE>
Stock have been paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for payment, all accrued and
unpaid dividends for all prior periods on the Series A Preferred Stock; and the
Company may not pay dividends on the Preferred Stock unless it has paid or
declared and set apart for payment, or contemporaneously pays or declares and
sets apart for payment, all accrued and unpaid dividends for all prior periods
on any outstanding Parity Stock. Whenever all accrued dividends are not paid in
full on the Preferred Stock or any Parity Stock, all dividends declared on the
Preferred Stock and any such Parity Stock will be declared or made pro rata so
that the amount of dividends declared per share on the Preferred Stock and any
such Parity Stock will bear the same ratio amount of dividends declared per
share on the Preferred Stock and any such Parity Stock will bear the same ratio
that accrued and unpaid dividends per share on the Preferred Stock and such
Parity Stock bear to each other.
The amount of dividends payable for the initial dividend period and
any period shorter than a full dividend period will be computed on the basis
of a 360 day year. No interest will be payable in respect of any dividend
payment on the Series A Preferred Stock which may be in arrears.
Preference
On the dissolution, liquidation, or winding up of the Company, the
holders of the Series A Preferred Stock shall be entitled to receive, before
any payment shall be made to the holders of Common Stock, the sum of one
dollar and fifty cents ($1.50) per share together with, in all cases, all past
accumulated and unpaid dividends. The consolidation or merger of the
Company at any time, or from time to time, with any other corporation or
corporations, or a sale of all or substantially all of the assets of the
Company, shall not be construed as a dissolution, liquidation, or winding up of
the Company within the meaning of these provisions.
After payment of the full preferential amounts previously mentioned,
the holders of the Series A Preferred Stock shall not be entitled to any
further participation in any distribution of the assets or funds of the
Company, and the remaining assets and funds of the Company shall be divided and
distributed among the holders of the Common Shares then outstanding according
to their respective interest.
Redemption Clause
The Company, at the option of the Board of Directors, may at any
time after December 31, 1998 redeem the whole or any part, of the Series A
Preferred Shares outstanding by paying in cash the sum of $1.50 per Share,
plus all dividends accrued, unpaid, and accumulated as provided in these
provisions to and including the date of redemption ("redemption price") and
by giving to each Series A Preferred shareholder of record at his or her last
known address, as shown on the records of the Company, at least thirty but
not more than sixty days prior notice personally or in writing, by mail,
postage prepaid, stating the class or series or part of any class or series of
shares to be redeemed and the date and plan of redemption, the redemption
price, and the place where each shareholder may obtain payment of the
redemption price on surrender of his or her respective Share certificates
("redemption notice"). Should only a part of the outstanding Series A Preferred
Shares be redeemed,
Page 2
<PAGE>
the redemption shall be affected by lot, or pro rata, as prescribed by the
Board of Directors. On or after the date fixed for redemption, each holder of
Shares called for redemption shall surrender his or her certificate for those
Shares to the Company at the place designated in the redemption notice and
shall then be entitled to receive payment of the redemption price. Should less
than all the Shares represented by any surrender certificate be redeemed, a new
certificate for the unredeemed Shares shall be issued. If the redemption
notice is duly given and if sufficient funds for the redemption are available
on the date fixed for redemption, then, whether or not the certificates that
evidence the Shares to be redeemed are surrendered, all rights with respect to
the Shares shall terminate on the date fixed for redemption, except for the
right of the holders to receive the redemption price, without interest, on
surrender of their certificate for the Shares.
If, on or prior to any date fixed for redemption of Series A Preferred
Shares as provided in this provision, the Company deposits with an escrow
agent of its choice to and as transfer agent for the Company, as a trust fund,
a sum sufficient to redeem, on the date fixed for redemption of Series A
Preferred Shares, the Shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to publish the notice
of redemption of Series A Preferred Shares, or to complete the publication if
previously commenced, and to pay, or and after the date fixed for redemption
or prior to that date, the redemption price of the Shares to their respective
holders on surrender of their Share certificates, then from and after the date
of the deposit, even though that date may be prior to the date fixed for
redemption, the Shares so called be deemed to be redeemed and dividends on
those Shares shall cease to accrue after the date fixed for redemption. The
deposit shall be deemed to constitute full payment of the Shares to their
holders and from and after the date of the deposit the Shares shall be deemed
to be no longer outstanding, and the holders of those Shares shall cease to be
shareholders with respect to those Shares and shall have no rights with respect
to them, except the right to receive from the bank or trust company payment
of the redemption price of the Shares, without interest, on surrender of their
certificates for the Shares.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of shares of Series A Preferred Stock are
entitled to receive the liquidation preference of $1.50 per share, plus an
amount equal to any accrued and unpaid dividends to the payment date, and
no more, before any payment or distribution is made to the holders of
Common Stock, or any series or class of the Company's stock hereafter issued
that ranks junior as to liquidation rights to the Series A Preferred Stock. The
holders of Preferred Stock and any Parity Stock hereafter issued that rank on
a parity as to liquidation rights with the Series A Preferred Stock will be
entitled to share ratably, in accordance with the respective preferential
amounts payable on such stock, in any distribution which is not sufficient to
pay in full the aggregate of the amounts payable thereon. After payment in
full of the liquidation preference of the shares of Series A Preferred Stock,
the holders of such shares will not be entitled to any further participation in
any distribution of assets by the Company. Neither a consolidation, merger or
other business combination of the Company with or into another corporation
or other entity nor a sale or transfer of all or part of the Company's assets
for cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company.
Page 3
<PAGE>
Conversion Rights of Series A Preferred Stock.
Automatic Conversion. If at any time after the initial issuance thereof
the closing price of the Common Stock is reported on the NASD Bulletin
Board (or the closing sale price as reported on any national securities
exchange on which the Common Stock is then listed), shall, for a period of 10
consecutive trading days, exceed $5.00, then effective as of the closing of
business on the tenth such trading day, all shares of Series A Preferred Stock
then outstanding and all accrued and undeclared dividends thereon shall
immediately and automatically without further notice be converted into shares
of Common Stock at a rate of $1.50 per share.
Optional Conversion. At any time after the initial issuance of the
Series A Preferred Stock and prior to the redemption thereof, the holder of
any shares of Series A Preferred Stock will have the right, at the holder's
option, to convert any or all such shares and all accrued and undeclared
dividends thereon into shares of Common Stock which Conversion Price may
be decreased as described below. The amount which shall be convertible at
the Conversion Price shall be the total of the liquidation preference ($1.50
per share of Series A Preferred Stock) plus all accrued and undeclared
dividends through the end of the calendar month in which the conversion is
effected. If the Series A Preferred Stock has been called for redemption, the
conversion right shall terminate at the close of business on the last business
day prior to the date fixed for redemption (unless the Company defaults in the
payment of the redemption price.)
Fractional shares of common stock will be rounded to the nearest full
share upon conversion. The Conversion Price will be subject to adjustment
in certain events, including: subdivisions or combinations of the Common
Stock; or the distribution to all holders of Common Stock of evidences of
indebtedness of the Company, cash (excluding ordinary cash dividends), other
assets or rights or Warrants to subscribe for or purchase any securities. No
adjustment in the Conversion Price will be required to be made until
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted; however, any adjustment not made shall be carried forward.
The Company from time to time may decrease the Conversion Price
by any amount for any period of at least 20 days, in which case the Company
shall give at least 15 days notice of such decrease. The Company may, at its
option, make such decreases in the Conversion Price, in addition to those set
forth above, as the Board of Directors of the Company deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from
any dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for Common Stock or from any event treated as such
for income tax purposes.
In case of any reclassification of the Common Stock, any consolidation
of the Company with, or merger of the Company into, any other person, any
merger of any person into the Company (other than a merger that does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash
or other properties, then provisions shall be made that the holder of such
share of Preferred Stock then outstanding shall have the right thereafter,
during the period such share of
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<PAGE>
Preferred Stock shall be convertible, to convert such share into the kind and
amount of securities, cash or other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Common Stock into which such share of
Preferred Stock might have been converted immediately prior to such
reclassification, consolidation, merger, sale transfer or share exchange.
Other Provisions. The shares of Series A Preferred Stock, when
issued as described in this Certificate of Designations will be duly and
validly issued, fully paid and nonassessable.
Voting Rights. The holders of the Series A Preferred Stock will have
no voting rights except as described below or as required by law. In
exercising any such vote, each outstanding share of Series A Preferred Stock
will be entitled to one vote, excluding shares held by the Company or any
entity controlled by the Company, which shares shall have no voting rights.
So long as any Series A Preferred Stock is outstanding, the Company
shall not, without the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of Series A Preferred Stock, voting separately as a
class, (i) amend, alter or repeal any provision of the Certificate or the
Bylaws of the Company so as to adversely affect the relative rights,
preferences, qualifications, limitations or restrictions of the Series A
Preferred Stock, (ii) authorize or issue, or increase the authorized amount of,
any additional class or series of stock, or any security convertible into stock
of such class or series, ranking senior to the Series A Preferred Stock as to
dividends or upon liquidation, dissolution or winding up of the Company or
(iii) effect any reclassification of the Series A Preferred Stock.
So long as any Series A Preferred Stock is outstanding, the Company
shall not, without the affirmative vote of the holders of at least 50% of all
outstanding shares of Series A Preferred Stock, voting separately as a class,
(i) authorize, issue, or increase the authorized amount of any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividends or
liquidation and having superior voting rights, or (ii) incur indebtedness or
authorize or issue, or increase the authorized amount of, any additional class
or series of stock, or any security convertible into stock of such class or
series, ranking on parity with the Series A Preferred Stock as to dividend or
liquidation rights if, immediately following such event, Adjusted Stockholder's
Equity is less than the aggregate liquidation preferences of all Series A
Preferred Stock and stock ranking senior to or on parity with the Series A
Preferred Stock as to liquidation. Adjusted Stockholder's Equity is the
Company's stockholder's equity as shown on its most recent balance sheet,
increased by (a) any amount of any liability or other reduction in
stockholder's equity attributable to the Series A Preferred Stock and each
series of stock senior to or on with parity with the Series A Preferred Stock
as to liquidation and (b) the net proceeds of any equity financing since the
date of the balance sheet, reduced by any reduction in stockholder's equity
resulting from certain dispositions of assets since the date of the balance
sheet.
/s/ WAYNE ALLISON /s/ DARRELL R. JOLLEY
Wayne Allison, President Darrell R. Jolley, Secretary
Page 5
<PAGE>
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 2nd day of April, 1997, before me, the undersigned Notary
Public, personally appeared Wayne Allison, known to me to be the President of
Eyemakers, Inc., a Nevada Corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ LISA M. JONES
Notary Public
[notary stamp as follows: Lisa M. Jones, my commission expires April 26, 2000]
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 2nd day of April, 1997, before me, the undersigned Notary
Public, personally appeared Darrell R. Jolley, known to me to be the Secretary
of Eyemakers, Inc., a Nevada Corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ LISA M. JONES
Notary Public
[notary stamp as follows: LISA M. JONES, my commission expires, April 26, 2000]
Page 6
[file-stamped as follows: FILED in the office of the Secretary of State of the
State of Nevada, C4743-95, Jan 29, 1998, Dean Heller, Secretary of State]
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK
OF
EYEMAKERS, INC.
January 26, 1998
Pursuant to Section 78.195 of the Nevada Revised Statutes, we the
undersigned officers of Eyemakers, Inc., a Nevada Corporation (the
"Company"), do hereby certify that 600,000 shares of the 5,000,000 Shares
of Preferred Stock, $.001 par value per Share, authorized by the Amended
Articles of Incorporation which was filed with the Nevada Secretary of
State on December 4, 1996, shall be designated Series B Preferred Stock
(the "Shares" or "Series B Preferred Stock") and shall contain the following
designations and preferences:
Series B Preferred Stock
The Series B Preferred Stock has been authorized by the Board of
Directors of the Company as a new series of preferred stock which shall be
subordinated in all respects to the Series A Preferred Stock. So long as any
Series B Preferred Stock is outstanding, the Company is prohibited from
issuing any series of stock having rights senior to the Series B Preferred
Stock ("Senior Stock") without the approval of the holders of 66 2/3% of
the outstanding Series B Preferred Stock. Additionally, so long as any
Series B Preferred Stock is outstanding, the Company may not, without the
approval of the holders of at least 50% of the outstanding Series B
Preferred Stock, issue any series of stock ranking on parity with the Series
B Preferred Stock ("Parity Stock") as to dividend or liquidation rights, or
having a right to vote on matters as to which the Series B Preferred Stock
is not entitled to vote, or if the Company's stockholder equity (as defined)
is less than the total liquidation preferences of all outstanding Series B
Preferred Stock.
Dividends. Holders of shares of Series B Preferred Stock, which
are subordinated in all respects to the Series A Preferred Stock, will be
entitled to receive, when, as, and if declared by the Board of Directors out
of funds at the time legally available therefor, cash dividends at an annual
rate of twenty one and one-fourth cents ($.2125) per share per annum,
payable annually in arrears on the anniversary date of the certificate
therefor, provided no dividend payments are in arrears with respect to the
Series A Preferred Stock. Dividends will accrue and be cumulative from the
date of first issuance of the Series B Preferred Stock and will be payable to
holders of record as they appear on the stock books of the Company on
such record dates as are fixed by the Board of Directors.
Unless a class or series of Senior Stock or Parity Stock is authorized
as described above, the Series B Preferred Stock will be senior as to
dividends to any series or class of the Company's stock hereafter issued, and
if at any time the Company has failed to pay or declare and set apart for
payment accrued and unpaid dividends on the Series B Preferred Stock, the
Company may not pay any other dividends unless they are senior to the
Series B Preferred Stock. The Series B Preferred Stock will have priority
as to dividends over the common stock and any series or class of the
Company's stock hereafter issued, and no dividend (other than dividends
payable solely in common stock or any other series or class of the
Company's stock hereafter issued that ranks junior as to dividends to the
Series
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<PAGE>
B Preferred Stock) may be declared, paid or set apart for payment
on, and no purchase, redemption or other acquisition may be made by the
Company of, any common stock or other stock unless all accrued and
unpaid dividends on the Series B Preferred Stock have been paid or
declared and set apart for payment, or contemporaneously pays or declares
and sets apart for payment, all accrued and unpaid dividends for all prior
periods on the Series B Preferred Stock; and the Company may not pay
dividends on the Series B Preferred Stock unless it has paid or declared and
set apart for payment, or contemporaneously pays or declares and sets apart
for payment, all accrued and unpaid dividends for all prior periods on any
outstanding Parity Stock. Whenever all accrued dividends are not paid in
full on the Series B Preferred Stock or any Parity Stock, all dividends
declared on the Series B Preferred Stock and any such Parity Stock will be
declared or made pro rata so that the amount of dividends declared per
share on the Series B Preferred Stock and any such Parity Stock will bear
the same ratio amount of dividends declared per share on the Series B
Preferred Stock and any such Parity Stock will bear the same ratio that
accrued and unpaid dividends per share on the Series B Preferred Stock and
such Parity Stock bear to each other.
The amount of dividends payable for the initial dividend period and
any period shorter than a full dividend period will be computed on the basis
of a 360 day year. No interest will be payable in respect of any dividend
payment on the Series B Preferred Stock which may be in arrears.
Preference
On the dissolution, liquidation, or winding up of the Company, the
holders of the Series B Preferred Stock, which is subordinated in all
respects to the Series A Preferred Stock, shall be entitled to receive, before
any payment shall be made to the holders of common stock, the sum of four
dollars and twenty-five cents ($4.25) per share together with, in all cases,
all past accumulated and unpaid dividends. The consolidation or merger of
the Company at any time, or from time to time, with any other corporation
or corporations, or a sale of all or substantially all of the assets of the
Company, shall not be construed as a dissolution, liquidation, or winding
up of the Company within the meaning of these provisions.
After payment of the full preferential amounts previously mentioned,
the holders of the Series B Preferred Stock shall not be entitled to any
further participation in any distribution of the assets or funds of the
Company, and the remaining assets and funds of the Company shall be
divided and distributed among the holders of the common shares then
outstanding according to their respective interest.
Redemption Clause
The Company, at the option of the Board of Directors, may at any
time during the two year period commencing on the date of issuance of the
Series B Preferred Stock, redeem the whole or any part, of the Series B
Preferred Shares outstanding by paying in cash the sum of $7.50 per Share,
plus all dividends accrued, unpaid, and accumulated as provided in these
provisions to and including the date of redemption ("redemption price") and
by giving to each Series B Preferred shareholder of record at his or her last
known address, as shown on the records of the Company, at least thirty but
Page 2
<PAGE>
not more than sixty days prior notice personally or in writing, by mail,
postage prepaid, stating the class or series or part of any class or series of
shares to be redeemed and the date and plan of redemption, the redemption
price, and the place where each shareholder may obtain payment of the
redemption price on surrender of his or her respective Share certificates
("redemption notice"). Should only a part of the outstanding Series B
Preferred Shares be redeemed, the redemption shall be affected by lot, or
pro rata, as prescribed by the Board of Directors. On or after the date fixed
for redemption, each holder of Shares called for redemption shall surrender
his or her certificate for those Shares to the Company at the place
designated in the redemption notice and shall then be entitled to receive
payment of the redemption price. Should less than all the Shares
represented by any surrender certificate be redeemed, a new certificate for
the unredeemed Shares shall be issued. If the redemption notice is duly
given and if sufficient funds for the redemption are available on the date
fixed for redemption, then, whether or not the certificates that evidence the
Shares to be redeemed are surrendered, all rights with respect to the Shares
shall terminate on the date fixed for redemption, except for the right of the
holders to receive the redemption price, without interest, on surrender of
their certificate for the Shares.
If, on or prior to any date fixed for redemption of Series B Preferred
Shares as provided in this provision, the Company deposits with an escrow
agent of its choice to and as transfer agent for the Company, as a trust fund,
a sum sufficient to redeem, on the date fixed for redemption of Series B
Preferred Shares, the Shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to publish the notice
of redemption of Series B Preferred Shares, or to complete the publication
if previously commenced, and to pay, on the date fixed for redemption or
prior to that date, the redemption price of the Shares to their respective
holders on surrender of their Share certificates, then from and after the date
of the deposit, even though that date may be prior to the date fixed for
redemption, the Shares so called shall be deemed to be redeemed and
dividends on those Shares shall cease to accrue after the date fixed for
redemption. The deposit shall be deemed to constitute full payment of the
Shares to their holders and from and after the date of the deposit the Shares
shall be deemed to be no longer outstanding, and the holders of those
Shares shall cease to be shareholders with respect to those Shares and shall
have no rights with respect to them, except the right to receive from the
bank or trust company payment of the redemption price of the Shares,
without interest, on surrender of their certificates for the Shares.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of shares of Series B Preferred Stock,
which are subordinated in all respects to Series A Preferred Stock, are
entitled to receive the liquidation preference of $4.25 per share, plus an
amount equal to any accrued and unpaid dividends to the payment date, and
no more, before any payment or distribution is made to the holders of
common stock, or any series or class of the Company's stock hereafter
issued that ranks junior as to liquidation rights to the Series B Preferred
Stock. The holders of Series B Preferred Stock and any Parity Stock
hereafter issued that rank on a parity as to liquidation rights with the Series
B Preferred Stock will be entitled to share ratably, in accordance with the
respective preferential amounts payable on such stock, in any distribution
which is not sufficient to pay in full the aggregate of the amounts payable
thereon. After payment in full of the liquidation preference of the shares of
Series B Preferred Stock, the holders of such shares will not be entitled to
any further participation in any distribution of assets by the Company.
Neither a
Page 3
<PAGE>
consolidation, merger or other business combination of the Company with or into
another corporation or other entity nor a sale or transfer of all or part of
the Company's assets for cash, securities or other property will be considered
a liquidation, dissolution or winding up of the Company.
Conversion Rights of Series B Preferred Stock.
Optional Conversion. At any time after the initial issuance of the
Series B Preferred Stock and prior to the redemption thereof, the holder of
any shares of Series B Preferred Stock will have the right, at the holder's
option, to convert any or all such shares into restricted common stock of
the Company at a rate of one share of restricted common stock for each one
share of Series B Preferred Stock. All accrued, undeclared and unpaid
dividends through the end of the calendar month in which the conversion
is effected, shall be convertible into restricted common stock of the
Company at a rate of $4.25 per share. Fractional shares of common stock
will be rounded to the nearest full share upon conversion of accrued,
undeclared and unpaid dividends. If the Series B Preferred Stock has been
called for redemption, the conversion right shall terminate at the close of
business on the last business day prior to the date fixed for redemption
(unless the Company defaults in the payment of the redemption price.)
In case of any reclassification of the common stock, any
consolidation of the Company with, or merger of the Company into, any
other person, any merger of any person into the Company (other than a
merger that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of common stock), any sale or transfer
of all or substantially all of the assets of the Company or any compulsory
share exchange whereby the common stock is converted into other
securities, cash or other properties, then provisions shall be made that the
holders of such shares of Series B Preferred Stock then outstanding shall
have the right thereafter, during the period such shares of Series B
Preferred Stock shall be convertible, to convert such shares into the kind
and amount of securities, cash or other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by
a holder of the number of shares of common stock into which such shares
of Series B Preferred Stock might have been converted immediately prior
to such reclassification, consolidation, merger, sale transfer or share
exchange.
Other Provisions. The shares of Series B Preferred Stock, when
issued as described in this Certificate of Designations will be duly and
validly issued, fully paid and nonassessable.
Voting Rights. The holders of the Series B Preferred Stock, which
are subordinated in all respects to the Series A Preferred Stock, will have
no voting rights except as described below or as required by law. In
exercising any such vote, each outstanding share of Series B Preferred
Stock will be entitled to one vote, excluding shares held by the Company
or any entity controlled by the Company, which shares shall have no voting
rights.
So long as any Series B Preferred Stock is outstanding, the
Company shall not, without the affirmative vote of the holders of at least 66
2/3% of all outstanding shares of Series B Preferred Stock, voting
separately as a class, (i) amend, alter or repeal any provision of the
Certificate or the Bylaws of the Company so as to adversely affect the
relative rights, preferences, qualifications,
Page 4
<PAGE>
limitations or restrictions of the Series B Preferred Stock, (ii) authorize or
issue, or increase the authorized amount of, any additional class or series of
stock, or any security convertible into stock of such class or series, ranking
senior to the Series B Preferred Stock as to dividends or upon liquidation,
dissolution or winding up of the Company or (iii) effect any reclassification
of the Series B Preferred Stock.
So long as any Series B Preferred Stock is outstanding, the
Company shall not, without the affirmative vote of the holders of at least
50% of all outstanding shares of Series B Preferred Stock, voting separately
as a class, (i) authorize, issue, or increase the authorized amount of any
additional class or series of stock, or any security convertible into stock of
such class or series, ranking on parity with the Series B Preferred Stock as
to dividends or liquidation and having superior voting rights, or (ii) incur
indebtedness or authorize or issue, or increase the authorized amount of,
any additional class or series of stock, or any security convertible into stock
of such class or series, ranking on parity with the Series B Preferred Stock
as to dividend or liquidation rights if, immediately following such event,
Adjusted Stockholder's Equity is less than the aggregate liquidation
preferences of all Series B Preferred Stock and stock ranking senior to or
on parity with the Series B Preferred Stock as to liquidation. Adjusted
Stockholder's Equity is the Company's stockholder's equity as shown on its
most recent balance sheet, increased by (a) any amount of any liability or
other reduction in stockholder's equity attributable to the Series B Preferred
Stock and each series of stock senior to or on parity with the Series B
Preferred Stock as to liquidation and (b) the net proceeds of any equity
financing since the date of the balance sheet, reduced by any reduction in
stockholder's equity resulting from certain dispositions of assets since the
date of the balance sheet.
/s/ JAMES C. MELLON /s/ DARRELL R. JOLLEY
James C. Mellon, President Darrell R. Jolley, Secretary
Page 5
<PAGE>
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 28th day of January, 1998, before me, the undersigned Notary
Public, personally appeared James C. Mellon, known to me to be the President of
Eyemakers, Inc., a Nevada Corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ KATHY CRABB
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this the 28th day of January, 1998, before me, the undersigned Notary
Public, personally appeared Darrell R. Jolley, known to me to be the Secretary
of Eyemakers, Inc., a Nevada Corporation, the corporation which executed the
attached instrument, and who executed same on behalf of said corporation,
freely and voluntarily and for the uses and purposes therein mentioned.
/s/ KATHY CRABB
Notary Public
Page 6
SUBSIDIARIES OF EYEMAKERS, INC.
The subsidiaries of the Company are:
1. Optical Resource Management, Inc., which was incorporated in the state of
Texas on July 22, 1994.
2. Budget Opticals of America, Inc., which was incorporated in the state of
Texas on July 29, 1987.
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONSOLIDATED FINANCIAL REPORT DATED DECEMBER 31, 1996 (AUDITED) AND
IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<CIK> 0001002452
<NAME> EYEMAKERS, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,168
<SECURITIES> 0
<RECEIVABLES> 975,055
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,131,128
<PP&E> 259,236
<DEPRECIATION> 118,688
<TOTAL-ASSETS> 3,742,403
<CURRENT-LIABILITIES> 942,608
<BONDS> 0
0
0
<COMMON> 5,235
<OTHER-SE> 2,201,608
<TOTAL-LIABILITY-AND-EQUITY> 3,742,403
<SALES> 0
<TOTAL-REVENUES> 2,656,340
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<OTHER-EXPENSES> 2,135,982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,620
<INCOME-PRETAX> 608,193
<INCOME-TAX> 232,521
<INCOME-CONTINUING> 375,672
<DISCONTINUED> 0
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<NET-INCOME> 375,672
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30,
1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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STATEMENTS.
</LEGEND>
<CIK> 0001002452
<NAME> EYEMAKERS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,585
<SECURITIES> 0
<RECEIVABLES> 1,271,224
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<CURRENT-ASSETS> 1,497,024
<PP&E> 259,236
<DEPRECIATION> 158,688
<TOTAL-ASSETS> 4,049,966
<CURRENT-LIABILITIES> 628,258
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750
<COMMON> 5,314
<OTHER-SE> 2,822,692
<TOTAL-LIABILITY-AND-EQUITY> 4,049,966
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<TOTAL-REVENUES> 1,066,070
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<EPS-PRIMARY> .00
<EPS-DILUTED> .00
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING
SEPTEMBER 30,
1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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</LEGEND>
<CIK> 0001002452
<NAME> EYEMAKERS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
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<PERIOD-END> SEP-30-1997
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