VISION HEALTH CARE, INC.
SUPPLEMENT
This Supplement is part of the Prospectus dated July 22, 1996
and should be read in conjunction therewith.
This Supplement is being distributed to provide information regarding
certain recent developments involving Vision Health Care, Inc. (the
"Company"), including the following:
1. Dental Network, Inc. ("DNI"), a Florida corporation which owns
Oral Health Services, Inc., a Florida-based prepaid dental care service
plan ("OHS"), has agreed to purchase 100,000 shares of the Company's
Common Stock for $10.00 per share in the Offering; and
2. The Company has entered into negotiations with Columbia/HCA
Healthcare Corporation, a national health care provider ("Columbia"), for
the Company's exclusive use of Columbia's ambulatory surgicenters to
perform procedures covered under the Company's eye care plans and for the
addition of Columbia's affiliated ophthalmologists in Florida to the
Company's network of preferred provider ophthalmologists.
More detailed information regarding each of these items is set forth
below.
INVESTMENT BY DNI
OHS, a Miami-based, wholly-owned subsidiary of DNI, is engaged in the
management, administration and provision of prepaid dental care service
plans in Florida. It is a dental care provider in Florida with 1995
revenues of approximately $33 million. Similar to Vision Care, Inc.
("VCI"), DNI contracts with public and private employers, health
maintenance organizations, preferred provider organizations, health
insurance carriers, self-insured corporations, unions and other
associations (collectively, the "Sponsors") to provide prepaid group
dental care services to members, clients and/or employees of the Sponsors
who choose to participate in a plan. Under agreements with plan Sponsors,
DNI is paid a fixed fee for each participant which entitles participants
to obtain cleanings, check-ups and other dental services for no additional
payment, unless there is a deductible or a required co-payment. Because
of these similarities in the businesses of VCI and DNI, the Company
believes, although there can be no assurances, that DNI's involvement as
an investor in the Company has the potential to create several short-term
and long-term benefits to the Company, particularly with respect to joint
marketing programs and increased marketing efficiencies. However, there
are no agreements regarding any such "joint" programs, and there can be no
assurance that any agreements will be reached or that any other benefits
will be achieved or that, if achieved, there will be a positive effect on
the Company's results of operations.
The date of this Supplement is December 19, 1996
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The Company has waived the maximum 2,500 share subscription amount
(see "Plan of Distribution" in the Prospectus) for DNI, and agreed to the
terms and conditions described below, in order to induce DNI to purchase
100,000 shares (the "DNI Shares") in the Offering. DNI has advised that
its purchase of the DNI Shares is contingent upon financing which it
expects to receive prior to the closing of the Offering.
Terms and Conditions of DNI Purchase
Board of Directors. The Company currently has four vacancies on its
16-seat Board of Directors. Immediately after the closing, the Company
will elect four nominees selected by DNI and reasonably acceptable to the
Board to fill the vacancies. Thereafter, as long as DNI continues to own
at least 100,000 shares of Common Stock, at each annual or special meeting
of shareholders at which directors are to be elected, DNI has the right to
nominate for election to the Board of Directors that number of directors
which, when added to the number of directors who are DNI nominees and who
will continue to be directors, represents 25% of the total number of
directors. The Company has agreed to support DNI's nominations, and the
Put Shareholders (as defined below) have agreed to vote their shares of
Common Stock in favor of such election. In the event any mid-term vacancy
is created by the resignation or other early termination of the term of
any director nominated by DNI, the Company has agreed to elect an
individual nominated by DNI to fill such vacancy. Collectively, any
directors nominated by DNI are referred to as the "DNI Directors".
Put Option. In negotiating its purchase of the DNI Shares, DNI
indicated an interest in exploring an acquisition or other control
transaction with respect to the Company. However, the Company's Board of
Directors is not presently prepared to sell shares to DNI sufficient to
make it a majority shareholder, nor to negotiate a merger or other
business combination. There have been no agreements or proposals
concerning the terms of any business combination between the Company and
DNI. Because DNI does not wish to remain a 25% investor indefinitely, DNI
requested that the Company give DNI the ability to liquidate its
investment (in the form of a put option). However, under generally
accepted accounting principles, a put to the Company would adversely
affect the Company's shareholders' equity. Accordingly, the Company
approached its principal shareholders about the possibility of granting
the put.
James W. Andrews, O.D., Howard J. Braverman, O.D., Roy L. Burgess,
C.P.A., M.S.M., Alan P. Fisher, O.D., Mitchell W. Legler, Peter D. Liane,
O.D., Jeffrey C. Locke, O.D., Terrance W. Naberhaus, O.D., Raymond M. Neff
and John M. Renaldo, O.D. (the "Put Shareholders") have given DNI an
option (the "Put Option") to sell all of the DNI Shares to the Put
Shareholders individually for the Put Price (as defined below). The Put
Option is exercisable at any time beginning on the 120th day following the
Florida Department of Insurance's approval of the DNI transaction and
ending on July 31, 1998, but becomes void if (i) the Company merges with,
is acquired by, or comes under common control with DNI or (ii) there is a
change of control of the Company which a majority of the DNI Directors
approved. The Put Price is an amount equal to the initial price paid by
DNI for the DNI Shares ($1,000,000), plus 12% per annum.
Each Put Shareholder is severally, but not jointly, liable for the
following approximate percentage of the Put Option: Andrews (13.63%),
Braverman (18.18%), Burgess (9.09%), Fisher (13.63%), Legler (4.55)%,
Liane (13.63%), Locke (4.55%), Naberhaus (13.63%), Neff (4.55%), and
Renaldo (4.55%). The obligations of each Put Shareholder under the Put
Option are secured by such Put Shareholder's pledge of the shares of
Common Stock now and hereafter owned by such Put Shareholder, together
with his options or rights therein to acquire Common Stock (to the extent
assignable) and the shares of Common Stock issuable upon exercise of such
options (all of the Common Stock and options pledged by all of the Put
Shareholders collectively are referred to as the "Collateral"). In the
event that DNI exercises the Put Option, the Put Shareholders will have
approximately 75 days to (1) purchase all of the DNI Shares in exchange
for the Put Price or (2) deliver the Collateral to DNI in termination of
the Put Option. If any Put Shareholder is unable or unwilling to purchase
his pro rata portion of the DNI Shares, the other Put Shareholders have
the right to buy his shares and post his share of the funds, but if they
do not do so, the entire Put Option will be satisfied by the delivery of
the Collateral, in which event DNI will own both the DNI Shares and the
shares constituting the Collateral. See "Significant Control by DNI"
below.
In exchange for granting the Put Option, the Company's Board of
Directors has granted each Put Shareholder options to purchase a pro rata
portion of 25,594 shares of Common Stock (collectively, the "Guaranty
Options") equal to the percentage of the Put Option that he is granting.
The options, which are 100% vested, have a term of 10 years and an
exercise price of $10.00 per share, and will be included in the Collateral
securing the Put Option. The total number of Guaranty Options is equal to
the number of shares of Common Stock that remained available for issuance
under the Company's stock option plan. Because the Board of Directors
elected to grant the Guaranty Options using the shares that were reserved
for issuance under the stock option plan, the dilution to investors
purchasing Common Stock in the Offering is no greater than if the Guaranty
Options had been granted using the shares available under the stock option
plan.
Removal of Blank Check Preferred Stock; Meetings Called by
Shareholders. The Company has agreed to submit to its shareholders on or
before March 31, 1997 a proposed amendment to its Articles of
Incorporation to (i) remove the provision authorizing "blank check"
preferred stock that can be issued by the Board of Directors with rights
and preferences established by the Board and (ii) reduce the percentage of
shareholders required to call a special meeting of the shareholders from
35% to 15%. The Put Shareholders have agreed to vote their shares of
Common Stock in favor of such amendment. See "Risk Factors--Anti-Takeover
Considerations" and "Description of Capital Stock--Preferred Stock" in the
Prospectus. The removal of the "blank check" preferred stock could have
the effect of making it less difficult for a party to acquire, or attempt
to acquire, control of the Company without approval of the Company's Board
of Directors.
Issuance of Shares to Health Care Facilities. The Company has agreed
not to issue any shares of Common Stock to any entity whose principal
business is the providing of physical facilities for use by health care
providers, without the prior written consent of DNI.
Insurance Department Approval. The purchase of the DNI Shares by DNI
is contingent upon receipt of all applicable approvals of the Florida
Department of Insurance. See "Extension of Escrow Period, Number of
Escrowed Shares and Department of Insurance Approval" below. In the event
that the Insurance Department has not approved the DNI transaction on or
before January 31, 1997, DNI has the right to demand the return of its
subscription funds, together with interest thereon.
Significant Control by DNI
As of the date of this Supplement, the Company has received
subscriptions for 258,165 shares of Common Stock in the Offering,
including the DNI Shares. Assuming that no other subscriptions are
received and accepted by the Company prior to the closing of the Offering,
DNI will beneficially own approximately 26% of the Common Stock
outstanding after the Offering. See "Principal Shareholders" in the
Prospectus. As a result, DNI will have substantial influence on the
Company and on the outcome of any matters submitted to the Company's
shareholders for approval, and the influence of the remaining shareholders
will be correspondingly limited. Furthermore, if the Put Option is
exercised, and the Put Shareholder's obligations are satisfied by the
delivery of the Collateral, DNI will beneficially own approximately 49% of
the Common Stock outstanding at that time, without giving effect to the
exercise of any options and assuming that no additional shares of Common
Stock are issued prior to such time.
NEGOTIATIONS WITH COLUMBIA/HCA HEALTHCARE CORPORATION
Columbia is one of the largest health care providers in the world,
owning and/or operating hospitals, medical clinics, ambulatory
surgicenters and other health care related facilities across the United
States, including Florida. The Company has entered into initial
negotiations with Columbia to establish a network provider agreement. To
date, discussions have centered around the Company agreeing to (1) use
Columbia's surgicenters exclusively (when geographically feasible) to
perform ophthalmological surgical procedures covered under the Company's
eye care plans, and (2) add Columbia's affiliated ophthalmologists serving
as eye care providers in Florida to the Company's network of preferred
provider ophthalmologists. The negotiations are ongoing and accordingly,
there can be no assurance that the Company and Columbia will reach an
agreement.
EXTENSION OF ESCROW PERIOD, NUMBER OF ESCROWED SHARES
AND DEPARTMENT OF INSURANCE APPROVAL
The Company has exercised its right to extend the escrow period to
5:00 p.m., Eastern Standard Time, on December 31, 1996. See "Plan of
Distribution" in the Prospectus. The Company has received subscriptions
for 258,165 shares of Common Stock in the Offering ($2,581,650) as of the
date of this Supplement, which exceeds the minimum offering amount of
250,000 shares. The Company has agreed with DNI not to issue more than
300,000 shares of Common Stock in the Offering.
Given the upcoming holiday season, there is a possibility that the
Florida Department of Insurance will not approve the Company's certificate
of authority and change of control applications and the DNI investment until
early 1997. In the event the Company has not received all necessary
approvals from the Department of Insurance on or before December 31, 1996,
the Company will close the Offering, purchase VCI's assets and deposit the
purchase price amount into an interest-bearing escrow account. Vision
Care, Inc. will continue to operate the purchased assets until the Company
receives all necessary Department of Insurance approvals, with all net
income during such period inuring to the benefit of the Company. In the
unlikely event that the Department of Insurance informs the Company that
the requisite approvals will not be granted, subscription funds will be
returned promptly, with any interest earned thereon.
