As filed with the Securities and Exchange Commission on September 21, 1998.
Registration Statement No. _____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM SB-2
Registration Statement Under
the Securities Act of 1933
MINIMALLY INVASIVE SURGERY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 8741 87-0392209
- ------------------------------- ---------------------------- -----------------
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) Identification No.)
601 Daily Drive, Suite 223, Camarillo, California 93010 (805) 484-6654
(Address and telephone number of principal executive offices)
Eric L. Robinson
BLACKBURN & STOLL, LC
77 West Second South, Suite 400
Salt Lake City, UT 84101 (801) 521-7900
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
from time to time after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------- ----------------------- ----------------------- ----------------------- ----------------------
Proposed Proposed
Title of Each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Unit(1) Offering Price(1) Fee
- ------------------------- ----------------------- ----------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Series A Warrants &
Common Stock 1,800,000 $3.00(2) $5,400,000 $1,593
- ------------------------- ----------------------- ----------------------- ----------------------- ----------------------
</TABLE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine. determine.
================================================================================
<PAGE>
(footnotes continued from previous page)
(1) Estimated solely for the purpose of determining the registration fee.
(2) Represents the price at which the Warrants may be exercised. Fees were
calculated under Rule 457(g) under the Securities Act of 1933.
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
1,800,000 Series A Warrants
Minimally Invasive Surgery Corporation (the "Company") is offering
under this Prospectus (i) 1,800,000 redeemable Series A Warrants (the
"Warrants") to be distributed as soon as practicable after the date of this
Prospectus, to common stockholders of record as of June 23, 1998; and (ii) the
offer and sale from time to time of up to 1,800,000 shares of the Company's $001
par value common stock (the "Common Stock" or "Shares") issuable upon exercise
of the Warrants. Each Warrant entitles the holder to purchase one share of
Common Stock of the Company at an exercise price of $3.00 per share. The
Warrants will be callable and can be redeemed by the Company for $.01 per
Warrant on 30 days notice at any time after the closing bid price of the Common
Stock equals or exceeds the exercise price of that Warrant for 10 consecutive
trading days. Warrants may only be exercised or redeemed if a current prospectus
is in effect. The exercise and redemption prices of the Warrants were
arbitrarily determined by the Company and bear no relationship to assets,
shareholders equity or any other objective criteria of value.
The Company's Common Stock is quoted on the NASD Electronic Bulletin
Board under the trading symbol "BACK." On September 16, 1998, the closing bid
price quotation for the Common Stock was $2.50.
---------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL AND
IMMEDIATE DILUTION AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD TO
RISK THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE 5.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
The Warrants are being distributed without any cash consideration. The
Shares are being offered by the Company only to the holders of the Warrants, and
will be sold by the Company without any underwriting discounts or other
commissions. The offering price of the Shares is payable in cash upon exercise
of the Warrants. No minimum number of Warrants must be exercised, and no
assurance exists that any Warrants will be exercised.
---------------
The date of this Prospectus is September 21, 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained in
the Registration Statement. For further information regarding both the Company
and the Securities offered hereby, reference is made to the Registration
Statement, including all exhibits and schedules thereto, which may be inspected
without charge at the public reference facilities of the Commission's
Washington, D.C. office, 450 Fifth Street, NW, Washington, D.C. 20549. Copies
may be obtained from the Washington, D.C. office upon request and payment of the
prescribed fee.
As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(The "Exchange Act") and, in accordance therewith, will file reports and other
information with the Commission. Reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act will be available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 7 World Trade Center, New York, New
York 10007; Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the public reference section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains an Internet Web site that contains
reports, proxy and information statements and other information regarding
issuers that file such reports electronically with the Commission. Such site is
accessible by the public through any Internet access service provider and is
located at http://www.sec.gov. Copies of the Company's Annual, Quarterly and
other Reports which will be filed by the Company with the Commission commencing
with the Quarterly Report for the first quarter ended after the date of this
Prospectus (due 45 days after the end of such quarter) will also be available
upon request, without charge, by writing Minimally Invasive Surgery Corporation,
601 Daily Drive, Suite 223, Camarillo, California 93010.
ANNUAL REPORTS
The Company intends to furnish annual reports to stockholders which
will contain financial statements examined by independent certified public
accountants and such other interim reports as the Company may determine.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the "Company" shall mean
Minimally Invasive Surgery Corporation and its subsidiary on a consolidated
basis and, where the context so requires, shall include its predecessors.
The Company
The Company is engaged in establishing a chain of neuro/orthopedic
spinal surgery clinics by purchasing, owning, establishing and expanding certain
assets used in minimally invasive spine surgery and neuro orthopedic spine
surgery clinics; managing and developing spine treatment and pain management
clinics, diagnostic and rehabilitation services and outpatient surgery
facilities; and providing non-professional support services, facilities,
equipment, non-professional personnel, supplies and non-professional support
staff to medical practices. The Company is in the development stage and will
require substantial additional funding to achieve its business objectives.
The Company's principal executive offices are located at 601 Daily
Drive, Suite 223, Camarillo, California 93010. The Company's telephone number is
(805) 484-6654.
Company Background
The Company was incorporated in the State of Utah on July 2, 1982,
under the name of Mark Oil, Inc. to explore for natural resources and to invest
in other assets or businesses. In January 1984, the Company acquired an
operating subsidiary and changed the Company's name to Clef Communications, Inc.
The business of the subsidiary was unsuccessful and the Company changed its
corporate domicile to the State of Delaware and its name to Galaxy Ventures,
Inc. in January 1997. The Company had no further operations until July 1997 when
it attempted to engage in the business of producing and selling fiberglass
playground equipment. However, that business was not successful and was
discontinued in December 1997. The Company had no further business operations
until June 1998 when the Company acquired of Chiu Minimally Invasive Spine
Surgery, Inc. ("CMIS").
There are no pending legal proceedings involving the Company, and the
Company is not aware of any threatened legal proceedings to which it may be a
party.
Risk Factors
An investment in the Company is highly speculative. Investors will
suffer substantial dilution in the book value per share of the Common Stock
compared to the purchase price. If substantial funds are not received from
exercise of the Warrants, of which there is no assurance, the Company may
require additional funding for which it has no commitments. No person should
invest in the Company who cannot afford to risk loss of the entire investment.
See "Risk Factors" beginning on page 5 and "Dilution."
The Offering
Securities Offered .............. 1,800,000 Warrants and 1,800,000 shares of
Common Stock issuable upon exercise of the
Warrants. See "Description of Securities".
Offering Price .................. Warrants will be distributed at no cost to
the Company's shareholders. The Shares
underlying the Warrants will be sold at $3.00
per share upon exercise of the Warrants.
Quotation........................ The Common Stock is quoted on the NASD
Electronic Bulletin Board.
3
<PAGE>
Trading Symbol................... "BACK"
Plan of Distribution ............ Warrants will be distributed as soon as
practicable after the date of this
Prospectus, to the common stockholders of the
Company of record as of June 23, 1998. The
Shares will be offered and sold by the
Company without any underwriting discounts or
other commissions, to the holders of these
Warrants, upon the exercise thereof. See
"Plan of Distribution."
Securities Outstanding .......... The Company is authorized to issue up to
20,000,000 shares of Common Stock. At
September 21, 1998, 8,133,333 Shares were
issued and outstanding. The Company has
reserved from its authorized but unissued
capital 1,800,000 shares of Common Stock for
issuance upon exercise of the Warrants
already outstanding. The Company is also
authorized to issue up to 100,000 shares of
Preferred Stock in one or more series with
such rights and preferences as the Board of
Directors may designate. The Board of
Directors has not designated any series of
Preferred Stock. See "Description of
Securities."
Warrants ........................ Each Warrant entitles the holder to purchase
one share of Common Stock. The Warrants are
exercisable at $3.00 per share. The Warrants
are callable and can be redeemed by the
Company for $.01 per Warrant on 30 days
notice at any time after the date of this
Prospectus if the closing bid price of the
Common Stock equals or exceeds 200% of the
exercise price for 20 consecutive trading
days. The exercise prices for the Warrants
are subject to adjustment in certain events.
See "Description of Securities."
Use of Proceeds ................. There is no assurance as to the amount of
proceeds that may be received from the
exercise of any of the Warrants. Any proceeds
that are received will be used generally to
provide additional working capital, but have
not been specifically allocated, inasmuch as
there is no assurance when or how many (if
any) Warrants will be exercised.
Transfer Agent .................. American Registrar and Transfer Co., 10
Exchange Place, Suite 705, Salt Lake City,
Utah 84110, (801) 363-9065, serves as
transfer agent and registrar for the
Company's outstanding securities.
4
<PAGE>
RISK FACTORS
An investment in the Company is speculative in nature, involves a high
degree of risk and should only be made by an investor who can afford the loss of
his entire investment. In addition to the other information in this Prospectus,
the following factors should be considered carefully by potential purchasers in
evaluating an investment in the Warrants and Common Stock of the Company offered
hereby.
When used in this Prospectus, the words or phrases "would be," "will
allow," "intends to," "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements." The Company cautions readers not to place
undue reliance on any forward-looking statements, which speak only as of the
date made, are based on certain assumptions and expectations which may or may
not be valid or actually occur, and which involve various risks and
uncertainties. Unless otherwise required by applicable law, the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
Profitability Uncertain
The Company is in the development stage and has reported no revenues or
sales. There is no assurance that the Company's business plan will ever be
commercially viable and no assurance can be given that the Company will ever
become profitable. In addition, prospects for the Company's profitability will
be affected by expenses, operational difficulties and other factors frequently
encountered in the development of a business enterprise in a competitive
environment, many of which factors may be unforeseen and beyond the Company's
control.
Limited Capital/Need for Additional Capital
The Company estimates that it may need substantial funding, in addition
to its present capital, to be able to fully develop and expand its business. The
Company believes that its current funds and funds generated from operations will
be sufficient to support its operations and planned capital expenditures for the
next twelve months. The Company's future need for capital will depend on a
number of factors, including the level of marketing activities, the amount of
funding required to establish a chain of neuro/orthopedic spinal surgery clinics
by purchasing, owning, establishing and expanding certain assets used in
minimally invasive spine surgery and neuro orthopedic spine surgery clinics;
managing and developing spine treatment and pain management clinics, diagnostic
and rehabilitation services and outpatient surgery facilities; and provide
non-professional support services, facilities, equipment, non-professional
personnel, supplies and non-professional support staff to medical practices. In
addition, revenues may not develop as projected. Moreover, the Company's
business plans may change or unforeseen events may occur which affect the amount
of additional funds required by the Company. If additional funds are not
obtained if and when required, the lack thereof could have a material adverse
effect on the Company. Further, there is no assurance that the terms on which
any funds obtained by the Company will be favorable to stockholders of the
Company at that time.
Dilution
Warrant holders who exercise their Warrants to purchase the underlying
shares of Common Stock will suffer substantial dilution in the purchase price of
the Shares compared to the net tangible book value per share immediately after
the purchase. The exact amount of dilution will vary depending upon the total
number of Warrants exercised, and will be greater if less than all the Warrants
are exercised. The fewer Warrants exercised, the greater dilution will be with
respect to the Warrants that are exercised. See "Dilution."
5
<PAGE>
Marketing Strategy/Asset Acquisition of Non-Professional Services
The Company intends to establish a chain of neuro/orthopedic spinal
surgery clinics by purchasing, owning, establishing and expanding certain assets
used in minimally invasive spine surgery and neuro orthopedic spine surgery
clinics; managing and developing spine treatment and pain management clinics,
diagnostic and rehabilitation services and outpatient surgery facilities; and
provide non-professional support services, facilities, equipment,
non-professional personnel, supplies and non-professional support staff to
medical practices. CMIS is in the development stage and will require substantial
additional funding to achieve its business objectives. There can be no assurance
that the Company will be successful in achieving its objectives. If the Company
is unsuccessful in achieving one or more of these objectives, it could have a
material adverse effect on the Company.
Dependence on Key Personnel
The success of the Company depends upon the skills, experience and
efforts of John C. Chiu, M.D. and the Company's other key personnel. Should the
services of Dr. Chiu and/or other key personnel become unavailable to the
Company for any reason, the business of the Company could be adversely affected.
There is no assurance that the Company will be able to retain Dr. Chiu, other
key personnel and/or attract new employees of the caliber needed to achieve the
Company's objectives. The Company has an employment agreement in place with Mr.
Jere D. Palazzolo, but it does not have employment agreements or noncompetition
agreements in place with Dr. Chiu or any other key personnel.
Growth Strategy/Rapid Growth
The Company's strategy is to rapidly grow by establishing a chain of
neuro/orthopedic spinal surgery clinics by purchasing, owning, establishing and
expanding certain assets used in minimally invasive spine surgery and neuro
orthopedic spine surgery clinics; managing and developing spine treatment and
pain management clinics, diagnostic and rehabilitation services and outpatient
surgery facilities; and provide non-professional support services, facilities,
equipment, non-professional personnel, supplies and non-professional support
staff to medical practices. Identifying appropriate physician groups and
proposing, negotiating and implementing economically attractive affiliations
with them can be a lengthy, complex and costly process. There can be no
assurance that the Company will be successful in identifying and establishing
relationships with neurosurgical, spine surgery and orthopedic groups. If the
Company is successful in implementing its strategy of rapid growth, such growth
may impair the Company's ability to efficiently provide non-professional support
services, facilities, equipment, non-professional personnel, supplies and
non-professional support staff to medical practices. The Company's future
results could be materially adversely affected if it is unable to manage growth
effectively.
Risks of Expansion
The ongoing expansion and development of the Company's network of
centers, markets and services is contingent on the Company's ability to
accurately assess markets, negotiate agreements, obtain adequate financing, hire
personnel, obtain required licenses and approvals, and other matters, all in a
timely manner, and at satisfactory costs, terms and conditions. Company's
inability to expand in accordance with their plans or manage their growth
effectively could have a material adverse affect on the overall success of the
Company and its ability to continue its proposed business.
Dependence on Affiliated Physician Groups
The Company's revenue is expected to depend on funds generated from the
establishment of a chain of neuro/orthopedic spinal surgery clinics by
purchasing, owning, establishing and expanding certain assets used in minimally
invasive spine surgery and neuro orthopedic spine surgery clinics; managing and
developing spine treatment and pain management clinics, diagnostic and
rehabilitation services and outpatient surgery facilities; and provide
non-professional support services, facilities, equipment, non-professional
personnel, supplies and non-professional support staff to medical practices.
6
<PAGE>
There is no assurance that the physician groups with whom the Company contracts,
if any, will be profitable. If such physician groups are not profitable, it will
have a material adverse effect on the Company.
Reimbursement by Third Party Payors
A significant portion of the Company's revenues are dependent on the
acceptance of its services as covered benefits under third party payor programs,
including private insurance, HMO's and other managed care entities. The
healthcare industry is undergoing significant changes, with third party payors
taking measures to reduce reimbursement rates or in some cases denying
reimbursement fees for previously acceptable treatment modalities. There is no
assurance that third party payors will pay for minimally invasive surgery
("MIS") services under their payor programs. Failure of third party payors to
adequately cover MIS will have a materially adverse affect on the Company.
Regulatory Environment
The Company's centers and its affiliated physicians are subject to
numerous regulatory, accreditation and certification requirements, including
requirements related to licensure, certificate of need, reimbursement from
insurance companies and other private third party payors, Medicare and Medicaid
participation and reimbursement, and utilization and quality review
organizations. An adverse determination by any authority could have a material
adverse effect on the Company.
Healthcare Reform
The public has recently focused significant attention on reforming the
healthcare system in the United States. A broad range of healthcare reform
measures have been introduced in Congress and in certain state legislatures.
Legislative interest recently has also focused on the role of HMO's in the
provision of healthcare and the effect of managed care reimbursement mechanisms
on healthcare service utilization and quality of service. It is not clear at
this time what proposals, if any, will be adopted or, if adopted what effect, if
any, such proposals would have on the Company's business. There can be no
assurance that any proposals adopted would be coordinated at the federal or
state level, and therefore the Company, as a national participant in the
healthcare industry, is subject to varying state regulatory environments.
Certain proposals, such as cutbacks in the Medicare and Medicaid programs,
containment of healthcare costs that could include a negative affect on prices
charged by physicians, hospitals or other healthcare providers, and greater
state flexibility in the administration of Medicaid, could adversely affect the
Company. There can be no assurance that currently proposed or future healthcare
programs, laws, regulations or policies will not have a material adverse effect
on the Company's operating revenue.
"Stark Laws"
The Company's centers and their physicians are also subject to the
Ethics in Patient Referrals Act of 1989 (the "Stark Law"). Unless excepted, a
physician may not make a referral of a Medicare or Medicaid patient to any
clinical laboratory services provider with whom he/she has a financial
relationship (either investment or compensation) for such restricted services,
and any provider who accepts such a referral may not bill for the service
provided pursuant to the referral. Sanctions for violating the Stark Law can
include civil monetary penalties and exclusion from Medicare and Medicaid. In
August 1993, Congress passed legislation ("Stark II") that, effective January 1,
1995, expanded the self-referral ban to include a number of healthcare services
provided by entities with which the physicians may have an ownership interest or
a financial relationship, although it does not specifically prohibit referrals
by physicians with an ownership interest in, or financial relationship with, an
ambulatory surgery center, provided that the surgery services are not provided
as "outpatient hospital services". In addition to the federal Stark Laws,
certain states have enacted similar patient referral legislation. Ambulatory
surgery is not included in the list of restricted services and the Company does
not believe that ambulatory surgery is subject to the Stark restrictions.
Likewise, services that are a part of a physician's private practice do not
apply to the restrictions. Violation of the Stark Law or Stark II or related
state laws by the Company may have a materially adverse effect on the Company.
7
<PAGE>
Risks Inherent in the Provision of Medical Services
The Company's affiliated physician groups are involved in the delivery
of healthcare services to the public and are exposed to the risk of professional
liability claims. Claims of this nature, if successful, could result in damage
awards to the claimants in excess of the limits of any applicable insurance
coverage. Insurance against losses related to claims of this type can be
expensive and varies widely from state to state. There can be no assurance that
the Company will not be subject to such claims, that any claim will be
successfully defended or, if the Company is found liable, that the claim will
not exceed the limits of the Company's insurance, if any. Professional liability
claims could have a material adverse effect on the Company.
Corporate Practice of Medicine
Organizations that employ physicians directly or exercise significant
control over physician's practice may be subject to challenge in states that
prohibit the corporate practice of medicine. In states that still prohibit the
corporate practice of medicine, agreements with physicians must provide the
physicians with sufficient control over their practices to avoid being deemed
employees for corporate practice purposes. Violation of the corporate practice
of medicine laws by the Company may have a materially adverse effect on the
Company.
Volatility of Stock Prices
In the event that an established public market for the Common Stock
develops, market prices will be influenced by many factors, and will be subject
to significant fluctuation in response to variations in operating results of the
Company and other factors such as investor perceptions of the Company, supply
and demand, interest rates, general economic conditions and those specific to
the industry, developments with regard to the Company's activities, future
financial condition and management.
Anti-Takeover Provisions
The Amended Certificate of Incorporation of the Company will contain
certain provisions which could be an impediment to a non-negotiated change in
control of the Company, namely an ability, without stockholder approval, to
issue up to 100,000 shares of preferred stock with rights and preferences
determined by the Board of Directors. These provisions could impede a
non-negotiated change in control and thereby prevent stockholders from obtaining
a premium for their Common Stock. See "Description of Securities".
No Dividends
The Company does not currently intend to pay cash dividends on its
Common Stock and does not anticipate paying such dividends at any time in the
foreseeable future. At present, the Company will follow a policy of retaining
all of its earnings, if any, to finance the development and expansion of its
business. See "Description of Securities--Dividend Policy."
Limited Liability of Management
The Company has adopted provisions in its Certificate of Incorporation
which limit the liability of its Officers and Directors and provisions in its
By-laws which provide for indemnification by the Company of its Officers and
Directors to the full extent permitted by Delaware corporate law. The Company's
Certificate of Incorporation generally provides that its directors shall have no
personal liability to the Company or its stockholders for monetary damages for
breaches of their fiduciary duties as directors, except for breaches of their
duties of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, acts involving unlawful
payment of dividends or unlawful stock purchases or redemptions, or any
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<PAGE>
transaction from which a director derives an improper personal benefit. Such
provisions substantially limit the stockholders' ability to hold directors
liable for breaches of fiduciary duty.
Potential Issuance of Additional Common and Preferred Stock
The Company is authorized to issue up to 20,000,000 shares of Common
Stock. To the extent of such authorization, the Board of Directors of the
Company will have the ability, without seeking shareholder approval, to issue
additional shares of Common Stock in the future for such consideration as the
Board of Directors may consider sufficient. The issuance of additional Common
Stock in the future will reduce the proportionate ownership and voting power of
the Common Stock offered hereby. The Company will also be authorized to issue up
to 100,000 shares of preferred stock, the rights and preferences of which may be
designated in series by the Board of Directors. To the extent of such
authorization, such designations may be made without shareholder approval. The
designation and issuance of series of preferred stock in the future would create
additional securities which would have dividend and liquidation preferences over
the Common Stock offered hereby. See "Description of Securities."
No Assurance of a Liquid Public Market for Securities
Although the Company's shares of Common Stock are quoted on the
Electronic Bulletin Board maintained by the NASD, there can be no assurance that
a regular and established market will continue for the securities upon
completion of this offering. There can also be no assurance as to the depth or
liquidity of any market for Common Stock or the prices at which holders may be
able to sell the Shares. As a result, an investment in the Shares may be totally
illiquid and investors may not be able to liquidate their investment readily or
at all when they need or desire to sell.
Volatility of Stock Prices
In the event that there is an established public market for the Shares,
market prices will be influenced by many factors and will be subject to
significant fluctuations in response to variations in operating results of the
Company and other factors such as investor perceptions of the Company, supply
and demand, interest rates, general economic conditions and those specific to
the industry, developments with regard to the Company's activities, future
financial condition and management.
Applicability of Low Priced Stock Risk Disclosure Requirements
The Common Stock of the Company may be considered a low priced security
under rules promulgated under the Securities Exchange Act of 1934. Under these
rules, broker-dealers participating in transactions in low priced securities
must first deliver a risk disclosure document which describes the risks
associated with such stocks, the broker-dealer's duties, the customer's rights
and remedies, and certain market and other information, and make a suitability
determination approving the customer for low priced stock transactions based on
the customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the customer,
obtain specific written consent of the customer, and provide monthly account
statements to the customer. With all these restrictions, the likely affect of
designation as a low priced stock will be to decrease the willingness of
broker-dealers to make a market for the stock, to decrease the liquidity of the
stock and to increase the transaction cost of sales and purchases of such stock
compared to other securities.
Outstanding Warrants, Options and Other Rights
In addition to the Warrants, the Company has authorized stock options
to acquire 500,000 shares of the Company's Common Stock under the Company's
stock option plan (the "Plan") and has granted stock options to purchase 205,000
shares of the Company's Common Stock under the Plan.
To the extent that options or warrants are exercised, the holders
thereof are given an opportunity to profit from a rise in the market price of
the Company's Common Stock with a resultant dilution of the interests of other
9
<PAGE>
stockholders if the then prevailing market price exceeds such exercise prices.
The holders thereof are likely to exercise them when, in all likelihood, the
Company could obtain funds from the sale of its securities on terms more
favorable than those provided by the options and warrants. Accordingly, the
Company may find it more difficult to raise additional capital while the options
and warrants are outstanding.
No Assurance of Warrant Exercise and No Escrow of Funds
There is no assurance that any proceeds will be received from exercise
of Warrants in this Offering. Proceeds may be insufficient to defray offering
expenses. No minimum number of Warrants must be exercised and there is no escrow
of funds received upon exercise. Any proceeds received will immediately be
retained by the Company to be used in its business. In the event that any
proceeds from this offering and the Company's existing capital are not
sufficient to enable the Company to develop and expand its business and generate
a profit, the Company may need to seek additional financing from commercial
lenders or other sources, for which it presently has no commitments or
arrangements. This creates an increased risk to persons who exercise Warrants,
because there is no assurance that any additional Warrants will be exercised or
that the Company will receive any further funding.
Risks of Warrant Exercise
There is no assurance that exercising Warrant holders will be able to
sell their Common Stock in the future at a price which equals or exceeds their
exercise price.
Current Prospectus and Registration Required for Exercise
Holders of the Warrants will only be able to exercise such securities
to acquire the underlying Common Stock if a current prospectus relating to the
Common Stock is then in effect and such exercise is qualified or exempt from
qualification under applicable securities laws of the states in which such
holders of the Warrants reside. Although the Company intends to use reasonable
efforts to update this Prospectus as necessary to maintain a current prospectus
and federal and state registration/qualification for such exercise, there is no
assurance that the Company will be able to do so at such time as such persons
may wish to exercise Warrants. The value of the Warrants may be greatly
diminished if the ability to exercise them is not maintained. If a current
prospectus is in effect, each of the Warrants is redeemable for nominal
consideration at any time after the date hereof upon 30 days notice, if the bid
price of the Common Stock equals or exceeds 200% of the exercise price of the
Warrants for 20 consecutive trading days. If redeemed when a current prospectus
is in effect, Warrant holders would have 30 days to exercise the Warrants, after
which they would be compelled to accept the nominal redemption price.
Determination of Offering Prices
The exercise prices of the Warrants were arbitrarily determined by
management of the Company and set at levels substantially in excess of prices
recently paid for securities of the same class. The prices bear no relationship
to the Company's assets, book value, net worth or other economic or recognized
criteria of value. In no event should the exercise prices be regarded as an
indicator of any future market price for the Company's securities.
Shares Eligible for Future Sale.
Of the 8,133,333 shares of the Company's Common Stock outstanding prior
to the exercise of any Warrants, 1,800,000 Shares are freely tradeable or are
eligible to be sold in the public market. All the shares of Common Stock to be
issued in this offering will also be freely tradeable immediately upon issuance.
All the remaining shares of Common Stock presently outstanding are restricted
and/or affiliate securities which are not presently, but may in the future be
sold into any public market that may exist for the Common Stock, pursuant to
registration or Rule 144 promulgated pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). Future sales by current shareholders of
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substantial amounts of Common Stock into the public market could depress the
market prices of the Common Stock in any such market. See "Shares Eligible for
Future Sale".
DILUTION
Dilution is the difference between the price per share being paid for
the Common Stock offered hereby pursuant to the exercise of the Warrants, and
the net tangible book value per share of the Common Stock immediately after its
purchase. The Company's net tangible book value per share of Common Stock is
calculated by subtracting the Company's total liabilities from its total assets
less any intangible assets and liquidation preferences, then dividing by the
number of shares of Common Stock then outstanding. Based on the unaudited
interim financial statements, the Company had 8,133,333 shares of Common Stock
outstanding at June 30, 1998, with a net tangible book value of $1,884,025 or
approximately $.23 per share. These amounts do not give effect to operating
results or any other changes in net tangible book value of the Company occurring
after June 30, 1998.
If all Warrants were immediately exercised (of which there is no
assurance), upon the exercise thereof, but before exercise of any option issued
under the Plan, the estimated net tangible book value of the Company after the
offering, on a pro forma basis (which gives effect to receipt of the estimated
net proceeds from such exercise and issuance of the underlying shares of Common
Stock, but does not take into consideration any other changes in net tangible
book value of the Company subsequent to June 30, 1998, would be $7,284,025 or
approximately $.73 per share. This would result in dilution to persons
exercising Warrants of $2.27 per share, or 76% of the exercise price of $3.00
per share. Net tangible book value per share would increase to the benefit of
present stockholders from $.23 prior to the offering to $.73 after the offering,
or an increase of $.50 per share attributable to the exercise of the Warrants.
If less than all the Warrants are exercised, dilution to the Warrant
holders who do not immediately exercise will be greater than the amount shown.
The fewer Warrants exercised, the greater dilution will be to those who do
exercise.
The following table sets forth the estimated net tangible book value
("NTBV") per share assuming immediate exercise of all Warrants, and the dilution
to persons purchasing the underlying shares of Common Stock.
Exercise of all Warrants:
Warrant exercise price/share $3.00
NTBV/share prior to exercise $ .23
Increase attributable to Warrant exercise $ .50
Pro forma NTBV/share after exercise $ .73
Dilution $2.27
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USE OF PROCEEDS
Net proceeds to the Company from sale of the shares of Common Stock
underlying the Warrants will vary depending upon the total number of Warrants
exercised. If all of the Warrants were exercised during the first year at $3.00
per share (of which there is absolutely no assurance, nor any assurance that any
Warrants will be exercised), the Company would receive gross proceeds of
$5,400,000. Regardless of the timing and number of Warrants exercised, the
Company expects to incur offering expenses presently estimated at $30,000 for
legal, accounting, printing and other costs in connection with the offering
pursuant to this Prospectus. Inasmuch as there is no assurance that any or all
of the Warrants will be exercised, there are no escrow provisions and any
proceeds that are received will be immediately available to the Company to
provide additional working capital to be used for general corporate purposes.
Proceeds will be used generally to provide working capital for whatever working
capital needs the Company may have at the time funds are received. The exact
uses of any proceeds will depend on the amounts received and the timing of
receipt. Management's general intent is to use whatever additional funds may be
generated from Warrant exercise to finance further development and expansion of
the Company's business. See "Management's Plan of Operations."
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company has traded in the over-the-counter
market since the acquisition wherein the Company acquired CMIS on June 23, 1997,
and is quoted on the National Association of Securities Dealers, Inc. Electronic
Bulletin Board under the symbol BACK. There was no price quoted for the stock
prior to the acquisition. Set forth below is high and low bid information for
the Common Stock as reported on the Bulletin Board system for each calendar
quarter during such part of the past two fiscal years that price quotations have
been available. These prices represent interdealer quotations, without retail
markup, markdown or commissions, and may not represent actual transactions.
Quarter Ended High Low
------------- ---- ---
1998
----
June 30 .............................. $3.42 $2.50
September 30 (through August 16)...... $3.50 $2.25
Holders of Record
As of September 16, 1998, there were approximately 323 record holders
of the Company's Common Stock.
Dividend Policy
The Company has not previously paid any cash dividends on its Common
Stock and does not anticipate or contemplate paying dividends on Common Stock in
the foreseeable future. It is the present intention of management of the Company
to utilize all available funds for the development of the Company's business.
The only restrictions that limit the ability to pay dividends on common or
preferred equity or that are likely to do so in the future, are those
restrictions imposed by law.
The payment of dividends, if any, on the Common Stock in the future is
at the discretion of the Board of Directors and will depend upon the Company's
earnings, if any, capital requirements, financial condition and other relevant
factors. The only restrictions that limit the ability of the Company to pay
dividends on its common equity or that are likely to do so in the future, are
those restrictions imposed by law. The Board of Directors does not intend to
declare any dividends on the Common Stock in the foreseeable future.
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MANAGEMENT'S PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and the notes associated
with them contained elsewhere in this Prospectus. The financial statements of
the Company referred to in this discussion include and reflect the financial
condition and operating results of the Company and its consolidated subsidiaries
for the period since its acquisition of CMIS on June 23, 1998 through June 30,
1998, and of CMIS for the period prior to such acquisition back its date of
inception on March 6, 1998. This discussion should not be construed to imply
that the results discussed herein will necessarily continue into the future or
that any conclusion reached herein will necessarily be indicative of actual
operating results in the future.
Plan of Operation
Management views the 3rd & 4th Quarters of 1998 as an organizational
and start-up period. The Company has begun negotiating arrangements whereby the
Company will establish a chain of neuro/orthopedic spinal surgery clinics by
purchasing, owning, establishing and expanding certain assets used in minimally
invasive spine surgery and neuro orthopedic spine surgery clinics; managing and
developing spine treatment and pain management clinics, diagnostic and
rehabilitation services and outpatient surgery facilities; and provide
non-professional support services, facilities, equipment, non-professional
personnel, supplies and non-professional support staff to medical practices. To
accomplish this business objective, the company has raised $1,951,565 from
financing activities. The Company is in the development stage, however, and will
require substantial additional funding to achieve its business objectives.
During the next twelve months the Company intends to enter into
arrangements acquire the assets and non-professional management rights of three
to seven clinics and provide such services as described above to individual
physicians or groups of physicians (hereinafter sometimes referred to as CMIS
Clinics"). There can be no assurance, however, that the Company will be
successful in entering into such arrangements.
The Company currently has a full-time President and Chief Operating
Officer. Financial and Human Resources services will be important to the
management and development of the Company's business plan. The Board of
Directors will determine the appropriateness of contracting for these services
or hiring full time corporate directors in these areas of expertise. It is
anticipated that a Chief Financial Officer and Director of Human Resources will
be hired within the next six to twelve month. It is anticipated that an
Administrative/Marketing Director will be assigned to oversee each center to
manage the business, expansion and development aspects of the center. Technical,
therapeutic, clerical and secretarial staff and other corporate management and
support staff, will be added throughout the coming twelve month period as
dictated by particular need. Management projects that the next tier of corporate
support requirements will include expertise in insurance/managed care
contracting, marketing and development, and billing & collections. Directors in
these areas of expertise, among others as deemed appropriate from time to time,
will be added at the discretion of the Board of Directors.
In addition to the capital requirements imposed by acquisition,
staffing and office lease costs, the Company will also be subject to capital
requirements in connection with physical facilities, equipment and ongoing
management for each CMIS Center. It is likely that the Company will need
substantial additional funding to execute its business plan. See "Risk
Factors--Limited Capital/Need for Additional Capital." The Company anticipates
seeking addition funding through the sale of equity securities sometime within
the next twelve months. There is no assurance that such funding will be
available or that the terms on which any funds obtained by the Company will be
favorable to stockholders of the Company at that time. The Company anticipates,
however, that existing capital and funds generated from operations will be
sufficient to fund operations and planned capital expenditure for the next
twelve months.
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BUSINESS
Introduction
John C. Chiu, M.D. is a leading neuro spine surgeon, international
lecturer and researcher in the field of MIS, who has performed numerous MIS
surgeries. Aware of the market demand, yet the lack of trained surgeons, he
formed CMIS for the purpose of establishing a chain of neuro/orthopedic spinal
surgery clinics by purchasing, owning, establishing and expanding certain assets
used in minimally invasive spine surgery and neuro orthopedic spine surgery
clinics; managing and developing spine treatment and pain management clinics,
diagnostic and rehabilitation services and outpatient surgery facilities; and
provide non-professional support services, facilities, equipment,
non-professional personnel, supplies and non-professional support staff to
medical practices. The Company is in the development stage and will require
substantial additional funding to achieve its business objectives.
Business Development
The Company was incorporated in the State of Utah on July 2, 1982,
under the name of Mark Oil, Inc. to explore for natural resources and to invest
in other assets or businesses. In January 1984, the Company acquired an
operating subsidiary and changed the Company's name to Clef Communications, Inc.
The business of the subsidiary was unsuccessful and the Company changed its
corporate domicile to the State of Delaware and its name to Galaxy Ventures,
Inc. in January 1997. The Company had no further operations until July 1997 when
it attempted to engage in the business of producing and selling fiberglass
playground equipment. However, that business was not successful and was
discontinued in December 1997.
In June 1998, the Company (which was then known as Galaxy Ventures,
Inc.) entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement") with CMIS and changed its name to Minimally Invasive Surgery
Corporation. CMIS was incorporated in March 1998, under the laws of the State of
California. Pursuant to the Reorganization Agreement, the Company reverse split
its Common Stock on a 16 to 1 basis, and then issued 5,000,000 post split Shares
of its authorized but previously unissued Common Stock to acquire all the issued
and outstanding stock of CMIS in a stock for stock exchange whereupon CMIS
became a wholly-owned subsidiary of the Company. The Acquisition is treated as a
"reverse merger" for accounting purposes and CMIS is deemed to be the successor
entity with a recapitalization of the stockholders equity portion of its
financial statements. In conjunction with the Acquisition, the Company declared
a distribution to shareholders of record as of June 23, 1998 (immediately prior
to the Acquisition) of 1,800,000 Warrants to be distributed in the future, upon
effectiveness of a registration statement covering the offer and sale of Shares
issuable upon exercise the Warrants.
The Company has not been subject to any bankruptcy, receivership or
similar proceedings.
Overview
At some point in their lifetime, many people are affected by back pain.
Pain management has been quite varied throughout the years, including many
treatment courses such as medication, exercise, physiotherapy, limitation of
activities, chiropractic manipulation, and surgery. If surgery is indicated, the
traditional method has involved a major traumatic procedure, including a long,
expensive hospitalization with a lengthy and painful recuperation, and
ultimately, questionable outcomes. It is the opinion of management that this
fragmented approach has caused inconsistent results, and created a sense of
anxiety and apprehension among many patients regarding the direction to take for
diagnosis and treatment. Therefore, many patients prefer the least invasive and
painful course, avoid surgeons, or manage their pain independently. Many
continue to live with pain rather than undergoing major back surgery.
CMIS, aware of the market perception and the huge volume of patient
candidates, has responded with the concept of developing MIS and pain management
centers. The centers are expected to specialize in the diagnosis and treatment
of back pain. The basic premise, after accurate diagnosis, is to establish the
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least invasive course of treatment possible. A common cause of persistent back
pain is disc herniation. Company management believes that many herniated discs
can be easily treated on an outpatient basis with MIS. Unfortunately, spine
surgeons not trained in this procedure often resort to more invasive back
surgery. This adds anxiety and potentially frightens away qualified patients in
need of surgery. Patients visiting a CMIS Center will know in advance that
participating surgeons will avoid major surgery whenever possible, thus
relieving the anxiety level immediately.
The Company expects to package a broad spectrum of back pain management
treatments and therapies in its CMIS Centers. Company management believes that
MIS surgical procedures are revenue producing, cost effective, profitable, and
very time efficient. Company management also believes that establishing a chain
of neuro/orthopedic spinal surgery clinics by purchasing, owning, establishing
and expanding certain assets used in minimally invasive spine surgery and neuro
orthopedic spine surgery clinics; managing and developing spine treatment and
pain management clinics, diagnostic and rehabilitation services and outpatient
surgery facilities; and provide non-professional support services, facilities,
equipment, non-professional personnel, supplies and non-professional support
staff to medical practices can be quite profitable, potentially contributing
significantly to a CMIS Center projected gross revenue and net income. This
multidisciplinary approach is very appealing to:
* Patients, due to its non-threatening and effective approach;
* Insurance companies, because it reduces costs up to 40% over
traditional surgery;
* Physicians, due to its potential to significantly increase
their net income; and
* Investors, because of its innovative approach and profitability.
Effectively, the foundation of the potential success of the CMIS
Centers is that the centers respond to an existing unmet demand and the needs of
all related parties.
The Procedure and Expanded Services
MIS responds to the market demand with an effective and less traumatic
alternative treatment. It is frequently performed as an ambulatory procedure at
an outpatient surgery center, requiring only a local or light general
anesthetic. There is only a tiny incision, usually requiring only local
anesthetic, with the entire procedure being performed through a small sleeve.
Micro-spinal discectomy instruments, a high tech endoscope and a laser probe are
inserted into the sleeve, under fluoroscopic x-ray guidance, during surgery.
Part of the disc is cut and removed, relieving the pressure on the nerve root
causing the pain. Then the affected disc is shrinked and tightened with the
laser. The actual operating time is approximately 30-45 minutes per disc.
The benefits of this mode of treatment over traditional open disc
surgery are many. The patient experiences decreased anxiety from not having to
undergo major surgery. The risks associated with major surgery are potentially
reduced. The surgery is relatively quick and effective, often resulting in
immediate relief of pain. There is minimal surrounding tissue damage as compared
to traditional open surgery, and nerve pain is often reduced. The patient is
often able to walk out of the outpatient surgery center, and to return to normal
activities within a short period of time, and without significant pain. Finally,
it is cost effective, with the entire procedure costing up to 40% less than that
of traditional open disc surgery. MIS is a new technique that seeks to maximize
patient and payor satisfaction, with a reduction of residual symptoms.
In addition to developing the technique of MIS within the practice, the
Company expects to institute a program with the goal of expanding the existing
billable practice revenues significantly. This will be done by developing
outpatient surgical centers, physiotherapy and other ancillary facilities, as
part of the CMIS Center. Within this structure, the practice will be able to
bill for the facility charges in addition to the customary professional services
of a surgical practice. Likewise, the expansion of practice specialties will be
evaluated and implemented as appropriate to potentially include an additional
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spine surgeon, internist/GP, neurologist, pain specialist, physiotherapist, and
others. These will also contribute to potentially significant increases in
practice revenues.
The Industry
Company management believes that present trends indicate that overall
healthcare expenditures will continue to increase with the aging of the
population and the extension of healthcare coverage to previously uninsured
groups. In recent years, government programs, private insurance companies,
managed care organizations and self-insured employers have implemented various
cost containment measures to limit the growth of healthcare expenditures. These
cost containment measures, together with technological advances, have resulted
in a significant shift in the delivery of healthcare services away from
traditional inpatient hospitals to more cost effective alternatives, including
outpatient surgery, MIS and treatment.
The American Hospital Association ("AHA") statistics indicate that
outpatient hospital-based surgical procedures nearly doubled, and significantly
surpassed the total inpatient surgeries, between 1985 and 1993, growing from 7.3
million to 13.1 million procedures. During that same period, inpatient surgeries
decreased from 13.9 million to 10.7 million. This represents a 79.4% growth in
outpatient surgeries, compared to a 23% decrease in inpatient surgeries during
the same period.
Managed care organizations, with significant numbers of covered lives,
are seeking to direct large numbers of patients to high quality, low cost
providers and provider groups. In order to compete for the growing number of
managed care patients, some hospitals, physicians, and other providers,
including alternate site outpatient providers, are forming integrated delivery
systems or provider joint ventures. Management believes that the Company model
fits well within this system, with its proposed multidisciplinary practice
approach, its joint venture relationships with existing surgery and MRI centers,
and its cost effective and efficient new surgical and treatment techniques.
Competition
Minimally invasive spinal surgery is a relatively recent and evolving
technique, with few well trained surgeons to perform the procedures at all
levels of the spine. There are, to the Company's knowledge, no national or
international networks dedicated primarily to MIS and pain management. The
Company is attempting to position itself as a leading national network of MIS
and pain management centers.
Outpatient surgery centers began to grow with the reductions in
reimbursement and the emphasis by payors on cost containment. According to the
American College of Surgeons and SMG Marketing Group (Chicago, IL), "...the
number of freestanding ASC's (ambulatory surgical centers) has increased 710%,
from 239 centers in 1983, to 1,696 centers in 1992." Even with this rapid growth
of freestanding centers, only 17% of ambulatory surgical procedures were
performed at ASC's, while 73% were performed in hospital outpatient facilities.
The Company is seeking to take advantage of existing underutilized outpatient
surgery centers through leased arrangements. This may allow more cost effective
expansion of practice services for the Company, while benefiting the contracted
surgery centers with additional revenue.
Factors Contributing To Growth
Cost Effective Alternative. Company management believes that outpatient
MIS and pain management are considerably less expensive than traditional
hospital-based inpatient major spinal surgery. Additionally, management believes
that surgery performed at a freestanding ambulatory surgery center is generally
less expensive than hospital-based ambulatory surgery for a number of reasons,
including lower facility development costs, more efficient staffing and space
utilization, and a specialized operating environment focused on cost
containment. Likewise, practice based treatment of pain management provides
similar savings over the more expensive and less efficient traditional
hospital-based approaches.
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Managed Care. Company management believes that managed care enrollment
will continue to increase, and that managed care organizations will seek high
quality, cost effective healthcare alternatives for their enrollees. As a
result, interest in alternatives such as MIS surgery and pain management
techniques may grow, if reimbursement continues to shift the risks for
healthcare costs from traditional payors to providers such as hospitals and
physician groups.
Physician and Patient Preference. It is the opinion of management that
many physicians choose to perform their surgeries at freestanding outpatient
surgery centers because of patient preference. Likewise, management believes
that patients often prefer the more friendly and simplified admissions and
discharge procedures, the less institutional atmosphere, and the cost
effectiveness of MIS outpatient surgery. When combined with the added benefits
of MIS over traditional surgical options, this often creates a very appealing
alternative to patients. Additionally, management believes that many physicians
prefer freestanding surgery facilities which often enhance physicians'
productivity by providing them with greater scheduling flexibility, more
consistent nurse staffing and faster turnaround time between cases, allowing
physicians to perform more surgeries in a defined period of time.
New Technology. New advances in technologies and anesthesia have opened
the doors to develop new techniques, such as MIS and pain management, allowing
them to be performed in more accommodating and cost effective settings such as
outpatient freestanding facilities. Lasers, fiberoptic endoscopes, real time
x-ray visualization, digital photography, micro-surgical instruments, and
advanced video monitoring have reduced the trauma and recovery time of these
once major surgical procedures. Improved anesthesia has shortened recovery time
by maximizing the use of local anesthesia and minimizing post-operative side
effects such as nausea and drowsiness, thereby in many instances avoiding the
need for overnight hospitalization. With MIS, the surgical procedure is often
significantly reduced, and the recovery period is minimized due to limited
trauma and the primary use of local anesthesia. Patients are usually able to
walk out of the facility within approximately one to two hours after the
completion of surgery.
Many even go out for dinner the evening of surgery.
Growth Strategy
The goal of the Company is to expand and develop the billable revenue
base by establishing a chain of neuro/orthopedic spinal surgery clinics by
purchasing, owning, establishing and expanding certain assets used in minimally
invasive spine surgery and neuro orthopedic spine surgery clinics; managing and
developing spine treatment and pain management clinics, diagnostic and
rehabilitation services and outpatient surgery facilities; and provide
non-professional support services, facilities, equipment, non-professional
personnel, supplies and non-professional support staff to medical practices.
CMIS is in the development stage and will require substantial additional funding
to achieve its business objectives. It is the goal of the Company to respond to
the market niche of MIS, potentially establishing itself as a leader in this
field. The network will be built upon the foundation of established neuro and
orthopedic spinal surgical practices. These experienced surgeons will bring in
an existing revenue stream and base of patients upon which to build future
business. Each practice will enter the network with a number of current patients
who may qualify for consideration for MIS, diagnostic and therapeutic
modalities. The addition of these new procedures to the practice will
potentially result in a short term boost in revenue related to the existing
patient base. In addition, administrative/marketing directors will implement
marketing strategies to expand the practice base and elicit new patient
referrals. Marketing strategies will be directed toward a varied audience
including referring primary care physicians, insurance and managed care
companies, employers and direct advertising to the public.
The Company has established a specific profile of surgical practice
candidates to be considered for affiliation. Experienced spine surgeons, with a
reputation for technical excellence, will be the primary target. Company
management believes that the surgeon should have an entrepreneurial orientation,
with an average to above average practice volume and income. The physician must
be desirous of expanding his/her skills and practice to include the latest
innovative surgical techniques, and increasing the volume of lucrative, high
margin procedures. The profile of affiliated physicians may vary significantly
based on the specific circumstances involved.
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Among other potential considerations, valuation of acquired practice
assets will be based on actual assets and outstanding receivables plus a factor
of net annual income of the practice assets. The purchase price for the practice
assets will include a combination of cash, and/or other instruments potentially
to include Company securities. The percentage of each purchase instrument will
depend on the specific needs of both the Company and the participating
surgeon(s). In most instances, after the acquisition, the Company plans to own
the assets and business aspects of the practice. In order to comply with the
corporate practice of medicine restrictions, affiliated physicians will continue
to direct their medical practice, but will be contractually obligated to the
Company center for non-professional management services.
The Company intends to acquire the assets of existing practices, and
develop CMIS Centers, according to a development plan established by Company
management. This year is viewed by Company management as a start-up and
organizational period. It is contemplated that each new CMIS Center will acquire
the practice assets of one or more private surgeon's practices, which will be
the basis of that center's initial volume and revenue. An accompanying
management contract with CMIS will assure a continued dedicated commitment by
the surgeon to expand and develop the practice. It is conceivable that larger
practices may be considered, accelerating this Company's acquisition schedule.
Practice Expansion
Upon acquisition, it is the goal of the Company to reorganize the
structure of each existing surgical practice as appropriate to maximize
additional billable revenues. Pain management techniques may be added, and
development of surgical centers, physiotherapy facilities, and imaging
facilities will be considered to enable each CMIS Center to bill for services
likely referred out in the past to unrelated entities.
Each participating surgeon will be provided the opportunity for
additional training in MIS technique. This will enable the surgeon to further
his MIS experience and associated services within the practice profile. The
Company will evaluate the potential of expanding the practice to a mini
multi-specialty group with consideration of an additional spine surgeon, an
internist/GP, a neurologist and a physiotherapist, among others. When management
deems it appropriate to expand, this new staff may be part-time initially,
increasing their coverage as volume grows. These additional specialties will be
considered in order to allow the practice to expand in strategic areas that
complement the main product lines, and maximize the retention of related
billable services.
Management Services
Participating spine surgeons will direct all aspects of the
professional medical practice of each CMIS Center. Company management
anticipates that the Company will provide the following management services. As
the network grows, specialists in many of the areas discussed below will be
hired or contracted to direct and supervise their particular area of
responsibility. This will be done to maintain control in these critical and
highly specialized areas.
Practice Valuation, Acquisition & Network Development. The Company
management team will evaluate each potential practice candidate pursuant to the
Company's acquisition criteria. A valuation of the practice assets will be
conducted. Negotiations will be completed, and contracts drafted detailing the
purchase terms and management relationship between the Company and the surgeons
and physicians for the operation of the CMIS Center. Lease arrangements will
also be negotiated and formalized as appropriate with outpatient, same day
surgery centers, MRI centers, and other facilities as appropriate.
Finance & Accounting. The Company anticipates that it will provide
financial and accounting services for the CMIS Centers, including regular
financial and management reports and direction. This support will be provided at
the corporate and center levels as appropriate, with the goal of equipping
management with tools to perform their functions effectively and efficiently.
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Management Information System. The Company anticipates implementing a
network billing, collections and management information and reporting system
into each CMIS Center as deemed appropriate by management. The goal is to
maximize effective results due to consistency in procedures, and the ability to
supervise activities on a corporate level whenever reasonably appropriate.
Insurance & Managed Care. The Company plans to develop a strategy for
contracting for services with insurance companies, managed care companies, and
third party administrators. These strategies will be implemented at the CMIS
Center level, and overseen by Company management. As the Company grows, it is
the intent of management to take advantage of its expanded geographic position
through negotiations of regional and national contracts, when deemed beneficial
for the Company.
Administration, Marketing & Development. As deemed appropriate by
management, an Administrative/Marketing Director will be assigned to each CMIS
Center. That person will have the responsibility for supervising the business
aspects of the CMIS Center(s), and to develop and implement the marketing,
development and expansion strategies of the CMIS Center(s), under the direction
of the Company. The Company will manage the facilities in consultation with the
participating surgeons and physicians. The Company will implement an integrated
management information system, as appropriate, to support practice management,
billing functions and patient record keeping. The Company will also provide
comprehensive purchasing support for supplies, equipment, purchased services,
pharmaceuticals, insurance and other expense items. Additionally, the Company
will provide regulatory review to evaluate compliance with the increasingly
complex laws and regulations that apply to medical and surgical practices
nationwide.
Internet Marketing. Company management expects to develop a cost
effective internet web site, tailored to develop and enhance exposure and
referrals among physicians and patients. Interactive webpages are expected to be
designed and coordinated on a corporate, regional and local level to maximize
effectiveness of the network's goals.
Personnel & Human Resources. It is the plan of Company management that
Company staff and employees of the CMIS Centers will be Company employees. This
strategy may be modified according to specific circumstances. The Company will
evaluate its employees, make staffing decisions, provide and manage employee
wages and benefits, and implement policies and procedures for significant
aspects of human resources and personnel management for the network.
Medical Education & Training. A training program in minimally invasive
spinal surgery will be recommended, as appropriate, by the Company for
affiliated spinal surgeons. Likewise, a continuing education program will be
recommended for surgeons and the medical and technical staff at the CMIS Centers
to help in achieving a consistently high level of surgical and medical technique
and services throughout the network.
Employees
Mr. Jere D. Palazzolo is currently the Company's only full-time
employees. Dr. John C. Chiu works for the Company on a substanial part-time
basis. The Company utilizes contract workers to provide secretarial, computer,
marketing, operations, business development, accounting and other services. The
Company intends to hire additional full time employees in the future. See
"Management's Plan of Operation." None of the Company's employees are expected
to be represented by unions.
Facilities
The Company's principal executive offices are located in Camarillo,
California. The Company there leases office space which serves as its corporate
headquarters, for $900 per month. The office lease is for an eighteen month
term, beginning in July 1998, and has a one year renewal option.
19
<PAGE>
MANAGEMENT
Executive Officers, Directors And Significant Employees
Set forth below is certain information concerning each member of the
Board of Directors, executive officers and significant employee of the Company
as of September 16, 1998. 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 stockholders and qualify. Officers and other employees serve at the will
of the Board of Directors.
With the
Name Age Position Company Since
John C. Chiu, M.D. 61 Chairman, Chief Executive June 1998
Officer and Director
Jere D. Palazzolo 45 President, Chief Operating June 1998
Officer and Director
Stanley L. Chiu 32 Secretary/Treasurer and Director June 1998
- ---------------
John C. Chiu, M.D. has been a director of the Company since June 1998.
Dr. Chiu is a Diplomat of the American Board of Neurological Surgery, and is a
neuro spine surgeon specializing in Minimally Invasive Microdecompressive
Endoscopic (Arthroscopic) Surgery of the cervical, thoracic and lumbar discs and
laser endoscopic spinal discetomy. He is a pioneer in the field of minimally
invasive spine surgery (MIS) and has developed several innovations, such as a
new laser thermodiskoplasty technique for shrinking, tightening and reshaping of
herniated discs, and established new cervical and thoracic endoscopic discectomy
techniques.
Dr. Chiu is the Chief Neuro Spine Surgeon at the California Center for
Minimally Invasive Spine Surgery, which has one of the largest private MIS
practices in the world, with patients from all over the United States and over
seas. Dr. Chiu's principal occupation has been neurospine surgery, specializing
in MIS, since 1988. He is owner and president of CMIS, California Back
Specialists Medical Group, and Conejo Multi-Specialty Medical Group. His center
also operates an outpatient surgical facility and an outpatient imaging center.
He was formerly owner, chairman of the board and president of a successful
private California hospital, and owner and director of another. Both were
operated successfully, and finally sold to other healthcare providers for a
profit. He is president of the American Academy of Minimally Invasive Spine
Medicine and Surgery, a professional society dedicated to the advancement of the
technique of MIS.
Dr. Chiu is a frequent professional and public speaker, and conducts
training fellowships, certification workshops and seminars on MIS for spine
surgeons, neurosurgeons, and orthopedic surgeons. He has presented at the annual
meeting of the American Association of Neurosurgeons, the Congress of
Neurological Surgeons and the International Congress of Laser Symposium on the
subject of Minimally Invasive Spine Surgery, Laser Endoscopic Spinal Discetomy
and Laser Thermodiskoplasty. Dr. Chiu also presented at the 3rd International
Congress of Minimally Invasive Neurosurgery in Paris, France, presenting his
papers on Holmium Laser (at non-ablative low energy level) Thermodiskoplasty
through Disk Shrinkage with Tightening Effect, Percutaneous Microdecompressive
Endoscopic Thoracic Discectomy with Laser Thermodiskoplasty for Herniated
Thoracic discs, and Transpinal Canal L5-Sl Percutaneous Microdecompressive
Endoscopic Lumbar Discectomy. In 1998 he has presented on numerous topics
related to MIS at the International Congress of the International
Musculoskeletal Laser Society in Seville, Spain, the Annual Meeting of the
American Association of Neurological Surgeons in Philadelphia, the Annual
Meeting of the International Intradiscal Therapy Society in San Antonio, and at
the International College of Surgeons Annual Meeting and many others.
Dr. Chiu is the recipient of many professional and governmental awards,
including two California Legislature Assembly Certificates of Recognition in
honor of "Promotion of Sino-American Medical Scientific Education Exchanges" and
in honor of "Outstanding Contribution and Development of Minimally lnvasive
Spinal Surgery/Neurosurgery", and four certificates of recognition from the city
of Los Angeles including the development of the procedure for minimally invasive
spine surgery, a new state-of-the-art procedure, and laser spine surgery. Dr.
Chiu is the author of the popular back care book, "Four Weeks to a Better Back",
"101 Ways to a Better Back" and over 100 presentations and medical publications
in the field of MIS and neurosurgery.
20
<PAGE>
Dr. Chiu finished his premedical education at Southern Methodist
University. He received his M.D. from Baylor University College of Medicine,
completed an internship at The Brooklyn Hospital, and completed further training
in neurosurgery at the Mayo Clinic, State University of New York/Long Island
College Hospital, Baylor University College of Medicine, Kings County Hospital
and University of Zurich.
Businesswise, Dr. Chiu is also a general partner of numerous successful
limited partnerships, in addition to owning and operating many real estate
ventures, including apartments and shopping centers.
Dr. Chiu will work for the Company on a substantial part-time basis
and will continue to devote time to his private medical practice and other
business endeavors. Dr. Chiu is the father of Mr. Stanley L. Chiu.
Jere D. Palazzolo has been a director of the Company since June 1998.
Mr. Palazzolo received a Masters degree in healthcare administration from
Washington University and a BA degree in management from Webster University.
From 1991 to 1997, Mr. Palazzolo was Vice President of Medical Imaging Centers
of America, Inc., a public company that owned and operated high tech radiology
practices and centers nationally. Prior to that Mr. Palazzolo held executive
positions for seven years with SSM Health Care System, a national
hospital/healthcare organization. He has participated in international
healthcare project delegations for the U.S. Commerce Department, private
ventures and public companies, to the United Kingdom, Italy, Spain, Greece,
China, Singapore, Malaysia, Indonesia and Thailand. Mr. Palazzolo's areas of
expertise include corporate operations and administration, new business
development, and medical staff affairs and physician relations. Mr. Palazzolo
will devote his full time services to the affairs of the Company.
Stanley L. Chiu has been a director of the Company since June 1998. Mr.
Chiu received a Master of Architecture degree from Harvard Graduate School of
Design, and a Bachelor of Arts degree from Wesleyan University. He is an
experienced architect with a strong design background in medical facilities. Mr.
Chiu is employed at Ellerbe Becket, Inc. and has primarily been employed as an
architect since graduation. Mr. Chiu has been designer on numerous award-winning
building, most recently Yonsei University Medical Center in Seoul, Korea, and
his work has been published and exhibited internationally. Among his extensive
project experience are included Mayo Clinic, Medical College of Ohio, Palo Alto
Medical Foundation, University of Minnesota, Golden Harbor Plaza (Inchon,
Korea), Bengals Stadium (Cincinnati, Ohio), Yamanashi Prefecture Horticulture
Museum (Tokyo), and many other major projects internationally. Businesswise, Mr.
Chiu is a partner in numerous successful business partnerships, in addition to
owning, operating and developing many real estate ventures. Mr. Chiu will work
for the Company on a part-time basis and will continue to devote a substantial
amount of his time to his architecture practice and other business endeavors.
Mr. Chiu is the son of Dr. John C. Chiu.
Compensation of Directors
No cash fees are expected to be paid to non-employee directors of the
Company by the Company for service on the Board of Directors. Mr. Stanley L.
Chiu is the only non-employee member of the Company's Board of Directors and he
has received stock options to acquire 5,000 shares of the Company's Common Stock
at an exercise price of $1.50 per share as compensation for service on the
Company's Board of Directors. The Company has made no other agreements regarding
compensation of non-employee directors. Directors of the Company who are also
officers of the Company receive no additional compensation for their service as
directors. All directors are entitled to reimbursement for reasonable expenses
incurred in the performance of their duties as members of the Board of
Directors.
Executive Compensation
No compensation was paid to the Company's Chief Executive Officer or
any other executive officer with annual compensation in excess of $100,000
("Named Executive Officers") during the past three fiscal years.
21
<PAGE>
The Company has entered into an employment agreement with Mr. Jere D.
Palazzolo for an initial term of four years. The principal terms of Mr.
Palazzolo's employment agreement are as follows: (i) an annual salary of
$150,000, which may be increased from time to time at the discretion of the
Board of Directors; (ii) stock options to purchase 100,000 shares of the
Company's Common Stock at an exercise price of $1.50 per share, which options
vest over a four year period; (iii) health and disability insurance coverage;
(iv) $50,000 of term life insurance; (v) discretionary bonuses; and (vi) payment
for certain relocation costs in the event the Company requires Mr. Palazzolo to
relocate.
The Company does not have employment agreements in place with any other
persons, including Dr. John C. Chiu. The Company has agreed, however, to pay Dr.
Chiu an annual salary of $120,000 per year, disability coverage and $50,000 of
term life insurance coverage.
Stock Options and Warrants
During 1998, the Company's Board of Directors approved the Plan.
Options granted under the Plan have exercise prices not less than the fair
market value of the underlying stock at the date of grant as determined by the
Company's Board of Directors. The number of shares, terms and exercise period of
options granted under the Plan are determined by the Company's Board of
Directors on a case-by-case basis. As of September 16, 1998, options to acquire
an aggregate of 205,000 shares of Common Stock were outstanding in connection
with the Plan.
The Company intends to declare a warrant distribution of Common Stock
Purchase Warrants to all stockholders of the Company who are stockholders of
record as of the Warrant Record Date. Subject to registration, the Warrants will
be distributed on a 1 for 1 basis (after giving effect to the reverse stock
split and will comprise in the aggregate 1,800,000 Series A Warrants, each of
which will be exercisable for one (1) share of Common Stock of the Company. The
Warrants will be exercisable at a price of $3.00 per shares prior to June 30,
2000. The shares of Common Stock underlying the Warrants must be registered with
the Securities and Exchange Commission prior to the Warrants becoming
exercisable. Therefore, the Company undertakes to file a registration statement
with the Securities and Exchange Commission and to use its best efforts to cause
the same to become effective wherein the Company will register the Warrants and
the shares of Common Stock underlying the Warrants. However, until such time as
said registration statement becomes effective, the Warrants will not be
exercisable.
The Warrants will contain standard provisions for similar instruments
and the exercise price of the Warrants may be adjusted downward at any time in
the sole discretion of the Company's Board of Directors.
Indemnity Agreements
The Company has entered into indemnity agreements (the "Indemnity
Agreements") with each of its executive officers and directors pursuant to which
the Company has agreed to indemnify the officers and directors to the fullest
extent permitted by law for any event or occurrence related to the service of
the indemnitee as an officer or director of the Company that takes place prior
to or after the execution of the Indemnity Agreement. The Indemnity Agreements
obligate the Company to reimburse or advance expenses relating to any proceeding
22
<PAGE>
arising out of an indemnifiable event. Under the Indemnity Agreements, the
officers and directors of the Company are presumed to have met the relevant
standards of conduct required by Delaware law for indemnification. Should the
Indemnity Agreements be held to be unenforceable, indemnification of these
officers and directors may be provided by the Company in certain cases at its
discretion.
Indemnification for Securities Act Liabilities
Delaware law authorizes, and the Company's Bylaws and Indemnity
Agreements provide for, indemnification of the Company's directors and officers
against claims, liabilities, amounts paid in settlement and expenses in a
variety of circumstances. Indemnification for liabilities arising under the
Securities Act may be permitted for directors, officers and controlling persons
of the Company pursuant to the foregoing or otherwise. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy and as
expressed in the Act and is, therefore, unenforceable.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of September 16,
1998, for: (i) each person who is known by the Company to beneficially own more
than 5 percent of the Company's Common Stock, (ii) each of the Company's
directors, (iii) each of the Company's Named Executive Officers, and (iv) all
directors and executive officers as a group. As of September 16, 1998, the
Company had 8,133,333 shares of Common Stock outstanding.
Shares
Name and Address Beneficially Percentage of
of Beneficial Owner(1) Owned(2) Total(2) Position
- ---------------------- -------- -------- --------
Dr. John C. Chiu (3) 5,000,000 62% Chairman, Chief Executive
Officer and Director
Jere D. Palazzolo (4) 25,000 * President, Chief Operating
Officer and Director
Stanley L. Chiu (5) 5,000 * Secretary/Treasurer and
Director
Officers and Directors 5,030,000 62%
as a Group (3 persons)
* less than one percent
- --------------
(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as the Company.
(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the total number of shares beneficially owned
by the designated person, but are not deemed outstanding for computing the
percentage for any other person.
(3) Includes 5,000,000 shares of Common Stock owned by an entity over which Dr.
Chiu has investment and/or voting power.
(4) Includes vested options to purchase 25,000 shares of Common Stock. Does not
include options to purchase 75,000 shares of Common Stock, which options
vest in equal installments in June 1999, 2000 and 2001.
(5) Includes vested options to purchase 5,000 shares of Common Stock.
The Company is not aware of any arrangements, the operation of which
may, at a subsequent date, result in a change in control of the Company.
CERTAIN TRANSACTIONS
In June 1998, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with CMIS. Pursuant to the
Reorganization Agreement, the Company issued 5,000,000 shares of Common Stock to
acquire all the issued and outstanding stock of CMIS in a stock for stock
23
<PAGE>
exchange whereupon CMIS became a wholly-owned subsidiary of the Company. The
sole stockholder of CMIS and recipient of the 5,000,000 shares of the Company's
Common Stock was a limited partnership over which Dr. John C. Chiu had
investment and/or voting power. Pursuant to the terms of the Reorganization
Agreement, on the date of the reorganization Dr. Chiu became the Chairman, Chief
Executive Officer and a Director of the Company. Prior to the reorganization,
Dr. Chiu was not affiliated with the Company.
The Company does not expected to have significant further dealings with
its current affiliates. However, if there are such dealings, the parties will
attempt to deal on terms competitive in the market and on the same terms that
either party would deal with a third person. Presently, none of the proposed
officers and directors have any transactions which they contemplate entering
into with the Company, aside from the matters described herein.
DESCRIPTION OF SECURITIES
The following statements do not purport to be complete and are
qualified in their entirety by reference to the detailed provisions of the
Company's Certificate of Incorporation, Bylaws, Series A Warrant Certificate and
Stock Option Plan.
Common Stock
The Company is authorized to issue 20,000,000 shares of $.001 par
value Common Stock and has issued 8,133,333 shares of Common Stock. The holders
of Common Stock of the Company are entitled to equal dividends and distributions
per share with respect to the Common Stock when, as and if declared by the Board
of Directors from funds legally available therefor. No holder of any shares of
Common Stock has a pre-emptive right to subscribe for any securities of the
Company, nor are any common shares subject to redemption or convertible into
other securities of the Company. Upon liquidation, dissolution or winding up of
the Company, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of Common Stock. All shares of Common Stock now outstanding are
fully paid, validly issued and non-assessable. Each share of Common Stock is
entitled to one vote with respect to the election of any director or any other
matter upon which stockholders are required or permitted to vote. Holders of the
Company's Common Stock do not have cumulative voting rights, so the holders of
more than 50% of the combined shares voting for the election of directors may
elect all of the directors if they choose to do so, and, in that event, the
holders of the remaining shares will not be able to elect any members to the
Board of Directors.
Blank Check Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
up to 100,000 shares of $.001 par value Preferred Stock. The Board of Directors
have the power, without further action by the holders of the Common Stock, to
designate the relative rights and preferences of the preferred stock, and to
issue the preferred stock in 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
affect 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 Delaware
Secretary of State a Certificate of Designation defining the rights and
preferences of each such series. Documents so filed are matters of public record
and may be examined in accordance with procedures of the Delaware Secretary of
State, or copies thereof may be obtained from the Company.
24
<PAGE>
Series A Warrants
The Company declared a warrant distribution of Warrants to all
stockholders of the Company who were stockholders of record as of a date
immediately preceding closing the Acquisition (the "Warrant Record Date").
Subject to registration, the Warrants will be distributed on a 1 for 1 basis and
will comprise in the aggregate 1,800,000 Warrants, each of which will be
exercisable for one (1) share of Common Stock of the Company. The Warrants will
be exercisable at a price of $3.00 per share prior to June 30, 2000. The shares
of Common Stock underlying the Warrants must be registered with the Securities
and Exchange Commission prior to the Warrants becoming exercisable. Until such
time as said registration statement becomes effective, the Warrants will not be
exercisable.
The Warrants will contain standard provisions for similar instruments
and the exercise price of the Warrants may be adjusted downward at any time in
the sole discretion of the Company's Board of Directors.
Stockholders of the Company must be stockholders of record as of the
Warrant Record Date in order to be entitled to the distribution of the Warrants,
which distribution is being made to said stockholders without monetary
consideration.
The Warrants will be redeemable by the Company at any time after the
initial Effective Date of the Registration Statement, regardless of whether the
Registration Statement is then current, upon thirty (30) days written notice, at
a price of $.01 per Warrant in the event the closing bid price of the Company's
Common Stock exceeds or equals 200% of the exercise price for 20 consecutive
trading days at any time during the relevant exercise period.
The Warrants will not be exercisable by, and may not be distributed to,
stockholders residing in states where the distribution or exercise is prohibited
without registration in said states and where the Company is unable to meet the
registration requirements of said state.
Stock Options
The Company currently has outstanding stock options to purchase up to
205,000 shares of Common Stock at an exercise price of $1.50 per share under the
Plan, which was adopted in June 1998. The Company may grant options to purchase
up to 500,000 shares of Common Stock under the Plan. As a result, option to
purchase up to an additional 295,000 shares of the Company's Common Stock may be
granted under the Plan. In addition, the Company's Board of Directors may amend
the Plan at any time to increase the number of options authorized under the
Plan.
Transfer Agent
The transfer agent for the Company is American Registrar and Transfer
Co., 10 Exchange Place, Suite 705, Salt Lake City, Utah 84110, (801) 363-9065.
Dividend Policy
The Company has not paid any dividends on Common Stock to date and does
not anticipate paying dividends on Common Stock in the foreseeable future. The
Company intends for the foreseeable future to follow a policy of retaining all
of its earnings, if any, to finance the development and expansion of its
business.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 8,133,333 shares of the Company's Common Stock outstanding prior
to the exercise of any Warrants, 1,800,000 Shares are freely tradeable or are
eligible to be sold in the public market. In addition, the 1,800,000 shares of
Common Stock underlying the Warrants will also be freely tradeable into the
public market immediately upon issuance. Sales of substantial amounts of this
25
<PAGE>
Common Stock in the public market could adversely affect the market price of the
Common Stock. Furthermore, all of the remaining shares of Common Stock presently
outstanding are restricted and/or affiliate securities which are not presently,
but may in the future be sold into any public market that may exist for the
Common Stock, pursuant to Rule 144 promulgated pursuant to the Securities Act of
1933, as amended (the "Securities Act"). In general, under Rule 144 as currently
in effect, a person (or group of persons whose shares are aggregated), including
affiliates of the Company, can sell within any three-month period, an amount of
restricted securities that does not exceed the greater of 1% of the total number
of outstanding shares of the same class, or (if the Stock becomes quoted on
NASDAQ or a stock exchange), the reported average weekly trading volume during
the four calendar weeks preceding the sale; provided, that at least one year has
elapsed since the restricted securities being sold were acquired from the
Company or any affiliate of the Company, and provided further that certain other
conditions are also satisfied. If at least two years have elapsed since the
restricted securities were acquired from the Company or an affiliate of the
Company, a person who has not been an affiliate of the Company for at least
three months can sell restricted shares under Rule 144 without regard to any
limitations on the amount. Future sales by current shareholders of substantial
amounts of Common Stock into the public market could depress the market prices
of the Common Stock in any such market.
PLAN OF DISTRIBUTION
This Prospectus and the Registration Statement of which it is part
relate to the offer and sale of 1,800,000 redeemable Warrants and 1,800,000
shares of Common Stock of the Company underlying these Warrants. As soon as
practicable after the date of this Prospectus, the Warrants will be distributed
to the record holders of the Company's Common Stock as of June 23, 1998 (prior
to the Acquisition). The Warrants are exercisable at a price of $3.00 per share
until June 30, 2000. The Warrants were not distributed and did not constitute an
offer by the Company to sell the shares prior to the date of this Prospectus.
The offering will be managed by the Company without an underwriter, and
the Shares will be offered and sold by the Company, without any discount, sales
commissions or other compensation being paid to anyone in connection with the
offering. In connection therewith, the Company will pay the costs o of
preparing, mailing and distributing this Prospectus to the holders of the
Warrants. Brokers, nominees, fiduciaries and other custodians will be requested
to forward copies of this Prospectus to the beneficial owners of securities held
of record by them, and such custodians will be reimbursed for their expenses.
There is no assurance that all or any of the Shares will be sold, nor
any requirement, or escrow provisions to assure that, any minimum amount of
Warrants will be exercised. All funds received upon the exercise of any Warrants
will be immediately available to the Company for its use.
Exercise Procedures
Warrants may be exercised in whole or in part by presentation of the
Warrant Certificate, with the Purchase Form on the reverse side thereof filled
out and signed at the bottom thereof, together with payment of the Exercise
Price and any applicable taxes at the principal office of American Registrar and
Transfer Co., 10 Exchange Place, Suite 705, Salt Lake City, Utah 84110. Payment
of the Exercise Price shall be made in lawful money of the United States of
America by wire transfer or check payable to the order of "Minimally Invasive
Surgery Corporation" All holders of Warrants will be given an independent right
to exercise their purchase rights. If, as and when properly completed and duly
executed notices of exercise are received by the Transfer Agent and/or Warrant
Agent, together with the Certificates being surrendered and full payment of the
Exercise Price in cleared funds, the checks or other funds will be delivered to
the Company and the Transfer Agent and/or Warrant Agent will promptly issue
certificates for the underlying Common Stock. It is presently estimated that
certificates for the shares of Common Stock will be available for delivery in
Salt Lake City, Utah at the close of business on the tenth business day after
the receipt of all required documents and funds.
26
<PAGE>
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be
passed upon for the Company by the law firm of Blackburn & Stoll, LC., Salt Lake
City, Utah.
EXPERTS
The consolidated financial statements of the Company (formerly known as
Galaxy Ventures, Inc.), included in this Prospectus have been audited by
Pritchett, Siler & Hardy, P.C., independent certified public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance on such report given upon the authority of that firm as experts in
accounting and auditing.
27
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONTENTS
PAGE
-- Independent Auditors' Report F-1
-- Consolidated Balance Sheet, June 30, 1998 F-2
-- Consolidated Statement of Operations, from inception
on March 6, 1998 through June 30, 1998 F-3
-- Consolidated Statement of Stockholders' Equity,
from inception on March 6, 1998 through
June 30, 1998 F-4
-- Consolidated Statement of Cash Flows, from inception
on March 6, 1998 through June 30, 1998 F-5
-- Notes to Consolidated Financial Statements F-6 to 11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
MINIMALLY INVASIVE SURGERY CORPORATION
Thousand Oaks, CA
The have audited the accompanying balance sheet of Minimally Invasive Surgery
Corporation [a development stage company] at June 30, 1998; and the related
statements of operations, stockholders' equity (deficit) and cash flows from
inception on March 6, 1998 through June 30, 1998. 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 audited by us present fairly, in all
material respects, the financial position of Minimally Invasive Surgery
Corporation as of June 30, 1998, and the results of its operations and its cash
flows for the period from inception through June 30, 1998, in conformity with
generally accepted accounting principles.
/s/ Pritchett, Siler & Hardy, P.C.
August 17, 1998
Salt Lake City, Utah
F-1
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONSOLIDATED BALANCE SHEET
ASSETS
June 30,
1998
-----------
CURRENT ASSETS:
Cash in bank $ 1,929,072
-----------
Total Current Assets 1,929,072
FURNITURE AND EQUIPMENT, net 7,341
OTHER ASSETS:
Organizational costs, net 1,830
-----------
$ 1,938,243
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,867
Due to shareholder 31,725
Accrued liabilities 3,796
-----------
Total Current Liabilities 52,388
-----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
100,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value,
20,000,000 shares authorized,
8,133,333 shares issued and outstanding 8,133
Paid in capital 1,941,009
Deficit accumulated during the
development stage (63,287)
-----------
Total Stockholders' Equity 1,885,855
-----------
$ 1,938,243
-----------
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONSOLIDATED STATEMENT OF OPERATIONS
From Inception
on March 6,
1998 Through
June 30, 1998
-----------------
REVENUE $ -
----------
EXPENSES:
General and administrative 63,287
----------
LOSS BEFORE INCOME TAXES (63,287)
CURRENT TAX EXPENSE -
DEFERRED TAX EXPENSE -
----------
NET LOSS $ (63,287)
----------
LOSS PER COMMON SHARE $ (.01)
----------
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON MARCH 6, 1998
THROUGH JUNE 30, 1998
[RESTATED]
Deficit
Accumulated
Common Stock During the
------------------------------- Paid in Development
Shares Amount Capital Stage
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
BALANCE, March 6, 1998 - $ - $ - $ -
Issuance of 5,000,000 shares
common stock for cash,
March 20, 1998 at $.006
per share 5,000,000 5,000 25,000 -
Issuance of 1,333,333 shares of
common stock for cash, June 4, 1998
at $1.50 per share, less
$80,858 in offering costs 1,333,333 1,333 1,917,809 -
Effect of reorganization of the
Company through the issuance of
1,800,000 shares of common stock
to acquire "Galaxy Ventures, Inc."
pursuant to agreement and plan
reorganization on June 23, 1998. 1,800,000 1,800 (1,800) -
Net loss for the period ended June 30, 1998 - - - (63,287)
----------- ------------ ----------- ------------
BALANCE, June 30, 1998 8,133,333 $ 8,133 $ 1,941,009 $ (63,287)
----------- ------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
CONSOLIDATED STATEMENT OF CASH FLOWS
From Inception
on March 6,
1998 Through
June 30, 1998
---------------
Cash Flows Used by Operating Activities:
<S> <C>
Net loss $ (63,287)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 122
Changes in assets and liabilities:
Increase in accounts payable 12,494
Increase in due to shareholder 31,725
Increase in accrued liabilities 3,796
--------------
Net Cash Used by Operating Activities (15,150)
--------------
Cash Flows Used by Investing Activities:
Equipment purchases (7,343)
--------------
Net Cash Used by Investing Activities (7,343)
--------------
Cash Flows Provided by Financing Activities:
Proceeds from common stock issuance 2,030,000
Payment of offering costs (78,435)
--------------
Net Cash Provided by Financing Activities 1,951,565
--------------
Net Increase in Cash 1,929,072
Cash at Beginning of Period -
--------------
Cash at End of Period $ 1,929,072
--------------
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ -
Income taxes $ -
Supplemental schedule of Noncash Investing and Financing Activities:
For the period ended June 30, 1998:
The Company entered into a reorganization with Galaxy Ventures, Inc.
wherein the shareholders of Galaxy retained 1,800,000 shares of stock
in the Company. The Company accrued accounts payable in the amount of
$1,950 for organization costs, and $2,423 for offering costs.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Chiu Minimally Invasive Spine Surgery, Inc. ("Subsidiary")
was organized under the laws of the State of California on March 6, 1998 as
Chiu Minimally Invasive Spine Surgery Medical Centers, Inc. During April,
1998 amended articles of incorporation were filed changing the name of the
Company and changing its status from a professional corporation to a
regular corporation. During June, 1998 the Company was reorganized through
a stock for stock exchange with Galaxy Ventures, Inc., a public company
[See note 2]. Galaxy Ventures, Inc., a Delaware corporation, was organized
on July 2, 1982. The Company has not commenced planned principal operations
and is considered a development stage company as defined in SFAS No. 7. The
Company is planning to engage in the business of operating minimally
invasive spine surgery medical centers. The Company has, at the present
time, not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
Consolidation - The consolidated financial statements include the accounts
of the company and its wholly-owned subsidiary Chiu Minimally Invasive
Spine Surgery, Inc. All significant intercompany transactions have been
eliminated in consolidation.
Furniture and Equipment - Furniture and equipment is carried at cost and is
depreciated over the estimated useful life of the equipment using the
straight line method.
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with FASB 128 "Earnings Per Share".
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period.
Actual results could differ from those estimated.
Restatement - The financial statements have been restated to reflect the
reorganization of the Company pursuant to a stock for stock exchange with a
public company (See Note 2). All references to common stock and the numbers
of shares issued and outstanding have been restated to reflect the shares
of common stock issued in the reorganization.
F-6
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - BUSINESS AQUISITION
On June 23, 1998 the Company entered into an Agreement and Plan of
Reorganization wherein the Company acquired all the issued and outstanding
shares of common stock of Subsidiary, a privately held California
corporation, in a stock for stock exchange. The Company issued 5,000,000
shares of common stock in the exchange. The agreement also provided that
the Company would raise $2,000,000 of additional capital through the
issuance of 1,333,333 shares of common stock. As a result of the
acquisition and stock issuance the former shareholders of Subsidiary gained
control of the Company. As a condition of the acquisition the Company
effected a reverse stock split just prior to the acquisition on the basis
of one share issued for each 16 shares previously issued (resulting in
1,800,000 shares outstanding just prior to the acquisition). The Company
also changed its name from Galaxy Ventures, Inc. to Minimally Invasive
Surgery Corporation. The financial statements have been presented to
reflect the acquisition as a reorganization of Subsidiary as the operations
of Subsidiary are the ongoing operations of the company.
NOTE 3 - FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
Estimated
Useful Lives June 30,
in Years 1998
----------- ----------
Machinery and equipment 5 - 7 $ 6,543
Furniture and fixtures 7 800
----------
7,343
Accumulated depreciation (2)
----------
$ 7,341
----------
NOTE 4 - CAPITAL STOCK
Common Stock - In connection with its acquisition of Subsidiary, the
Company issued 5,000,000 shares (restated) of its previously authorized,
but unissued common stock. Total proceeds from the sale of common stock
amounted to $30,000.
During June, 1998, the Company issued 1,333,333 shares of common stock for
cash in a private placement at $1.50 per share. Gross proceeds from the
sale amounted to $2,000,000. Offering costs of $80,858 were offset against
the proceeds and posted to additional paid in capital.
F-7
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK [Continued]
Stock Warrants - Pursuant to the acquisition agreement, the Company
declared a dividend to its stockholders consisting of 1,800,000 "Series A"
warrants which would entitle the shareholders to purchase one share of the
Company's common stock for each warrant at a price of $3 per share. The
warrants would expire on June 30, 2000. The warrants have not yet been
issued, but would be issued subsequent to the successful filing of a
registration statement with the Securities and Exchange Commission to
register the shares of stock underlying the warrants.
Stock Option Plan - During June, 1998 the Company implemented its 1998
stock option plan. The plan provides for 500,000 shares of common stock to
be reserved for issuance to officers, directors, employees and consultants
as employment incentives. As of June 30, 1998, options for a total of
205,000 shares have been issued by the plan to officers of the Company. All
the options are exercisable at $1.50 per share. The Company's chairman and
chief executive officer received 100,000 of the options which are fully
vested and can be exercised through June 23, 2008. The Company's President
received 100,000 options of which 25,000 are fully vested and the remainder
vest at a rate of 25,000 shares per year. The options can be exercised
through June 23, 2008. The Secretary of the Company received 5,000 options
which are fully vested and can be exercised through June 23, 2008.
A summary of the status of the options granted under the Company's stock
option plans and other agreements at June 30, 1998 and changes during the
period then ended is presented in the table below:
1998
-----------------------------
Weighted Average
Shares Exercise Price
-------- ----------------
Outstanding at beginning of period - $ -
Granted 205,000 1.50
Exercised - -
Forfeited - -
Canceled - -
-------- ----------------
Outstanding at end of Period 205,000 $ 1.50
-------- ----------------
Exercisable at end of period 130,000 $ 1.50
-------- ----------------
Weighted average fair value of
options granted 205 $ .62
-------- ----------------
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants during the period ended June
30, 1998: risk-free interest rate of 5.316%, expected dividend yield of 0%,
expected life of 10 years, and expected volatility of 0%.
F-8
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK [Continued]
A summary of the status of the options outstanding under the Company's
stock option plans and other agreements at June 30, 1998 is presented
below:
Options Outstanding Options Exercisable
--------------------------------------- ------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- --------- ----------- ---------- ----------- ----------- ---------
$1.50 205,000 10 years $1.50 130,000 $1.50
The Company accounts for its option plans and other option agreements under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, since all options
granted were granted with exercise prices at market value or above, no
compensation cost has been recognized in the accompanying financial
statements. Had compensation cost for these options been determined based
on the fair value at the grant dates for awards under these plans and other
option agreements consistent with the method prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per common share would
have been the proforma amounts as indicated below:
Year Ended
June 30,
1998
------------
Net Loss As reported $ (63,287)
Proforma $ (116,483)
Loss per share As reported $ (.01)
Proforma $ (.02)
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At June 30, 1998 the Company
has available unused operating loss carryforwards of approximately $63,000,
which may be applied against future taxable income and which expire in
2013.
F-9
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES [Continued]
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $21,500 as of December 31, 1997 with an offsetting valuation
allowance of the same amount resulting in a change in the valuation
allowance of approximately $21,500 during 1998.
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for
the period ended June 30, 1998.
1997
-----------
Loss from continuing operations
available to common shareholders
(numerator) $ (63,287)
-----------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 5,463,399
-----------
NOTE 7 - RELATED PARTY TRANSACTIONS
Management Compensation - The Company expensed $20,000 for consulting fees
and $3,431 in salary to the Company's president during the period ended
June 30, 1998.
Shareholder Advance - During the period ended June 30, 1998, certain
officer/shareholders of the company made advances to the Company totaling
$31,735 on a non-interest bearing basis which are due on demand.
Office Space - As of June 30, 1997, the Company has not rented office
space. An officer/shareholder of the Company has been allowing the Company
to use his office as a mailing address, as needed, at no expense to the
Company.
Stock Options - During the period ended June 30, 1997, Officers and
Directors of the company, including a majority shareholder, were issued
options for a total of 205,000 shares of common stock [See Note 4].
F-10
<PAGE>
MINIMALLY INVASIVE SURGERY CORPORATION
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - DEVELOPMENT STAGE COMPANY
The Company was formed with a very specific business plan. However, the
possibility exists that the Company could expend virtually all of its
working capital in a relatively short time period and may not be successful
in establishing on-going profitable operations.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Employment Agreement - The Company entered into a four year employment
agreement during June, 1998 with its President, Jere Palazzolo.
Concentration of Credit Risk - as of June 30, 1998 the Company had bank
accounts with $1,824,985 in excess of federally insured amounts.
NOTE 10 - SUBSEQUENT EVENTS
Related Party Advance - During July, 1998 an Officer and majority
shareholder of the Company advanced $10,000 to the Company.
Lease Agreement - During July, 1998 the Company entered into a lease
agreement for office space. The Company paid a deposit of $900 and will
make monthly rent payments of approximately $900. The agreement has an 18
month term and a one year renewal option.
F-11
<PAGE>
==================================== ======================================
No dealer, salesman or other person
is authorized to give any
information or To make any
representations other that those
contained in this Prospectus in
connection with the offer made 1,800,000 Warrants and Underlying
hereby. If given or made, such Shares of Common Stock
information or representations must
not be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or a solicitation of
an offer to buy any of the
securities covered hereby in any
jurisdiction or to any person to
whom it is unlawful to make such
offer or solicitation in such
jurisdiction. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, in any
circumstances, create any MINIMALLY INVASIVE
implication that there has been no SURGERY CORPORATION
change in the affairs of the Company
since the date hereof.
----------------------
TABLE OF CONTENTS
Page
Available Information..............2
Annual Reports.....................2
Prospectus Summary.................3
Risk Factors.......................5 ------------------
Dilution..........................11 PROSPECTUS
Use of Proceeds...................12 ------------------
Market for Common Equity and
Related Shareholder Matters.....12
Management's Plan of Operation....13
Business..........................14
Management........................20
Certain Transactions..............24
Description of Securities.........25
Shares Eligible for Future Sale...26
Plan of Distribution..............27
Legal Matters.....................27
Experts...........................27
----------------------
Until 90 days after the date of this
Prospectus, all dealers effecting
Transactions in the registered
securities, whether or not
participating in This distribution,
may be required to deliver a
prospectus. This is in addition to
the obligation of dealers to deliver
a prospectus when acting as ------------------------
underwriters and with respect to September 21, 1998
their unsold allotments or
subscriptions.
==================================== ======================================
==================================== ======================================
==================================== ======================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification Of Directors And Officers
Section 145 of the Delaware General Corporation Law (the "DGCL")
permits the Company to indemnify its directors, officers, employees and agents,
subject to certain conditions and limitations. Article XI of the Company's
Bylaws requires the Company to indemnify officers, employees and agents
(collectively "Agents") to the full extent permitted by the DGCL. The Company
has also entered into Indemnity Agreements with its officers pursuant to which
the Company has agreed to indemnify them. The Indemnity Agreements require
payment of any amount which an indemnitee is legally obligated to pay because of
claims relating to his or her service as an officer, although in some
circumstances such indemnification would be discretionary. The Indemnity
Agreements also provide that the Company will have the burden of proving that
the applicable standard of conduct has not been met. However, Company is not
obligated to make any payment prohibited by law or to pay where payment is made
to an indemnitee under an insurance policy or otherwise.
The Company's Bylaws, together with the Indemnity Agreements, expand
the Company's indemnity obligations to the full extent permitted by law. While
Delaware law contemplates some expansion of indemnification beyond what is
specifically authorized by the DGCL, the courts have not yet established the
boundaries of permissible indemnification.
The Company and its directors and officers are also covered by
liability insurance coverage.
Item 25. Other Expenses Of Issuance And Distribution
The following table sets forth all estimated costs and expenses, other
than underwriting discounts, commissions and expense allowances, payable by the
registrant in connection with the maximum offering for the securities included
in this Registration Statement:
Securities and Exchange Commission registration fee.....$ 1,593
Blue Sky fees and expenses.............................. --
Printing and shipping expenses.......................... 500
Legal fees and expenses................................. 15,000
Accounting fees and expenses............................ 5,000
Transfer Agent and Miscellaneous fees .................. 1,000
--------
Total...........................................$ 23,093
========
---------------
* All expenses are estimated except the Commission filing fee.
Item 26. Recent Sales Of Unregistered Securities
On June 4, 1998, the Company entered into an Agreement and Plan of
Reorganization with Chiu Minimally Invasive Spine Surgery, Inc. ("CMIS").
Pursuant to the Reorganization Agreement, the Company reverse split its Common
Stock on a 16 to 1 basis, and then issued 5,000,000 post split shares of its
authorized but previously unissued shares of Common Stock to all the existing
shareholders of CMIS (1 entity), and acquired all the issued and outstanding
stock of CMIS in a stock for stock exchange (the "Acquisition") whereupon CMIS
became a wholly-owned subsidiary of the Company. The Acquisition was not
registered under the Securities Act of 1933 (the "Act") in reliance on the
exemption from registration in Section 4(2) of the Act, as a transaction not
involving any public offering, and Regulation D promulgated thereunder. These
securities were issued as restricted securities and the certificates were
stamped with restrictive legends to prevent any resale without registration
under the Act or in compliance with an exemption.
II-1
<PAGE>
Contemporaneous with the Acquisition, the Company issued 1,333,333
shares of Common Stock to sixteen accredited investors and raised gross proceeds
of $2,000,000 in a non public offering of its securities and granted stock
options to purchase 205,000 shares of Common Stock to the Company's officers and
directors. There were no underwriting discounts or commissions. These
transactions were not registered under the Act, in reliance on the exemption
from registration in Section 4(2) of the Act, as transactions not involving any
public offering, and Regulation D promulgated thereunder. These securities were
issued as restricted securities and the certificates were stamped with
restrictive legends to prevent any resale without registration under the Act or
in compliance with an exemption.
Item 27. Exhibits Index
Exhibit No. Description
2.1 Agreement and Plan of Reorganization, dated June 4, 1998.
3(i).1 Certificate of Incorporation for Minimally Invasive Surgery
Corporation
3(i).2 Certificate of Amendment to Certificate of Incorporation
for Minimally Invasive Surgery Corporation
3(i).3 Restated Articles of Incorporation for Chiu Minimally Invasive
Spine Surgery, Inc.
3(i).4 Certificate of Amendment of Articles of Incorporation for Chiu
Minimally Invasive Spine Surgery, Inc.
3(i).5 Certificate of Amendment of Articles of Incorporation for Chiu
Minimally Invasive Spine Surgery, Inc.
3(ii).1 Bylaws for Minimally Invasive Surgery Corporation
3(ii).2 Amended and Restated Bylaws for Chiu Minimally Invasive Spine
Surgery, Inc.
4.1 Series A Warrant Agreement
4.2 Form of Common Stock Purchase Warrant
4.3 Form of Common Stock Certificate
5.1* Opinion of Blackburn & Stoll, LC
21.1 Schedule of subsidiaries
23.1 Consent of Pritchett, Siler & Hardy P.C., Independent Public
Accountants
23.3* Consent of Blackburn & Stoll, LC (included in Exhibit 5.1
hereto)
24.1 Powers of Attorney (included in Part II of this Registration
Statement)
27.1 Financial Data Schedule
---------------
* To be filed by amendment.
Item 28. Undertakings
The registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to: (i) Include
any prospectus required by section 10(a)(3) of the Securities Act of
II-2
<PAGE>
1933; (ii) Include any additional or changed material information on
the plan of distribution; and (iii) Reflect in the prospectus any facts
or events which, individually or together, represent a fundamental
change in the information in the Registration Statement.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Camarillo, State of California, on September 23, 1998.
MINIMALLY INVASIVE SURGERY CORPORATION
By /s/ John C. Chiu
---------------------------------------
John C. Chiu, Chairman, Chief Executive
Officer and Director
We the undersigned, directors and officers of Minimally Invasive
Surgery Corporation, do hereby severally constitute and appoint John C. Chiu and
Jere D. Palazzolo, and each of them, our true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign and all amendments or
post-effective amendments to this Registration Statement, and to file the same
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that the said attorneys-in-fact and agents, and each of them, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
II-3
<PAGE>
Signature Title Date
/s/ John C. Chiu Chairman, Chief Executive Officer September 23, 1998
- ----------------- and Director
John C. Chiu
/s/ Jere D. Palazzolo President, Chief Operating September 23, 1998
- --------------------- Officer, Chief Financial
Jere D. Palazzolo Officer and Director
/s/ Stanley L: Chiu Secretary/Treasurer and Director September 23, 1998
- -------------------
Stanley L. Chiu
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
GALAXY VENTURES, INC.
AND
CHIU MINIMALLY INVASIVE SPINE SURGERY INC.
<PAGE>
TABLE OF CONTENTS
1. Plan of Reorganization.........................................1
2. Exchange of Shares.............................................1
3. Pre-Closing Events.............................................2
4. Exchange of Securities.........................................2
5. Post Acquisition Events........................................3
6. Other Matters..................................................3
7. Delivery of Shares.............................................4
8. Representations of CMIS Shareholders...........................4
9. Representations of CMIS........................................4
10. Representations of Galaxy and Barlow...........................6
.........
11. Closing........................................................8
.........
12. Conditions Precedent to the Obligations of CMIS................8
13. Conditions Precedent to the Obligations of Galaxy ............10
14. Indemnification...............................................10
15. Nature and Survival of Representations........................11
16. Documents at Closing..........................................11
17. Finder's Fees.................................................12
18. Miscellaneous.................................................13
Signature Page.............................................................13
Exhibit A - CMIS Stockholder Schedule
Exhibit B - Amendment to Certificate of Incorporation
Exhibit C - Investment Letter
(i)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement")
is entered into effective as of this 4th day of June, 1998, by and among Galaxy
Ventures, Inc., a Delaware corporation (hereinafter "Galaxy"); Clayton B.
Barlow, the sole officer and director of Galaxy (hereinafter "Barlow"); Chiu
Minimally Invasive Spine Surgery, Inc., a California corporation (hereinafter
"CMIS"), and the owners of all the outstanding shares of common stock of CMIS
(hereinafter the "CMIS Stockholders").
RECITALS:
WHEREAS, the CMIS Stockholders own all of the issued and outstanding
common stock of CMIS which comprises 1,000 shares (the "CMIS Common Stock").
Galaxy desires to acquire the CMIS Common Stock solely in exchange for voting
common stock of Galaxy, making CMIS a wholly-owned subsidiary of Galaxy; and
WHEREAS, the CMIS Stockholders (as set forth on the attached Exhibit
"A") desire to acquire voting common stock of Galaxy in exchange for the CMIS
Common Stock, as more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other
good and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. It is hereby agreed that all of the CMIS
Common Stock shall be acquired by Galaxy in exchange solely for Galaxy common
voting stock (the "Galaxy Shares"). It is the intention of the parties hereto
that all of the issued and outstanding shares of capital stock of CMIS shall be
acquired by Galaxy in exchange solely for Galaxy common voting stock and that
this entire transaction qualify as a corporate reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and related or
other applicable sections thereunder.
2. Exchange of Shares. Galaxy and CMIS Stockholders agree that on the
Closing Date or at the Closing as hereinafter defined, the CMIS Common Stock
shall be delivered at Closing to Galaxy in exchange for the Galaxy Shares, after
giving effect to a 16 to 1 reverse stock split (the "Galaxy Reverse Stock
Split") as to all presently outstanding shares of Galaxy common stock, as
follows:
(a) At Closing, Galaxy shall, subject to the conditions set forth
herein, issue an aggregate of 5,000,000 shares of Galaxy common stock for
immediate delivery to the CMIS Stockholders on the basis of 5,000 Galaxy Shares
for each outstanding share of CMIS Common Stock.
(b) Each CMIS Stockholder shall execute this Agreement.
(c) Unless otherwise agreed by Galaxy and CMIS this transaction shall
close only in the event Galaxy is able to acquire all of the outstanding CMIS
Common Stock.
3. Pre-Closing Events. The Closing is subject to the completion of the
following:
(a) Galaxy shall have authorized 30,000,000 shares of $.001 par value
common stock and 100,000 shares of $.001 par value preferred stock. The
preferred stock shall be subject to issuance in such series and with such
rights, preferences and designations as determined in the sole discretion of the
board of directors.
(b) Galaxy shall have effectuated the Galaxy Reverse Stock Split at or
prior to Closing, and shall have 1,800,000 shares of its common stock issued and
outstanding and no other shares of capital stock issued or outstanding.
1
<PAGE>
(c) Galaxy shall demonstrate to the reasonable satisfaction of CMIS
that it has no material assets and no liabilities contingent or fixed.
4. Exchange of Securities. As of the Closing Date each of the following
shall occur:
(a) Each share of CMIS Common Stock issued and outstanding immediately
prior to the Closing Date shall be exchanged for 5,000 Galaxy Shares to be
delivered at Closing. All such outstanding shares of CMIS Common Stock shall be
deemed, after Closing, to be owned by Galaxy. The holders of such certificates
previously evidencing shares of CMIS Common Stock outstanding immediately prior
to the Closing Date shall cease to have any rights with respect to such shares
of CMIS Common Stock except as otherwise provided herein or by law;
(b) Any shares of CMIS Common Stock held in the treasury of CMIS
immediately prior to the Closing Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
(c) The 1,800,000 shares of Galaxy common stock previously issued and
outstanding prior to the Closing, after giving effect to the Galaxy Reverse
Split will remain outstanding.
5. Other Events Occurring at Closing. At Closing, the following shall
be accomplished:
(a) Galaxy shall file an amendment to its Certificate of Incorporation
with the Secretary of State of the State of Delaware in substantially the form
attached hereto as Exhibit "B" effecting an amendment to its Certificate of
Incorporation to reflect a name change and to accomplish the Galaxy Reverse
Stock Split, all as set forth in the attached Exhibit "B".
(b) The resignation of the existing Galaxy officer and director and
appointment of new officers and directors as described in Section 12(f) hereof.
(c) Galaxy shall have completed a private placement of 1,333,333 shares
of its common stock at $1.50 per share. The gross proceeds of this offering (the
"Galaxy Financing") shall be $2,000,000, which amount, less $75,000 costs, shall
be delivered to the control of new management of Galaxy at Closing in good
funds. The Galaxy Financing shall have been completed in compliance with all
applicable state and federal securities laws and the securities sold shall be
delivered at Closing to the investors in the Galaxy Financing.
6. Other Matters.
(a) Except as otherwise described herein, including the Galaxy Reverse
Stock Split, there shall be no stock dividend, stock split, recapitalization, or
exchange of shares with respect to or rights issued in respect of, Galaxy's
capital stock after the date hereof and there shall be no dividends paid on
Galaxy's capital stock after the date hereof, in each case through and including
the Closing Date.
(b) CMIS shall have received all requisite director and shareholder
approval of all matters set forth herein, and no shareholder of CMIS shall have
exercised any dissenters rights under applicable corporate law.
(c) Galaxy shall have received all requisite shareholder approval of
the matters set forth herein.
(d) At or prior to Closing, Galaxy shall announce the declaration of a
distribution of Series A Warrants to the shareholders of record as of a date to
be announced but which shall be as of a date prior to Closing. The Series A
Warrants shall be distributed on the basis of one warrant for each share of
post-split common stock held by each shareholder of record. There shall be
1,800,000 Series A Warrants distributed, each of which shall entitle the holder
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<PAGE>
thereof to purchase one share of the Company's common stock at $3.00 per share
prior to June 30, 2000, subject to the terms and conditions set forth in the
Memorandum (as such term is hereinafter defined).
(e) All parties hereto acknowledge and recognize that as an integral
part of the consideration given herein, Galaxy has agreed and committed to
immediately proceed, upon Closing, to obtain all necessary audited financial
statements and to commence preparation for filing, as soon as practicable, a
registration statement with the Securities and Exchange Commission ("S.E.C."),
registering the distribution of the Series A Warrants and the exercise of said
Warrants. Therefore Galaxy, with the complete cooperation of CMIS, hereby agrees
to commence preparation of said registration statement for filing with the
S.E.C. and to attempt to file such registration statement within three months of
Closing and to prosecute the same with all diligence to effectiveness.
7. Delivery of Shares. On or as soon as practicable after the Closing
Date, CMIS will use its best efforts to cause the CMIS Stockholders to surrender
for cancellation certificates representing their shares of CMIS Common Stock,
against delivery of certificates representing the Galaxy Shares for which the
shares of CMIS Common Stock are to be exchanged at Closing.
8. Representations of CMIS Stockholders. CMIS Stockholders hereby
represent and warrant each only as to its own CMIS Common Stock, effective this
date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the CMIS Common Stock is
free from claims, liens, or other encumbrances, and at the Closing Date CMIS
Stockholders will have good title and the unqualified right to transfer and
dispose of such CMIS Common Stock.
(b) Each CMIS Stockholder, respectively, is the sole owner of the
issued and outstanding CMIS Common Stock as set forth in Exhibit "A";
(c) No CMIS Stockholder has the present intent to sell or dispose of
the Galaxy Shares and no CMIS Stockholder is under a binding obligation, formal
commitment, or existing plan to sell or otherwise dispose of the Galaxy Shares.
9. Representations of CMIS. CMIS hereby represents and warrants as
follows, which warranties and representations shall also be true as of the
Closing Date:
(a) Except as noted on Exhibit "A", the CMIS Stockholders listed on the
attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of CMIS.
(b) CMIS has no outstanding or authorized capital stock, warrants,
options or convertible securities other than as described in the CMIS Financial
Statements or in Exhibit "A", attached hereto.
(c) The audited financial statements as of and for the period ended
March 20, 1998, which have been delivered to Galaxy (hereinafter referred to as
the "CMIS Financial Statements") are complete and accurate and fairly present
the financial condition of CMIS as of the date thereof and the results of its
operations for the period covered. There are no material liabilities or
obligations, either fixed or contingent, not disclosed in the CMIS Financial
Statements or in any exhibit thereto or notes thereto other than contracts or
obligations in the ordinary course of business; and no such contracts or
obligations in the ordinary course of business constitute liens or other
liabilities which materially alter the financial condition of CMIS as reflected
in the CMIS Financial Statements. CMIS has good title to all assets shown on the
CMIS Financial Statements subject only to dispositions and other transactions in
the ordinary course of business, the disclosures set forth therein and liens and
encumbrances of record. The CMIS Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated therein or in the notes thereto).
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<PAGE>
(d) Since the date of the CMIS Financial Statements, there have not
been any material adverse changes in the financial position of CMIS except
changes arising in the ordinary course of business, which changes will in no
event materially and adversely affect the financial position of CMIS.
(e) CMIS is not a party to any material pending litigation or, to its
best knowledge, any governmental investigation or proceeding, not reflected in
the CMIS Financial Statements, and to its best knowledge, no material
litigation, claims, assessments or any governmental proceedings are threatened
against CMIS.
(f) CMIS is in good standing in its jurisdiction of incorporation, and
is in good standing and duly qualified to do business in each jurisdiction where
required to be so qualified except where the failure to so qualify would have no
material negative impact on CMIS.
(g) CMIS has (or, by the Closing Date, will have filed) all material
tax, governmental and/or related forms and reports (or extensions thereof) due
or required to be filed and has (or will have) paid or made adequate provisions
for all taxes or assessments which have become due as of the Closing Date.
(h) CMIS has not materially breached any material agreement to which it
is a party. CMIS has previously given Galaxy copies or access thereto of all
material contracts, commitments and/or agreements to which CMIS is a party
including all relationships or dealings with related parties or affiliates.
(i) CMIS has no subsidiary corporations except as described in writing
to Galaxy.
(j) CMIS has made all material corporate financial records, minute
books, and other corporate documents and records available for review to present
management of Galaxy prior to the Closing Date, during reasonable business hours
and on reasonable notice.
(k) The execution of this Agreement does not materially violate or
breach any material agreement or contract to which CMIS is a party and has been
duly authorized by all appropriate and necessary corporate action under
California law and CMIS, to the extent required, has obtained all necessary
approvals or consents required by any agreement to which CMIS is a party.
(l) All information regarding CMIS which is set forth in the Memorandum
or otherwise delivered to Galaxy by CMIS for use in connection with the
transaction (the "Acquisition") described herein is true, complete and accurate
in all material respects.
10. Representations of Galaxy and Barlow. Galaxy, and Barlow to the
best of his knowledge, hereby jointly and severally represent and warrant as
follows, each of which representations and warranties shall continue to be true
as of the Closing Date:
(a) As of the Closing Date, the Galaxy Shares, to be issued and
delivered to the CMIS Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of Galaxy common
stock, fully-paid and nonassessable.
(b) Galaxy has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the board of directors of Galaxy. The execution and
performance of this Agreement will not constitute a material breach of any
agreement, indenture, mortgage, license or other instrument or document to which
Galaxy is a party and will not violate any judgment, decree, order, writ, rule,
statute, or regulation applicable to Galaxy or its properties. The execution and
performance of this Agreement will not violate or conflict with any provision of
the Articles of Incorporation or by-laws of Galaxy.
(c) Galaxy has delivered to CMIS a true and complete copy of its
audited financial statements for the years ended December 31, 1996 and 1997,
(the "Galaxy Financial Statements"). The Galaxy Financial Statements are
4
<PAGE>
complete, accurate and fairly present the financial condition of Galaxy as of
the dates thereof and the results of its operations for the periods then ended.
There are no material liabilities or obligations either fixed or contingent not
reflected therein. The Galaxy Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Galaxy as of the dates thereof and the results
of its operations and changes in financial position for the periods then ended.
(d) Since December 31, 1997, there have not been any material adverse
changes in the financial condition of Galaxy except with regard to disbursements
to pay reasonable and ordinary expenses in connection with maintaining its
corporate status and pursuing the matters contemplated in this Agreement. Prior
to Closing, all accounts payable and other liabilities of Galaxy shall be paid
and satisfied in full.
(e) Galaxy is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the Galaxy
Financial Statements or otherwise disclosed herein, and there are no lawsuits,
claims, assessments, investigations, or similar matters, to the best knowledge
of Barlow, threatened or contemplated against or affecting Galaxy, its
management or its properties.
(f) Galaxy is duly organized, validly existing and in good standing
under the laws of the State of Delaware; has the corporate power to own its
property and to carry on its business as now being conducted and is duly
qualified to do business in any jurisdiction where so required except where the
failure to so qualify would have no material negative impact on it.
(g) Galaxy has filed all federal, state, county and local income,
excise, property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date hereof,
except where the failure to do so would have no material adverse impact on
Galaxy, and has paid or made adequate provision in the Galaxy Financial
Statements for the payment of all taxes, fees, or assessments which have or may
become due pursuant to such returns or pursuant to any assessments received.
Galaxy is not delinquent or obligated for any tax, penalty, interest,
delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights
or commitments of any character relating to the issued or unissued capital stock
or other securities of Galaxy, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents
and records of Galaxy have been made available to CMIS prior to the Closing.
(j) Galaxy has not breached, nor is there any pending, or to the
knowledge of management, any threatened claim that Galaxy has breached, any of
the terms or conditions of any agreements, contracts or commitments to which it
is a party or by which it or its assets are is bound. The execution and
performance hereof will not violate any provisions of applicable law or any
agreement to which Galaxy is subject. Galaxy hereby represents that it is not a
party to any material contract or commitment other than appointment documents
with its transfer agent, and that it has disclosed to CMIS all relationships or
dealings with related parties or affiliates.
(k) Galaxy common stock is currently approved for quotation on the OTC
Bulletin Board and there are no stop orders in effect with respect thereto.
(l) All information regarding Galaxy which has been provided to CMIS in
the Galaxy Private Placement Memorandum dated June 4, 1998 (the "Memorandum") or
otherwise disclosed to the public in connection with the transactions
contemplated herein, is true, complete and accurate in all material respects.
Galaxy and Barlow specifically disclaim any responsibility regarding disclosures
as to CMIS or its business.
11. Closing. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing shall be no later than June 30, 1998, unless
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<PAGE>
extended by mutual consent of all parties hereto. The "Closing Date" of the
transactions described herein (the "Acquisition"), shall be that date on which
all conditions set forth herein have been met and the Galaxy Shares are issued
in exchange for the CMIS Common Stock.
12. Conditions Precedent to the Obligations of CMIS. All obligations of
CMIS under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Closing Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of Barlow and
Galaxy contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at and
as of the Closing and Closing Date as though such representations and warranties
were made at and as of such time.
(b) Galaxy shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of Galaxy, shall
have approved in accordance with applicable state corporation law the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein.
(d) On or before the Closing Date, Galaxy shall have delivered to CMIS
certified copies of resolutions of the board of directors and shareholders of
Galaxy approving and authorizing the execution, delivery and performance of this
Agreement and authorizing all of the necessary and proper action to enable
Galaxy to comply with the terms of this Agreement including the election of
CMIS's nominees to the Board of Directors of Galaxy and all matters outlined
herein.
(e) The Acquisition shall be permitted by applicable law and Galaxy
shall have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing officers and directors of Galaxy shall
have resigned in writing from all positions as directors and officers of Galaxy
effective upon the election and appointment of the CMIS nominees.
(g) At the Closing, all instruments and documents delivered to CMIS and
CMIS Stockholders pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for CMIS.
(h) The shares of restricted Galaxy capital stock to be issued to CMIS
Stockholders and in the Galaxy Financing at Closing will be validly issued,
nonassessable and fully-paid under Delaware corporation law and will be issued
in compliance with all federal, state and applicable corporation and securities
laws.
(i) CMIS and CMIS Stockholders shall have received the advice of their
tax advisor, if deemed necessary by them, as to all tax aspects of the
Acquisition.
(j) CMIS shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) Galaxy shall have $1,925,000 in good funds, at Closing, from the
Galaxy Financing, for delivery at the direction of CMIS.
(l) At the Closing, Galaxy shall have delivered to CMIS an opinion of
its counsel dated as of the Closing to the effect that:
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<PAGE>
(i) Galaxy is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(ii) This Agreement has been duly authorized, executed and
delivered by Galaxy and is a valid and binding obligation of Galaxy
enforceable in accordance with its terms;
(iii) Galaxy through its board of directors and stockholders
has taken all corporate action necessary for performance under this
Agreement;
(iv) The documents executed and delivered by Galaxy to CMIS
and CMIS Stockholders hereunder are valid and binding in accordance
with their terms and vest in CMIS Stockholders, as the case may be, all
right, title and interest in and to the Galaxy Shares to be issued
pursuant to the terms hereof, and the Galaxy Shares when issued will be
duly and validly issued, fully-paid and nonassessable;
(v) Galaxy has the corporate power to execute, deliver
and perform under this Agreement;
(vi) Legal counsel for Galaxy is not aware of any liabilities,
claims or lawsuits involving Galaxy;
13. Conditions Precedent to the Obligations of Galaxy. All obligations
of Galaxy under this Agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions:
(a) The representations and warranties by CMIS and CMIS Stockholders
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof shall be true in all material respects at and as of the
Closing as though such representations and warranties were made at and as of
such time.
(b) CMIS shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing;
(c) CMIS shall deliver on behalf of the CMIS Stockholders a letter
commonly known as an "Investment Letter," signed by each of said shareholders,
in substantially the form attached hereto as Exhibit "C", acknowledging that the
Galaxy Shares are being acquired for investment purposes.
(d) CMIS shall deliver an opinion of its legal counsel to the effect
that:
(i) CMIS is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation
and is duly qualified to do business in any jurisdiction where so
required except where the failure to so qualify would have no material
adverse impact on CMIS;
(ii) This Agreement has been duly authorized, executed and
delivered by CMIS.
(iii) The documents executed and delivered by CMIS and CMIS
Stockholders to Galaxy hereunder are valid and binding in accordance
with their terms and vest in Galaxy all right, title and interest in
and to the CMIS Common Stock, which stock is duly and validly issued,
fully-paid and nonassessable.
14. Indemnification. For a period of one year from the Closing, Galaxy
and Barlow agree to jointly and severally indemnify and hold harmless CMIS, and
CMIS agrees to indemnify and hold harmless Galaxy and Barlow, at all times after
the date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the foregoing,
resulting from any material misrepresentations made by an indemnifying party to
7
<PAGE>
an indemnified party, an indemnifying party's breach of covenant or warranty or
an indemnifying party's nonfulfillment of any agreement hereunder, or from any
material misrepresentation in or omission from any certificate furnished or to
be furnished hereunder.
15. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for one
year from the Closing. All of the parties hereto are executing and carrying out
the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement and not upon
any investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
16. Documents at Closing. At the Closing, the following documents shall
be delivered:
(a) CMIS will deliver, or will cause to be delivered, to Galaxy the
following:
(i) a certificate executed by the President and Secretary of
CMIS to the effect that all representations and warranties made by CMIS
under this Agreement are true and correct as of the Closing, the same
as though originally given to Galaxy on said date;
(ii) a certificate from the jurisdiction of incorporation of
CMIS dated at or about the Closing to the effect that CMIS is in good
standing under the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as
Exhibit "C" executed by each CMIS Stockholder;
(iv) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement;
(v) certified copies of resolutions adopted by the
shareholders and directors of CMIS authorizing this transaction; and
(vi) all other items, the delivery of which is a condition
precedent to the obligations of Galaxy as set forth herein.
(vii) the legal opinion required by Section 13(d) hereof.
(b) Galaxy will deliver or cause to be delivered to CMIS:
(i) stock certificates representing the Galaxy Shares to be
issued as a part of the stock exchange as described herein;
(ii) a certificate of the President of Galaxy, to the effect
that all representations and warranties of Galaxy made under this
Agreement are true and correct as of the Closing, the same as though
originally given to CMIS on said date;
(iii) certified copies of resolutions adopted by Galaxy's
board of directors and Galaxy's Stockholders authorizing the
Acquisition and all related matters described herein;
(iv) certificate from the jurisdiction of incorporation of
Galaxy dated at or about the Closing Date that Galaxy is in good
standing under the laws of said state;
(v) opinion of Galaxy's counsel as described in Section 12(l)
above;
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<PAGE>
(vi) such other instruments and documents as are required to
be delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of
Galaxy;
(viii) all corporate and financial records of Galaxy; and
(ix) all other items, the delivery of which is a condition
precedent to the obligations of CMIS, as set forth in Section 13
hereof.
17. Finder's Fees. Galaxy, represents and warrants to CMIS, and CMIS
represents and warrants to Galaxy that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby. In this regard, Galaxy, on the one
hand, and CMIS on the other hand, will indemnify and hold the other harmless
from any claim, loss, cost or expense whatsoever (including reasonable fees and
disbursements of counsel) from or relating to any such express or implied
liability.
18. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Termination. All obligations hereunder may be terminated at the
discretion of either party's board of directors if (i) the closing conditions
specified in Sections 12 and 13 are not met by June 30, 1998, unless extended,
or (ii) any of the representations and warranties made herein have been
materially breached.
(d) Amendment. This Agreement may be amended only in writing as agreed
to by all parties hereto.
(e) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
(f) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(h) Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Utah.
(i) Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(j) Entire Agreement. This Agreement and the attached Exhibits
constitute the entire agreement of the parties covering everything agreed upon
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<PAGE>
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(k) Time. Time is of the essence.
(l) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
(m) Responsibility and Costs. All fees, expenses and out-of-pocket
costs and expenses, including, without limitation, fees and disbursements of
counsel, advisors and accountants, incurred by the parties hereto shall be borne
solely and entirely by the party that has incurred such costs and expenses.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
GALAXY VENTURES, INC.
By: /s/ Clayton B. Barlow
--------------------------
Clayton B. Barlow, President
and Secretary
/s/ Clayton B. Barlow
--------------------------
Clayton B. Barlow,
individually
CHIU MINIMALLY INVASIVE SPINE
SURGERY, INC.
By: By: /s/ John C. Chiu
------------------------ ---------------------------
Secretary President
SHAREHOLDERS OF CHIU MINIMALLY
INVASIVE SPINE SURGERY, INC.
John C. Chiu Family Limited
Partnership N
By: /s/ John C. Chiu
----------------------------
John C. Chiu, General Partner
10
CERTIFICATE OF INCORPORATION
OF
GALAXY VENTURES, INC.
FIRST: The name of this Corporation shall be: GALAXY VENTURES, INC.
SECOND: Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle 19805 and
its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is:
Twenty Five Million One Hundred Thousand (25,100,000) shares divided
into Twenty Five Million (25,000,000) common shares with a par value of
One-Tenth of One Cent ($.001) per share and One Hundred Thousand
(100,000) Preferred shares with a par value of ($.001) per share.
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article, to provide for the issuance
of the shares of preferred stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish
from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
FIFTH: The name and address of the incorporator is as follows:
Thomas G. Kimble
311 South State, Suite 440
Salt Lake City, Utah 84111
SIXTH: The Board of Directors shall have the power to adopt, amend or
appeal the by-laws.
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this 12th day of December, 1996.
/s/ Thomas G. Kimble
----------------------------
Thomas G. Kimble, Incorporator
GALAXY VENTURES, INC.
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
Galaxy Ventures, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
1st: That by unanimous written consent of the Board of Directors of
Galaxy Ventures, Inc., a resolution was duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and proposing approval by the stockholders of
said corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the FIRST article thereof so that,
as amended, said Article shall read as set forth below:
FIRST: The name of this corporation shall be: Minimally
Invasive Surgery Corporation
2nd: The Corporation has effectuated a 16 to 1 reverse stock split
effective with the commencement of business on June 3, 1998, which reduced the
outstanding shares from 28,800,000 shares to 1,800,000 shares but does not
reduce the Corporation's authorized shares of common stock.
3rd: That thereafter, pursuant to resolution of its Board of Directors,
a written approval by majority consent of the stockholders of said Corporation
was duly received in accordance with the General Corporation law of the State of
Delaware, by which consent the necessary number of shares as required by statute
were voted in favor of the amendment.
4th: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware, and the necessary number of shares as required by statute were voted
in favor of the amendment.
IN WITNESS WHEREOF, said Galaxy Ventures, Inc., has caused this
certificate to be signed by Clayton B. Barlow, its President and its Secretary -
Treasurer, this 3rd, day of June, 1998.
By: /s/ Clayton B. Barlow
-------------------------
Clayton B. Barlow, President and
Secretary - Treasurer
RESTATED ARTICLES OF INCORPORATION OF
CHIU MINIMALLY INVASIVE SPINE SURGERY AND MEDICAL CENTERS, INC.
JOHN C. CHIU, M.D., certifies that:
1. He is both the President and the Secretary of CHIU MINIMALLY
INVASIVE SPINE SURGERY MEDICAL CENTERS, INC., a California corporation.
2. The following Restated Articles restate the entire text of the
Articles of Incorporation of the Corporation as amended to date:
"FIRST: The name of this Corporation is CHIU MINIMALLY
INVASIVE SPINE SURGERY CENTERS, INC.
SECOND: The purpose of this Corporation is to engage in
any lawful act or activity for which a corporation may be
organized under the General Corporation Law of California other
than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the
California Corporations Code.
THIRD: The total number of shares which this Corporation
is authorized to issue is one hundred thousand (100,000).
FOURTH: The name and address in this state of the
Corporation's initial agent for service of process is John C.
Chiu, M.D., 2100 Lynn Road, Suite 125, Thousand Oaks, California
91360.
FIFTH: The liability of the directors of this Corporation
for monetary damages shall be eliminated to the fullest extent
permissible under California law.
SIXTH: This Corporation is authorized to indemnify the
directors and officers of the Corporation to the fullest extent
permissible under California law.
<PAGE>
3. The Restated Articles do not themselves amend the Articles of
Incorporation of the Corporation and no approval of this certificate by the
outstanding shares is required.
4. The execution and filing of this certificate was authorized and has
been approved by the Board of Directors.
/s/ John C. Chiu
---------------------------------
JOHN C. CHIU, M.D., President and
Secretary
The undersigned declares under penalty of perjury that the matter set
forth in the foregoing certificate are true and correct of his own knowledge and
that this declaration was executed on April 14, 1998, at Thousand Oaks,
California.
/s/ John C. Chiu
-------------------------------
JOHN C. CHIU, M.D.
2
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
CHIU MINIMALLY INVASIVE
SPINE SURGERY MEDICAL CENTERS, INC.
JOHN C. CHIU, M.D., certifies that:
1. He is both the President and the Secretary of CHIU MINIMALLY
INVASIVE SPINE SURGERY MEDICAL CENTERS, INC. (the "Corporation"). The
Corporation has been organized under the laws of the State of California.
2. The Board of Directors of the Corporation has approved the following
amendment to Article FIRST of the Articles of Incorporation of the Corporation:
"FIRST: The name of this Corporation is CHIU MINIMALLY
INVASIVE SPINE SURGERY AND MEDICAL CENTERS, INC."
3. The Board of Directors of the Corporation has approved the following
amendment to Article SECOND of the Articles of Incorporation of the Corporation:
"SECOND: The purpose of this Corporation is to engage in any
lawful act or activity for which a corporation may be
organized under the General Corporation Law of California
other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by
the California Corporations Code."
4. The Board of Directors has approved the following amendment to
Article THIRD of the Articles of Incorporation of the Corporation:
"THIRD: The total number of shares which this Corporation is
authorized to issue is one hundred thousand (100,000)."
5. The Board of Directors has approved the following amendment to
Article FIFTH of the Articles of Incorporation of the Corporation:
"FIFTH: The liability of the directors of this Corporation for
monetary damages shall be eliminated to the fullest extent
permissible under California law."
6. The Board of Directors has approved the following amendment to
Article SIXTH of the Articles of Incorporation of the Corporation:
<PAGE>
"SIXTH: This Corporation is authorized to indemnify the
directors and officers of the Corporation to the fullest
extent permissible under California law."
7. The foregoing amendments each have been approved by the required
vote of the shareholders in accordance with Section 902 of the California
Corporations Code. The Corporation has only one class of shares. Each
outstanding share is entitled to one (1) voting only. The Corporation has one
thousand (1,000) shares outstanding and, hence, the total number of shares
entitled to vote with respect to the amendment was one thousand (1,000). The
number of shares voting in favor of the amendment exceeded the vote required, in
that the affirmative vote of a majority, that is, more than fifty percent (50%),
of the outstanding share was required for approval of the amendment and the
amendment was approved by the affirmative vote of one thousand (1,000) shares,
or one hundred percent (100%) of the outstanding voting shares.
/s/ John C. Chiu
-----------------------------------------
JOHN C. CHIU, M.D., President & Secretary
The undersigned declares under penalty of perjury that the matter set
forth in the foregoing certificate are true and correct of his own knowledge and
that this declaration was executed on April 13, 1998, at Thousand Oaks,
California.
/s/ John C. Chiu
-----------------------------------------
JOHN C. CHIU, M.D.
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
CHIU MINIMALLY INVASIVE
SPINE SURGERY CENTERS, INC.
JOHN C. CHIU, M.D., certifies that:
1. He is both the President and Secretary of CHIU MINIMALLY INVASIVE
SPINE SURGERY CENTERS, INC. (the "Corporation"). The Corporation has been
organized under the laws of the State of California.
2. The Board of Directors of the Corporation has approved the following
amendment to Article FIRST of the Articles of Incorporation of the Corporation:
"FIRST: The name of this Corporation is CHIU MINIMALLY
INVASIVE SPINE SURGERY, INC."
3. The foregoing amendments each have been approved by the required
vote of the shareholders in accordance with Section 902 of the California
Corporations Code. The Corporation has only one class of shares. Each
outstanding share is entitled to one (1) voting only. The Corporation has one
thousand (1,000) shares outstanding and, hence, the total number of shares
entitled to vote with respect to the amendment was one thousand (1,000). The
number of shares voting in favor of the amendment exceeded the vote required, in
that the affirmative vote of a majority, that is, more than fifty percent (50%),
of the outstanding shares was required for approval of the amendment and the
amendment was approved by the affirmative vote of one thousand (1,000) shares,
or one hundred percent (100%) of the outstanding voting shares.
/s/ John C. Chiu
----------------------
JOHN C. CHIU, M.D.
President & Secretary
The undersigned declares under penalty of perjury that the matter set
forth in the foregoing certificate are true and correct of his own knowledge and
that this declaration was executed on May 20, 1998, at Thousand Oaks,
California.
/s/ John C. Chiu
-----------------------
JOHN C. CHIU, M.D.
BY-LAWS
OF
GALAXY VENTURES, INC.
ARTICLE I - OFFICES
Section 1. AGENT: The registered office of the corporation in the State of
Delaware shall be at 1013 Centre Road, Wilmington, Delaware 19805-1297.
The registered agent in charge thereof shall be CSC Networks.
Section 2. OTHER OFFICES: 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
Section 1. DESCRIPTION: A corporate seal, if adopted by the Board of
Directors, shall have inscribed thereon the name of the corporation, the year of
its organization and the words "Corporate Seal, Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. LOCATION: Meetings of stockholders shall be held at the
registered office of the corporation in this state or at such place, either
within or without this state, as may be selected from time to time by the Board
of Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders shall be
held on such date as is determined by the Board of Directors for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 3. ELECTION OF DIRECTORS: Elections of the directors of the
corporation shall be by written ballot.
Section 4. SPECIAL MEETINGS: Special meetings of the stockholders may be
called at any time by the President, or the Board of Directors, or stockholders
entitled to cast at least one-fifth of the votes which all stockholders 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
sixty days after receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all stockholders
entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time and
place and object thereof, shall be given to each stockholder 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.
Section 5. QUORUM: A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. If a majority of the outstanding shares entitled
to vote is represented at a meeting, a majority of the shares so represented may
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<PAGE>
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 6. PROXIES: Each stockholder entitled to vote at a meeting of
stockholders 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, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Unless otherwise provided by law, written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken at
any annual or special meeting of stockholders of a corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
No share of stock upon which any installment is due and unpaid shall be voted at
any meeting. The list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
ARTICLE IV - DIRECTORS
Section 1. NUMBER: The business and affairs of this corporation shall be
managed by its Board of Directors, no less than one in number or such other
minimum number as is required by law. The directors need not be residents of
this state or stockholders in the corporation. They shall be elected by the
stockholders of the corporation or in the case of a vacancy by remaining
directors, and each director shall be elected for the term of one year, and
until his successor shall be elected and shall qualify or until his earlier
resignation or removal.
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<PAGE>
Section 2. REGULAR MEETINGS: Regular meetings of the Board shall be held
without notice other than this by-law immediately after, and at the same place
as, the annual meeting of stockholders. The directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 3. SPECIAL MEETINGS: Special Meetings of the Board may be called by
the President or any director upon two day notice. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them.
Section 4. QUORUM: A majority of the total number of directors shall
constitute a quorum for the transaction of business.
Section 5. CONSENT IN LIEU OF MEETING: Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee. The Board of
Directors may hold its meetings, and have an office or offices, outside of this
state.
Section 6. CONFERENCE TELEPHONE: One or more directors may participate in a
meeting of the Board, of a committee of the Board or of the stockholders, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other;
participation in this manner shall constitute presence in person at such
meeting.
Section 7. COMPENSATION: Directors as such, shall not receive any stated
salary for their services, but 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.
Section 8. REMOVAL: Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that when cumulative voting
is permitted, if less than the entire Board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which he is a part.
ARTICLE V - OFFICERS
Section 1. NUMBER: The executive officers of the corporation shall be
chosen by the directors and shall be a President, Secretary and Treasurer. The
Board of Directors may also choose a Chairman, one or more Vice Presidents and
such other officers as it shall deem necessary. Any number of offices may be
held by the same person.
Section 2. SALARIES: Salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: 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 interest of the corporation
will be served thereby.
Section 4. PRESIDENT: The President shall be the chief executive officer of
the corporation; he shall preside at all meetings of the stockholders 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
3
<PAGE>
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 power and duties of supervision and management usually vested in the
office of President of a corporation.
Section 5. SECRETARY: The Secretary shall attend all sessions of the Board
and all meetings of the stockholders 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 shall perform like duties for all committees of
the Board of Directors when required. He shall give, or cause to be given,
notice of all meetings of the stockholders 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.
Section 6. TREASURER: 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 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.
ARTICLE VI - VACANCIES
Section 1. NEW APPOINTMENTS. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise, shall be filled by the
Board of Directors. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. If at any time, by reason of death or resignation or other
cause, the corporation should have no directors in office, then any officer or
any stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders in
accordance with the provisions of these By-Laws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more
directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. CERTIFICATES. Any stockholder of record, in person or by
attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in this state or at its principal place of business.
4
<PAGE>
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. CERTIFICATES: The stock certificates of the corporation shall be
numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall bear the corporate seal and shall be
signed by the
Section 2. TRANSFERS: Transfers 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.
Section 3. LOST CERTIFICATE: The corporation may issue a new certificate of
stock in the place of any certificate theretofore signed by it, alleged to have
been lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4. RECORD DATE: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, 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 change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed:
(a) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
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.
(b) The record date for determining stockholders entitled to express
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 the first
written consent is expressed.
(c) The record date for determining stockholders 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.
(d) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5. DIVIDENDS: 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 Certificate of Incorporation.
Section 6. RESERVES: 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 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.
5
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ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. CHECKS: 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.
Section 2. FISCAL YEAR: The fiscal year shall begin on the first day of
January or as otherwise determined by the Board of Directors.
Section 3. NOTICE: Whenever written notice is required to be given to 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 stockholders, the general nature of the
business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice is required by
statute, or by the Certificate or the 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
stockholders, 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.
Section 5. DISALLOWED COMPENSATION: Any payments made to an officer or
employee of the corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense 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.
Section 6. RESIGNATIONS: Any director or other officer may resign at any
time, such resignation to be in writing and to take effect from the time of its
receipt by the corporation, unless some time be fixed in the resignation and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. PRESENTATION: The President and the Board of Directors shall
present at each annual meeting a full and complete statement of the business 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.
ARTICLE XI - INDEMNIFICATION AND INSURANCE:
Section 1. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
6
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employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition: provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT:
If a claim under paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard or
conduct.
(c) Notwithstanding any limitation to the contrary contained in sub-paragraphs
(a) and 8 (b) of this section, the corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
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person who has ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
(d) INSURANCE:
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Del General Corporation Law.
ARTICLE XII - AMENDMENTS
Section 1. VOTE: These By-Laws may be amended or repealed by the vote of
directors.
/s/ Clayton B. Barlow
------------------------------
Clayton B. Barlow, Secretary
December 12, 1996
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AMENDED AND RESTATED
BYLAWS OF
CHIU MINIMALLY INVASIVE SURGERY AND MEDICAL CENTERS, INC.
ARTICLE I
SHAREHOLDERS' MEETING
Section 1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the Board of Directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
Section 2. ANNUAL MEETINGS.
The annual meeting of the shareholders shall be held each year on a
date and at a time designated by the Board of Directors. The date so designated
shall be within five (5) months after the end of the fiscal year of the
corporation, and within fifteen (15) months after the last annual meeting. At
each annual meeting directors shall be elected, and any other proper business
may be transacted.
Section 3. SPECIAL MEETINGS.
A special meeting of the shareholders may be called at any time by the
Board of Directors, or by the chairman of the Board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the Board, the president, any
vice president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article I,
that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this Section
3 shall be construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.
Section 4. NOTICE OF MEETINGS.
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 5 of this Article I not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (a) in the case of a special
meeting, the general nature of the business to be transacted or (b) in the case
of an annual meeting, those matters which the Board of Directors, at the time of
giving notice, intends to present for action by the shareholders. The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees whom, at the time of the notice, management intends to
present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment of the Articles of Incorporation, pursuant to Section 902 of that
<PAGE>
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section
1900 of that Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of shareholders shall be given either personally
or by first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by first-class mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one (1) year from the date of the giving of the
notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meetings shall be executed by the secretary, assistant secretary
or any transfer agent of the corporation giving the notice, and shall be filed
and maintained in the minute book of the corporation.
Section 6. QUORUM.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting of shareholders shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING AND NOTICE THEREOF.
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy, but in the
absence of a quorum, no other business may be transacted at that meeting, except
as provided in Section 6 of this Article I.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from the
date set for the original meeting, in which case the Board of Directors shall
set a new record date. Notice of any such adjourned meeting shall be given to
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each shareholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article I. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
Section 8. VOTING RIGHTS; CUMULATIVE VOTING.
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 11 of this Article I,
subject to the provisions of Sections 702 through 704, inclusive, of the
Corporations Code of California (relating to voting shares held by a fiduciary,
in the name of a corporation, or in joint ownership). The shareholders may vote
by voice vote or by ballot; provided, however, that any election for directors
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of directors, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares that the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless a vote of a greater number or voting by
classes is required by the California General Corporation Law or by the Articles
of Incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to accumulate votes (i.e., to cast for any one or
more candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to a holding of the meeting
or an approval of the minutes. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any annual or special
meeting of shareholders, except that if action is taken or proposed to be taken
for approval of any of those matters specified in the second paragraph of
Section 4 of this Article I, the waiver of notice or consent shall state the
general nature of the proposal. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that 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
of the meeting if that objection is expressly made at the meeting.
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Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of the
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or to take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case of an
election of directors, such consent shall be effective only if signed by the
holders of all outstanding shares entitled to vote for the election of
directors; provided, however, that a director may be elected at any time to fill
a vacancy on the Board of Directors that has not been filled by the directors,
by the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be filed
with the secretary of the corporation and shall be maintained in the corporate
records. Any shareholder giving a written consent, or the shareholder's proxy
holder, or a transferee of the shares or a personal representative of the
shareholder or his respective proxy holder, may revoke the consent by a writing
received by the secretary of the corporation before written consents of the
number of shares required to authorize the proposed action have been filed with
the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
This notice shall be given in the manner specified in Section 5 of this Article
I. In the case of approval of (a) contracts or transactions in which a director
has a direct or indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (b) indemnification of agents of the
corporation, pursuant to Section 317 of that Code, (c) a reorganization of the
corporation, pursuant to Section 1201 of that Code, and (d) a distribution in
dissolution other than in accordance with the rights of the outstanding
preferred shares, pursuant to Section 2007 of that Code, the notice shall be
given at least ten (10) days before the consummation of any action authorized by
that approval.
Section 11. RECORD DATE FOR SHAREHOLDERS' NOTICE, VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the Board of Directors may fix, in advance, a record date, which shall
be not more than sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such action without a
meeting, and in this event only shareholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding the transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the California General
Corporation Law.
If the Board of Directors does not so fix a record date:
(a) 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 business day next preceding
the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting (i) when no prior
action by the Board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board has been taken, shall
be at the close of business on the day on which the Board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
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Section 12. PROXIES.
Every person entitled to vote for directors or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (a) revoked by the person executing it,
before the vote pursuant to that proxy by a writing delivered to the corporation
stating that the proxy is revoked, or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by the person executing the
proxy, or (b) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy, and, provided, further, that the proxy shall be valid only if executed in
favor of another shareholder of the corporation. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Corporations Code of California.
Section 13. INSPECTORS OF ELECTION.
Before any meeting of shareholders, the Board of Directors may appoint
any persons other than nominees for office to act as inspectors of election at
the meeting or its adjournment. If no inspectors of election are so appointed,
the chairman of the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at the meeting on the request of one or more shareholders or proxies,
the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
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Section 14. VOTING TRUSTS.
If a voting trust agreement is filed in the office of the corporation,
the corporation shall take notice of its terms and the limitations this
agreement places on the authority of the trustee. The agreement shall be valid
only if voting power is vested in another shareholder of the corporation.
ARTICLE II
DIRECTORS; MANAGEMENT
Section 1. POWERS.
Subject to the limitations of the Articles of Incorporation, of the
Bylaws and of the laws of the State of California as to action to be authorized
or approved by the shareholders, all corporate powers shall be exercised by or
under authority of, and the business and affairs of this corporation shall be
controlled by, a Board of Directors.
Section 2. NUMBER AND QUALIFICATION.
(a) The authorized number of directors shall be not less than three (3)
and not more than five (5), unless there shall be less than three (3)
shareholders in which case the number of directors shall be equal to the number
of shareholders.
(b) The exact number of directors within the range of Paragraph (a)
shall be fixed and may from time to time be changed by a resolution adopted by
the Board of Directors.
(c) The minimum and maximum number of directors of the corporation as
stated in Paragraph (a) may be changed only by an amendment of the provisions of
Paragraph (a) of this Section of the Bylaws approved by the holders of a
majority of the outstanding voting shares.
Section 3. ELECTION AND TENURE OF OFFICE.
Directors shall be elected at each annual meeting of the shareholders
to hold office until the next annual meeting. Each director, including a
director elected to fill a vacancy, shall hold office until the expiration of
the term for which elected and until a successor has been elected and qualified.
Section 4. VACANCIES.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
except that a vacancy created by the removal of a director by the vote or
written consent of the shareholders, or by court order, may be filled only by
the vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the written consent of holders of a
majority of the outstanding shares entitled to vote. Each director so elected
shall hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, disqualification, resignation, or removal of
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any director, or if the Board of Directors by resolution declares vacant the
office of a director who has been declared of unsound mind by an order of court
or convicted of a felony, or if the authorized number of directors is increased,
or if the shareholders fail, in any meeting of shareholders at which any
director or directors are elected, to elect the number of directors to be voted
for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective on giving written notice to the
chairman of the Board, the president, the secretary or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 5. REMOVAL OF DIRECTORS.
The entire Board of Directors or any individual director may be removed
from office as provided by Sections 302, 303 and 304 of the Corporations Code of
the State of California.
Section 6. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
Regular meetings of the Board of Directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the Board. In the absence of such designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the Board shall be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or there is no notice, at the principal executive
office of the corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all
directors participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
Section 7. ANNUAL MEETING.
Immediately following each annual meeting of shareholders, the Board of
Directors shall hold a regular meeting for the purpose of organization, any
desired election of officers and the transaction of other business. Notice of
this meeting shall not be required.
Section 8. OTHER REGULAR MEETINGS.
Other regular meetings of the Board of Directors shall be held without
call at such time as it shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice.
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Section 9. SPECIAL MEETINGS - NOTICES.
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the Board or the president or any
vice president or the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director, or sent by first-class mail or
telegram, charges prepaid, and dressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place, if the meeting is to be held at the
principal executive offices of the corporation.
Section 10. QUORUM.
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
13 of this Article II, unless the authorized number of directors is two (2) or
less, in which case all of the duly elected and acting directors shall
constitute a quorum for the transaction of business. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors,
subject to the provisions of Section 310 of the Corporations Code of the State
of California (as to approval of contracts or transactions in which a director
has a direct or indirect material financial interest), Section 311 of that Code
(as to appointment of committees), and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
Section 11. WAIVER OF NOTICE.
The transactions of any meeting of the Board of Directors, however
called and noticed and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents and approval shall be filed with the
corporate records or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any director who attends the meeting
without protesting before or at its commencement, the lack of notice to that
director.
Section 12. DIRECTORS ACTING WITHOUT A MEETING BY UNANIMOUS
WRITTEN CONSENT.
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, if all members of the Board shall individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the Board of
Directors. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board.
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Section 13. ADJOURNMENT.
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
Section 14. NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need not
be given, unless the meeting is adjourned for more than twenty-four (24) hours,
in which case notice of the time and place shall be given before the time of the
adjourned meeting in the manner specified in Section 9 of this Article II, to
the directors who are not present at the time of the adjournment.
Section 15. COMPENSATION OF DIRECTORS.
Directors and members of committees, as such, shall not receive any
stated salary for their services, but by resolution of the Board a fixed sum and
expense of attendance, if any, may be allowed for attendance at each regular and
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 III
OFFICERS
Section 1. OFFICERS.
The officers of the corporation shall consist of a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the Board of Directors, a chairman of the Board, one or more
additional vice presidents, one or more assistant secretaries, one or more
assistant treasurers and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article.
Section 2. ELECTION.
The officers of the corporation, except those officers as may be
appointed in accordance with the provisions of Section 3 and Section 5 of this
Article III, shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC.
The Board of Directors may appoint such other officers as the business
of the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the bylaws or as
the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by the Board
of Directors at any regular or special meeting, or, except in the case of an
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officer chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the president or to the secretary of the corporation.
Any such resignation shall take effect at the date of this notice or at any
later specified time; and, unless otherwise specified, the acceptance of this
resignation shall not be necessary to make it effective.
Section 5. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification, or because of any other cause shall be filled in the manner
prescribed in the bylaws for regular appointments to the office.
Section 6. CHAIRMAN OF THE BOARD.
The chairman of the Board, if there shall be such an officer, shall, if
present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may from time to time be assigned to him
by the Board of Directors or prescribed by the bylaws. If there is no president,
the chairman of the Board shall in addition be the chief executive officer of
the corporation and shall have the powers and duties prescribed in Section 7 of
this Article III.
Section 7. PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the Board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. He or she
shall preside at all meetings of the shareholders and, in the absence of the
chairman of the Board, or if there be none, at all meetings of the Board of
Directors. He or she shall be ex officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of a corporate management usually vested in the office
of president of a corporation and shall have such other powers and duties as may
be prescribed by the Board of Directors or the bylaws.
Section 8. VICE PRESIDENT.
In the absence or disability of the president, the vice president, if
any, shall perform all the duties of the president, and when so acting shall
have all the powers of, and be subject to all the restrictions upon, the
president. The vice president shall have such other powers and perform such
other duties as from time to time may be prescribed by the Board of Directors or
the bylaws.
Section 9. SECRETARY.
The secretary shall keep, or cause to be kept, at the principal office
or such other place as the Board of Directors may order, a book of minutes of
all meetings of directors and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the bylaws.
Section 10. CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of stated capital shall be classified according
to source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as chief financial officer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
bylaws.
Section 11. SALARIES.
The salaries of the officers and other shareholders employed by the
corporation shall be fixed from time to time by the Board of Directors or
established under agreements with officers or shareholders approved by the Board
of Directors, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
ARTICLE IV
CORPORATE RECORDS AND REPORTS-INSPECTION
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.
The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed and as
determined by resolution of the Board of Directors, a record of its shareholders
giving the names and addresses of all shareholders, and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (a) inspect and copy the records of the shareholders' names and
addresses and shareholdings during usual business hours on five (5) days prior
written demand on the corporation, and (b) obtain from the transfer agent of the
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corporation, on written demand and on tender of such transfer agent's usual
charges for such a list, a list of the shareholders' names and addresses who are
entitled to vote for the election of directors and their shareholdings, as of
the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. This list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or the date specified in the
demand as the date as of which the list is to be compiled. The record of
shareholders shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate, at any time during usual
business hours, for a purpose reasonably related to the holder's interest as a
shareholder or as a holder of a voting trust certificate. Any inspection and
copying under this Section 1 may be made in person or by an agent or attorney of
the shareholder or holder of a voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS.
The corporation shall keep at its principal executive office, or if its
principal executive office is not in the State of California, at its principal
business office in this state, the original or a copy of the bylaws amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the corporation
is outside the State of California and the corporation has no principal business
office in this state, the secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the bylaws as amended to
date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
Board of Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records 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 the
holder's interests as a shareholder or as a holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. INSPECTION BY DIRECTORS.
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation at each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS.
The annual report to shareholders referred to in Section 1501 of the
California General Corporation Law is expressly dispensed with, but nothing
herein shall be interpreted as prohibiting the Board of Directors from issuing
annual or other periodic reports to the shareholders of the corporation as they
consider appropriate.
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Section 6. FINANCIAL STATEMENTS.
A copy of any annual financial statement and any income statement of
the corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the corporation as of the end of such period, that
has been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of such statement or a copy thereof shall be mailed to
any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three (3) month, six (6) month or nine (9) month period of the then current
fiscal year ended more than thirty (30) days before the date of the request, and
a balance sheet of the corporation as of the end of that period, the treasurer
or chief financial officer shall cause that statement to be prepared, if not
already prepared, and shall deliver personally or mail that statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the shareholders its
annual report for the last fiscal year, this report shall likewise be delivered
or mailed to the shareholder or shareholders within thirty (30) days after the
request.
The corporation shall also, on the written request of any shareholder,
mail 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
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by a report, if any, of any independent accountants
engaged by the corporation or the certificate of an authorized officer of the
corporation that the financial statements were prepared without audit from the
books and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION.
The corporation shall annually, during the period commencing five
calendar months preceding the calendar month during which the original Articles
of Incorporation were filed and ending with the end of the calendar month during
which the original Articles of Incorporation were filed with the Secretary of
State, file with the Secretary of State of the State of California, on the
prescribed form, a statement setting forth the authorized number of directors,
the names and complete business or residence addresses of all incumbent
directors, the names and complete business or residence addresses of the chief
executive officer, secretary and chief financial officer, the street address of
its principal executive office or principal business office in the state, and
the general type of business constituting the principal business activity of the
corporation, together with a designation of the agent of the corporation for the
purpose of service of process, all in compliance with Section 1502 of the
Corporations Code of California.
ARTICLE V
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the shareholders 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 (other
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than action by shareholders by written consent without a meeting), the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) days before any such action and in that case only shareholders of record on
the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date so fixed, except as otherwise provided in the California General
Corporation Law.
If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the Board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation,
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation and this authority shall be general or confined to specific
instances; and, unless so authorized or ratified by the Board of Directors or
within the agency power of an officer, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
Section 4. CERTIFICATES FOR SHARES.
A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each shareholder when any of these shares are
fully paid, and the Board of Directors may authorize the issuance of
certificates or shares as partly paid provided that these certificates shall
state the amount of the consideration to be paid for them and the amount paid.
All certificates shall be signed in the name of the corporation by the chairman
of the Board or vice-chairman of the Board or the president or vice president
and by the chief financial officer or an assistant treasurer or the secretary or
any assistant secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on a certificate
shall have ceased to be that officer, transfer agent or registrar before that
certificate is issued, it may be issued by the corporation with the same effect
as if that person were an officer, transfer agent or registrar at the date of
issuance.
Section 5. LOST CERTIFICATES.
Except as provided in this Section 5, no new certificates for shares
shall be issued to replace an old certificate unless the latter is surrendered
to the corporation and canceled at the same time. The Board of Directors, in
case any share certificate or certificate for any other security is lost,
stolen, or destroyed, may authorize the issuance of a replacement certificate on
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such terms and conditions as the Board may require, including provision for
indemnification of the corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of the certificate or the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the Board, the president or any vice president, or any
other person authorized by resolution of the Board of Directors or by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations, foreign
or domestic, standing in the name of the corporation. The authority granted to
these officers to vote or represent on behalf of the corporation any and all
shares held by the corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person authorized to do
so by a proxy duly executed by these officers.
Section 7. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS.
The corporation shall, to the maximum extent permitted by California
General Corporation Law, indemnify each of its agents against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact that any such
person is or was an agent of the corporation. For purposes of this Section 7, an
"agent" of the corporation includes any person who is or was a director,
officer, employee or other 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, or was a
director, officer, employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
Section 8. CONSTRUCTION AND DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the California General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular in number includes the plural, the plural number
includes the singular and the term "person" includes both a corporation and a
natural person.
ARTICLE VI
OFFICES
Section 1. PRINCIPAL OFFICES.
The Board of Directors shall fix the location of the principal
executive offices of the corporation at any place within or outside the State of
California. If the principal executive offices are located outside the state,
and the corporation has one or more business offices in the state, the Board of
Directors shall fix and designate a principal business office in the State of
California.
Section 2. OTHER OFFICES.
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
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ARTICLE VII
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS.
New Bylaws may be adopted or these Bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the Articles of Incorporation of
the corporation set forth the number of authorized directors of the corporation,
the authorized number of directors may be changed only by an amendment of the
Articles of Incorporation.
Section 2. AMENDMENT BY DIRECTORS.
Subject to the rights of the shareholders as provided in Section 1 of
this Article VII, Bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors, may be adopted, amended or repealed by the
Board of Directors.
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SERIES A WARRANTS
WARRANT AGREEMENT
MINIMALLY INVASIVE SURGERY CORPORATION
AND
AMERICAN REGISTRAR & TRANSFER CO.
Warrant Agent
<PAGE>
THIS WARRANT AGREEMENT (the "Agreement") is dated effective as of
_______________, 19__, between Minimally Invasive Surgery Corporation, a
Delaware Corporation (the "Company"), and American Registrar & Transfer Co.,
Salt Lake City, Utah (the "Warrant Agent").
WHEREAS, the Company proposes to issue Series A Common Stock Purchase
Warrants (the "Warrants"), each of which will entitle the holder thereof to
purchase one share of Common Stock in the future at such time as the conditions
set forth in the Warrant Certificate are fulfilled.
WHEREAS, in conjunction with the potential exercise of the Warrants, the
Company anticipates the issuance of up to 1,800,000 shares of its Common Stock
(the "Warrant Shares");
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
hereinafter set forth, it is agreed that:
1. Warrants/Warrant Certificates. Each Warrant will, in the future during
the period specified in the Warrant Certificate, upon fulfillment of the
conditions and subject to the terms set forth therein, entitle the holder (the
"Registered Holder" or, in the aggregate, the "Registered Holders") in whose
name the Warrant Certificate shall be registered on the books maintained by the
Warrant Agent to purchase one share of Common Stock on exercise thereof, subject
to modification and adjustment as provided in Section 8. Warrant Certificates
representing the right to purchase Warrant Shares shall be executed by the
Company's President and attested to by the Company's Secretary or Assistant
Secretary, or shall bear facsimile signatures of such officers, and shall be
delivered to the Warrant Agent upon execution of this Agreement for distribution
to the Company's shareholders pursuant to written instructions from the Company
to the Warrant Agent.
Subject to the provisions of Sections 3, 5, 6 and 8, the Warrant Agent
shall deliver Warrant Certificates in required whole number denominations to
Registered Holders in connection with any transfer or exchange permitted under
this Agreement. Except as provided in Section 6 hereof, no Warrant Certificates
shall be issued except (i) Warrant Certificates initially issued hereunder, (ii)
Warrant Certificates issued on or after the initial issuance date, upon the
exercise of any Warrants, to evidence the unexercised Warrants held by the
exercising Registered holder, and (iii) Warrant Certificates issued after the
initial issuance date, upon any permitted transfer or exchange of Warrant
Certificates or replacements of lost or mutilated Warrant Certificates.
2. Form and Execution of Warrant Certificates. The Warrant Certificates
shall be substantially in the form attached hereto as an exhibit. The Warrant
Certificates shall be dated as of the date of their issuance, whether on initial
issuance, transfer or exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.
Each Warrant Certificate shall be numbered serially with the designation
"Series A Warrant", appearing on each Warrant Certificate.
The Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. In the
event any officer of the Company who executed the Warrant Certificates shall
cease to be an officer of the Company before the date of issuance of the Warrant
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Certificates or before countersignature and delivery by the Warrant Agent, such
warrant Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed such
Warrant Certificates had not ceased to be an officer of the Company.
3. Exercise. Subject to the provisions of Sections 4, 7 and 8, the
Warrants, when evidenced by a Warrant Certificate, may be exercised at a price
(the "Exercise Price") of $3.00 per share, in whole or in part, commencing on
the date of issuance (the "Initial Exercise Date") and terminating on June 30,
2000, unless extended by the Company's Board of Directors (the "Exercise
Period"). A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date (the "Exercise Date") of the surrender for
exercise of the Warrant Certificate. The exercise form shall be executed by the
Registered Holder thereof or his attorney duly authorized in writing and
delivered to the Warrant Agent, in person at 10 Exchange Place, Suite 750, Salt
Lake City, Utah 84111,(the "Corporate Office") or by mail to P.O. Box 1798, Salt
Lake City, Utah 84110, or to such other place as designated by the Company,
together with payment in cash or by official bank or certified check, of an
amount equal to the aggregate Exercise Price, in lawful money of the United
States of America.
Unless Warrant Shares may not be issued as provided herein, the person
entitled to receive the number of Warrant Shares deliverable on such exercise
shall be treated for all purposes as the holder of such Warrant Shares as of the
close of business on the Exercise date. In addition, the Warrant Agent shall
also, at such time, verify that all of the conditions precedent to the issuance
of Warrant Shares set forth in Section 4 have been satisfied as of the Exercise
Date. If any one of the conditions precedent set forth in Section 4 are not
satisfied as of the Exercise Date, the Warrant Agent shall request written
instructions from the Company as to whether to return the Warrant and pertinent
Exercise Price to the exercising Registered Holder or to hold the same until all
such conditions have been satisfied. The Company shall not be obligated to issue
any fractional share interests in Warrant Shares issuable or deliverable on the
exercise of any Warrant or scrip or cash therefor and such fractional shares
shall be of no value whatsoever. If more than one Warrant shall be exercised at
one time by the same Registered Holder, the number of full Shares which shall be
issuable on exercise thereof shall be computed on the basis of the aggregate
number of full shares issuable on such exercise.
Within thirty days after the Exercise Date and in any event prior to the
pertinent Expiration Date, the Warrant Agent shall cause to be issued and
delivered to the person or persons entitled to receive the same, a certificate
or certificates for the number of Warrant Shares deliverable on such exercise.
No adjustment shall be made in respect of cash dividends on Warrant Shares
delivered on exercise of any Warrant. The Warrant Agent shall promptly notify
the Company in writing of any exercise and of the number of Warrant Shares
delivered and shall cause payment of an amount in cash equal to the pertinent
Exercise Price to be promptly made to the order of the Company.
Upon the exercise of any Warrant, the Warrant Agent shall promptly deposit
the payment into a segregated account established by mutual agreement of the
Company and the Warrant Agent at a federally insured commercial bank. All funds
deposited in the escrow account will be disbursed on a weekly basis to the
Company once they have been determined by the Warrant Agent to be collected
funds. Once the funds are determined to be collected the Warrant Agent shall
cause the share certificate(s) representing the exercised Warrants to be issued.
Expenses incurred by the Warrant Agent while acting in the capacity as
Warrant Agent will be paid by the Company. These expenses, including delivery of
exercised share certificates to the shareholder, will be deducted from the
exercise fee submitted prior to distribution of funds to the Company.
A detailed accounting statement relating to the number of shares exercised
and the net amount of exercised funds remitted will be given to the Company with
the payment of each exercise amount. This will serve as an interim accounting
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for the Company's use during the exercise periods. A complete accounting will be
made by the Warrant Agent to the Company concerning all persons exercising
Warrants, the number of shares issued and the amounts paid at the completion of
the Exercise Period.
The Company may deem and treat the Registered Holder of the Warrants at any
time as the absolute owner thereof for all purposes, and the Company shall not
be affected by any notice to the contrary. The Warrants shall not entitle the
holder thereof to any of the rights of shareholders or to any dividend declared
on the Common Stock unless the holder shall have exercised the Warrants and
purchased the shares of Common Stock prior to the record date fixed by the Board
of Directors of the Company for the determination of holders of Common Stock
entitled to such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The Company covenants that
it will at all times reserve and have available from its authorized Common Stock
such number of shares as shall then be issuable on the exercise of all
outstanding Warrants. The Company covenants that all Warrant Shares which shall
be so issuable shall be duly and validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
If any shares of Common Stock to be reserved for the purpose of exercise of
Warrants hereunder require any other registration with or approval of any
government authority under any federal or state law before such shares may be
validly issued or delivered, then the Company covenants that it will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be. No Warrant Shares shall be issued unless and until
any such registration requirements have been satisfied.
The Registered Holder shall pay all documentary, stamp or similar taxes and
other government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be delivered in
a name other than the name of the Registered Holder of the Warrant Certificate,
no such delivery shall be made unless the person requesting the same has paid to
the Warrant Agent the amount of any such taxes or charges incident thereto.
In the event the Warrant Agent ceases to also serve as the stock transfer
agent for the Company, the Warrant Agent is irrevocably authorized to
requisition the Company's new transfer agent from time to time for Certificates
of Warrant Shares required upon exercise of the Warrants, and the Company will
authorize such transfer agent to comply with all such requisitions. The Company
will file with the Warrant Agent a statement setting forth the name and address
of its new transfer agent, for shares of Common Stock or other capital stock
issuable upon exercise of the Warrants and of each successor transfer agent.
5. Exercise or Transfer. The Warrant Certificates may be exercised or
transferred in whole or in part only if permitted by the Company in accordance
with the terms and conditions of this agreement and the Warrant Certificates. In
any permitted exercise or transfer, the Warrant Certificates to be exchanged
shall be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the holder
making the exercise or transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office which
shall register Warrant Certificates and the transfer thereof. On due presentment
for registration of transfer of any Warrant Certificate at such office, the
Company shall execute and the Warrant Agent shall issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be accompanied by
a written instrument or instruments or transfer in form satisfactory to the
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Company and the Warrant Agent. At the time of exercise, the transfer fee shall
be paid by the Company. The Company may require payment of a sum sufficient to
cover any tax or other government charge that may be imposed in connection
therewith.
All Warrant Certificates so surrendered, or surrendered for exercise, or
for exchange in case of mutilated Warrant Certificates, shall be promptly
canceled by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of the agency created by this Agreement. Prior to due presentment
for registration of transfer thereof, the Company and the Warrant Agent may
treat the Registered Holder of any Warrant Certificate as the absolute owner
thereof (notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company or the Warrant Agent), and the parties hereto
shall not be affected by any notice to the contrary.
6. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate, the Company shall execute, and the
Warrant Agent shall countersign and deliver in lieu thereof, a new Warrant
Certificate representing an equal aggregate number of Warrants. In the case of
loss, theft or destruction of any Warrant Certificate, the individual requesting
issuance of a new Warrant Certificate shall be required to indemnify the Company
and Warrant Agent in an amount satisfactory to each of them. In the event a
Warrant Certificate is mutilated, such certificate shall be surrendered and
canceled by the Warrant Agent prior to delivery of a new Warrant Certificate.
Applicants for a new Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may prescribe.
7. Call Option. If at any time, the closing bid price of the Company's
common stock equals or exceeds 200% of the exercise price (including any
adjustment or reduction of such exercise price pursuant to Section 8 or 9
hereof) of the Warrants, for 20 consecutive trading days, the Company shall have
the right and option with respect to the Warrants, upon thirty (30) days written
notice to each Warrantholder (or such longer period as is required under any
applicable law), to call, redeem and acquire all of the Warrants which remain
outstanding and unexercised at the date specified for such redemption in such
notice (the "Redemption Date"), which Redemption Date shall be 30 days after the
date of such notice, for an amount equal to $.01 per Warrant; provided, however,
the Warrantholders shall have the right during the 30-day period immediately
following the date of such notice to exercise the Warrants in accordance with
the provisions of Section 3 hereof. In the event any Warrants are exercised
during such 30-day period, this call option shall be deemed not to have been
exercised by the Company as to the Warrants so exercised by the holders thereof.
Said notice of redemption shall require each Warrantholder to surrender to the
Company, on the Redemption Date, at the Corporate Office of the Warrant Agent
(or its successor), his certificate or certificates representing the Warrants to
be redeemed. Notwithstanding the fact that any Warrants called for redemption
have not been surrendered for redemption and cancellation on the Redemption
Date, after the Redemption Date, such Warrants shall be deemed to be expired and
all rights of the holders of such unsurrendered Warrants shall cease and
terminate, other than the right to receive the redemption price of $.01 per
Warrant for such Warrants, without interest provided, however, that such right
to receive the redemption price of $.01 per Warrant for such Warrants shall
itself expire on the Expiration Date of the Warrants. The Company shall notify
the Warrant Agent verbally, with confirmation in writing, of the call of the
Warrants and of the Redemption Date and the Company shall instruct the Warrant
Agent accordingly as to the procedures to be followed by the Warrant Agent in
connection with the redemption of the Warrants.
8. Adjustment of Exercise Price and Shares. After each adjustment of the
Exercise Price pursuant to this Section 8, the number of shares of Common Stock
purchasable on the exercise of each Warrant shall be the number derived by
dividing such adjusted pertinent Exercise Price into the original pertinent
Exercise Price. The pertinent Exercise Price shall be subject to adjustment as
follows:
5
<PAGE>
(a) In the event, prior to the expiration of the Warrants by exercise or by
their terms, the Company shall issue any shares of its Common Stock as a share
dividend or shall subdivide the number of outstanding shares of Common Stock
into a greater number of shares, then, in either of such events, the Exercise
Price per share of Common Stock purchasable pursuant to the Warrants in effect
at the time of such action shall be reduced proportionately and the number of
shares purchasable pursuant to the Warrants shall be increased proportionately.
Conversely, in the event the Company shall reduce the number of shares of its
outstanding Common Stock by combining such shares into a smaller number of
shares, then, in such event, the Exercise Price per share purchasable pursuant
to the Warrants in effect at the time of such action shall be increased
proportionately and the number of shares of Common Stock at that time
purchasable pursuant to the Warrants shall be decreased proportionately. Any
dividend paid or distributed on the Common Stock in shares of any other class of
the Company or securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of Common
Stock are issuable on the conversion thereof.
(b) In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its property,
or dissolves, liquidates or winds up its affairs, prompt, proportionate,
equitable, lawful and adequate provision shall be made as part of the terms of
any such sale, dissolution, liquidation or winding up such that the holder of a
Warrant may thereafter receive, on exercise thereof, in lieu of each share of
Common Stock of the Company which he would have been entitled to receive, the
same kind and amount of any share, securities, or assets as may be issuable,
distributable or payable on any such sale, dissolution, liquidation or winding
up with respect to each share of Common Stock of the Company; provided, however,
that in the event of any such sale, dissolution, liquidation or winding up, the
right to exercise this Warrant shall terminate on a date fixed by the Company,
such date to be not earlier than 4:00 p.m., Eastern Time, on the 10th day next
succeeding the date on which notice of such termination of the right to exercise
the Warrants has been given by mail to the holders thereof at such addresses as
may appear on the books of the company.
(c) In the event, prior to the expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of its
Common Stock for the purpose of determining shareholders entitled to receive any
share dividend or other right which will cause any change or adjustment in the
number, amount, price or nature of the shares of Common Stock or other
securities or assets deliverable on exercise of the Warrants pursuant to the
foregoing provisions, the Company shall give to the Registered Holders of the
Warrants at the addresses as may appear on the books of the Company at least 10
days prior written notice to the effect that it intends to take such a record.
Such notice shall specify the date as of which such record is to be taken; the
purpose for which such record is to be taken; and the number, amount, price and
nature of the Common Shares or other shares, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such record
will be taken has been completed. Without limiting the obligation of the Company
to provide notice to the Registered Holders of the Warrant Certificates of any
corporate action hereunder, the failure of the Company to give notice shall not
invalidate such corporate action of the Company.
(d) No adjustment of the Exercise Price shall be made as a result of or in
connection with (i) the issuance of Common Stock of the Company pursuant to
options, warrants and share purchase agreements outstanding or in effect on the
date hereof, (ii) the establishment of additional option plans of the Company,
the modification, renewal or extension of any plan now in effect or hereafter
created, or the issuance of Common Stock, on exercise of any options pursuant to
such plans, in connection with compensation arrangements for officers, employees
or agents of the Company or any subsidiary, and the like or (iii) the issuance
of Common Stock in connection with an acquisition or merger of any type
(therefore, the antidilution provisions of this Section 8 will not apply in the
event a merger or acquisition is undertaken by the Company).
(e) This Agreement shall be incorporated by reference on the Warrant
Certificates.
6
<PAGE>
Upon any adjustment of the exercise Price required to be made pursuant to
this Section 8, the Company within 30 days thereafter shall (A) cause to be
filed with the Warrant Agent a certificate setting forth the pertinent Exercise
Price after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based, and (B) cause to
be mailed to each of the Registered Holders of the Warrant Certificates written
notice of such adjustment.
9. Reduction in Exercise Price at Company's Option. In addition to any
adjustments made to the Exercise Price pursuant to Section 8, the Company's
Board of Directors may, at its sole discretion, reduce the Exercise Price of the
Warrants in effect at any time either for the life of the Warrants or any
shorter period of time determined by the Company's Board of Directors. The
Company shall promptly notify the Warrant Agent and the Registered Holders of
any such reductions in the Exercise Price.
10. Duties. Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not, by issuing and delivering Warrant Certificates or by
any other act hereunder, be deemed to make any representation as to the
validity, value or authorization of the Warrant Certificates or the Warrants
represented thereby or of the Common Stock or other property delivered on
exercise of any Warrant. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of the Warrant Certificates to make or
cause to be made any adjustment of the Exercise Price or to determine whether
any fact exists which may require any such adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance on
any Warrant Certificate or other document or instrument believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement
except for its own negligence or willful misconduct, or (iii) be liable for any
act or omission in connection with this Agreement except for its own negligence
or willful misconduct.
The Company agrees to indemnify the Warrant Agent against any and all
losses, expenses and liabilities which the Warrant Agent may incur in connection
with the delivery of copies of the Company's prospectus to exercising Registered
Holders upon the exercise of any Warrants as set forth in Section 4.
The Warrant Agent may at any time consult with counsel satisfactory to it
(which may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in accordance
with the opinion or advice of such counsel. Any notice, statement, instruction,
request, direction, order or demand of the Company shall be sufficiently
evidenced by an instrument signed by its President and attested by its Secretary
or Assistant Secretary. The Warrant Agent shall not be liable for any action
taken or omitted by it in accordance with such notice, statement, instruction,
request, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse the Warrant Agent for its reasonable
expenses. The Company further agrees to indemnify the Warrant Agent against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for any action taken or omitted by the Warrant Agent in the execution of
its duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further duties
and liabilities hereunder (except liabilities arising as a result of the Warrant
Agent's own negligence or willful misconduct), on 30 days' prior written notice
7
<PAGE>
to the other party. At least 15 days prior to the date such resignation is to
become effective, the Warrant Agent shall cause a copy of such notice of
resignation to be mailed to the Registered Holder of each Warrant Certificate.
On such resignation or termination the Company shall appoint a new warrant
agent. If the Company shall fail to make such appointment within a period of 30
days after it has been notified in writing of the resignation by the Warrant
Agent, then the registered holder of any Warrant Certificate may apply to any
court of competent jurisdiction for the appointment of a new warrant agent.
After acceptance in writing of an appointment of a new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; provided, however, if it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed. The
Company shall file a notice of appointment of a new warrant agent with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged, or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent
shall be a successor Warrant Agent under this Agreement, provided that such
corporation is eligible for appointment as a successor to the Warrant Agent
under the provisions of the preceding paragraph. Any such successor Warrant
Agent shall promptly cause notice of its succession as Warrant Agent to be
mailed to the Company and to the Registered Holder of each Warrant Certificate.
No further action shall be required for establishment and authorization of such
successor warrant agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the Company and
otherwise deal with the Company in the same manner and to the same extent and
with like effect as though it were not Warrant Agent. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
11. Modification of Agreement. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained; or
(ii) that they may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrant Certificates; provided, however,
this Agreement shall not otherwise be modified, supplemented or altered in any
other respect except with the consent in writing of the registered holders of
Warrant Certificates representing not less than 51% of each class of Warrants
outstanding. Additionally, except as provided in Section 8, no change in the
number or nature of the Warrant Shares purchasable on exercise of a Warrant,
increase the purchase price therefor, or the acceleration of the Expiration Date
of a Warrant shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed or allowed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by tested telex, telegram or
cable to the last known address of the Company, the Warrant Agent and if to the
Registered Holder of a Purchase Warrant Certificate, at the address of such
holder as set forth on the books maintained by the Warrant Agent.
13. Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the Company, the Warrant Agent and their respective successors
and assigns, and the holders from time to time of Purchase Warrant Certificates.
8
<PAGE>
Nothing in this Agreement is intended or shall be construed to confer upon any
other person any right, remedy or claim or to impose on any other person any
duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and all
such other instruments and shall take any and all other actions as may be
reasonably necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable, or inoperative
for any reason by any court of competent jurisdiction, government authority or
otherwise, such holding, declaration or pronouncement shall not affect adversely
any other provision of this Agreement, which shall otherwise remain in full
force and effect and be enforced in accordance with its terms, and the effect of
such holding, declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies as
provided by law. No delay or failure on the part of either party in the exercise
of any right or remedy arising from a breach of this Agreement shall operate as
a waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement. The consent of any party where required hereunder to act or
occurrence shall not be deemed to be a consent to any other action or
occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Utah. Except as
otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be modified or
amended or any term or provisions hereof waived or discharged except in writing
signed by the party against whom such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are for
convenience in reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MINIMALLY INVASIVE SURGERY CORPORATION
By _____________________________
Authorized Officer
THE WARRANT AGENT:
AMERICAN REGISTRAR & TRANSFER CO.
By ___________________________
Authorized Officer
9
COMMON STOCK PURCHASE WARRANT
GALAXY VENTURES, INC.
(a Nevada corporation)
Dated:_________________, 199
THIS CERTIFIES THAT (hereinafter called the "Holder") will in the
future during the period hereinafter specified, upon fulfillment of the
conditions and subject to the terms hereinafter set forth, be entitled to
purchase from Galaxy Ventures, Inc., a Nevada corporation (hereinafter called
the "Company"), shares (the "Shares") of the Company's common stock, par value
$.001 per share ("Common Stock"), at an exercise price of $3.00 per Share (the
"Exercise Price"), on the basis of one share for each warrant (the "Warrants" or
"Unit Warrants") indicated on the face hereof.
1. Commencing with the issuance of this certificate and ending on June
30, 2000, unless extended by the Company ("Expiration Date"), the Holder shall
have the right to purchase the Shares hereunder at the Exercise Price. After the
Expiration Date, the Holder shall have no right to purchase any Shares hereunder
and this Warrant shall expire thereon effective at 4:00 p.m., New York time.
2. The rights represented by this Warrant may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Warrant (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Shares specified in the
above-mentioned purchase form together with applicable stock transfer taxes, if
any; and (iii) delivery to the Company, if the Company so requires, of a duly
executed agreement signed by the Holder to the effect that such person agrees to
be bound by all provisions hereof. This Warrant shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to the
close of business on the date this Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this Paragraph 2, and the person or
persons in whose name or names the certificates for Shares shall be issuable
upon such exercise shall become the holder or holders of record of such Shares
at that time and date. The certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time after the rights represented by
this Warrant shall have been exercised.
3. This Warrant is NONTRANSFERABLE and may not be sold, transferred,
assigned, or otherwise disposed of at any time by the Holder without express
written permission of the Company.
4. The Company covenants and agrees that all Shares purchased
hereunder will, upon issuance, be duly and validly issued, fully paid and
non-assessable and no personal liability will attach to the Holder thereof. The
Company further covenants and agrees that during the period within which this
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
5. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company, either at law or in equity, and
the rights of the Holder are limited to those expressed in this Warrant and are
not enforceable against the Company except to the extent set forth herein.
1
<PAGE>
6. In the event that the Company shall at any time subdivide or
combine into a greater or lesser number the number of outstanding shares of
Common Stock, the number of Shares purchasable upon exercise of the Warrant
shall be proportionately increased and the Exercise Price proportionally
decreased in the case of subdivision or, in the case of combination, the number
of Shares purchasable upon the exercise of the Warrant shall be proportionately
decreased and the Exercise Price proportionately increased. Irrespective of any
adjustments in the Exercise Price or the number of Shares purchasable upon
exercise of the Warrant, the Warrant theretofore or thereafter issued may
continue to express the same price and number and kind of Shares as are stated
in the Warrant initially issued.
7. Notwithstanding any other provision, this Warrant shall not be
exercisable by the Holder at any time that the exercise thereof would violate
any applicable law.
8. The Warrants represented by this certificate are subject to
redemption by the Company at $.01 per Warrant, upon 30 days notice if the
closing bid price of the Company's common stock equals or exceeds $6.00 per
share for 20 consecutive trading days at any time prior to notice of redemption.
The terms of the redemption and other terms of these Warrants are set forth in a
Warrant Agreement between the Company and its Warrant Agent, which agreement
shall control the terms and conditions of this Warrant.
9. This Warrant Certificate does not constitute an offer to sell, nor
does it confer any right to purchase securities of the company until such time
as the conditions precedent to its exercisability have been fulfilled.
10. This Warrant shall be governed by and be in accordance with the
laws of the State of Nevada and may not be amended other than by written
instrument executed by the parties hereto except as provided in the Warrant
Agreement between the Company and the Warrant Agent.
IN WITNESS WHEREOF, Galaxy Ventures, Inc. has caused this Warrant to be
signed by its duly authorized officers.
GALAXY VENTURES, INC., a Nevada Corporation
By: _____________________________
2
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the Holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, _______________ Shares of the Common Stock of
Galaxy Ventures, Inc., and herewith makes payment of $_______________ therefore,
and requests that the share certificates be issued in the name(s) of, and
delivered to ______________________________________________ whose address(es) is
(are) ________________________________________________________________________.
Dated: _______________________
______________________________
(Signature)
______________________________
Name (Print or Type)
______________________________
Address
______________________________
CUSIP NO. 60365N 10 2
NUMBER Minimally Invasive SHARES
Surgery Corporation
RESTRICTED SECURITIES
AUTHORIZED COMMON STOCK: 20,000,000 SHARES
PAR VALUE: $.001
THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED), "THE ACT") OR ANY STATE
SECURITIES LAW, AND MAY NOT BE
THIS CERTIFIES THAT TRANSFERRED OR SOLD UNLESS AN EXEMPTION
FROM SUCH REGISTRATION PROVISIONS IS
AVAILABLE (THE ISSUER AND/OR ITS
TRANSFER AGENT HAVE AN OPTION TO REQUIRE
THAT AVAILABILITY OF AN EXEMPTION BE
ESTABLISHED BY AN OPINION OF COUNSEL
WHICH IS SATISFACTORY TO THEM).
IS THE RECORD HOLDER OF
Countersigned & Registered;
AMERICAN REGISTRAR & TRANSFER CO.
P.O. Box 1799 * Salt Lake City, UT 84110
By
-------------------------------------
Registrar-Authorized Signature
--Shares of MINIMALLY INVASIVE SURGERY CORPORATION Common Stock--
transferable 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:
- ----------------------- [CORPORATE SEAL] -----------------------
SECRETARY PRESIDENT
SCHEDULE OF SUBSIDIARIES
1. Chiu Minimally Invasive Spine Surgery, Inc. (incorporated in the State of
California).
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 for Minimally Invasive Surgery Corporation
of our report dated August 17, 1998, relating to the June 30, 1998 financial
statements of Minimally Invasive Surgery Corporation, which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts".
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
September 18, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,929,072
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,929,072
<PP&E> 7,343
<DEPRECIATION> 2
<TOTAL-ASSETS> 1,938,243
<CURRENT-LIABILITIES> 52,388
<BONDS> 0
0
0
<COMMON> 8,133
<OTHER-SE> 1,877,722
<TOTAL-LIABILITY-AND-EQUITY> 1,938,243
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,287
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,287)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,287)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,287)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
