<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1999
REGISTRATION NO. 333-86981
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRUEVISION INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8741 84-1080044
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------
1720 LOUISIANA BOULEVARD
SUITE 100
ALBUQUERQUE, NEW MEXICO 87110
505-256-3534
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL
EXECUTIVE OFFICES)
------------------------
JOHN C. HOMAN, CHIEF EXECUTIVE OFFICER
TRUEVISION INTERNATIONAL, INC.
1720 LOUISIANA BOULEVARD
SUITE 100
ALBUQUERQUE, NEW MEXICO 87110
505-256-3534 (TELEPHONE)
505-256-3521 (FACSIMILE)
(Name, Address, And Telephone Number Of Agent For Service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
GREGORY BARTKO, ESQ. LAWRENCE B. FISHER, ESQ.
Law Office of Gregory Bartko Orrick, Herrington & Sutcliffe LLP
3475 Lenox Road, Suite 400 666 Fifth Avenue
Atlanta, Georgia 30326 New York, New York 10103
(404) 238-0550 (telephone) (212) 506-5000 (telephone)
(404) 238-0551 (facsimile) (212)-506-5151 (facsimile)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable 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, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box: / /__________________
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[LOGO]
TRUEVISION INTERNATIONAL, INC.
500,000 UNITS
This is an initial public offering of 500,000 units of TrueVision
International, Inc., each unit consists of two shares of common stock and a
redeemable common stock purchase warrant to purchase one share of common stock.
The common stock and the warrants will trade as separate securities 30 days
after this offering.
Before this offering, there has been no public market for any of our
securities. We anticipate that the initial public offering price will be $18.10
per unit, which consists of $9.00 per share of common stock and $.10 per
warrant.
PLEASE SEE THE RISK FACTORS BEGINNING ON PAGE 6 TO READ ABOUT FACTORS YOU
SHOULD CONSIDER BEFORE BUYING ANY OF OUR SECURITIES.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER UNIT TOTAL
-------- --------
<S> <C> <C> <C>
- - Price to the public................................. $ $
- - Underwriting discounts and commissions.............. $ $
- - Proceeds, before expenses, to TrueVision............ $ $
</TABLE>
The underwriters may purchase an additional 75,000 units from us at the
initial public offering price less the underwriting discount to cover any
over-allotments.
Delivery of the securities offered by this prospectus will be made on or
about , 2000, in New York, New York. The underwriters are offering
the units on a firm commitment basis.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities, in any state where the offer and sale is not permitted.
DIRKS & COMPANY, INC.
PROSPECTUS DATED , 2000.
<PAGE>
[Photo depicting, at the top
of the page, a women serving as
a customer representative for a
medical services company. At the bottom
of the page, a women's eyes are
focused in close-up fashon.]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Prospectus summary.......................................... 3
Risk factors................................................ 6
Cautionary note regarding forward-looking statements........ 11
Use of proceeds............................................. 11
Dividend policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Selected consolidated financial data........................ 15
Management's discussion and analysis of financial condition
and results of operations................................. 17
Business.................................................... 23
Management.................................................. 33
Certain transactions........................................ 40
Principal stockholders...................................... 44
Description of securities................................... 46
Shares eligible for future sale............................. 50
Underwriting................................................ 52
Legal matters............................................... 54
Experts..................................................... 54
Index to consolidated financial statements.................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
INVESTORS SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE FINANCIAL
STATEMENTS WHICH ARE A PART OF THIS PROSPECTUS.
OUR BUSINESS
TrueVision International, Inc., through our operating subsidiaries,
TrueVision Laser Center of Albuquerque, Inc. and TrueVision of Nevada, Inc.,
provide laser vision correction and image enhancement procedures to individuals
at our TrueVision centers. Our doctors and those with which we are affiliated,
provide these services using state-of-the-art excimer laser technology. We also
offer patients ancillary image enhancement procedures and other vision
correction devices on a limited basis, including eye glasses and contact lenses.
CORPORATE BACKGROUND
On March 16, 1999 we changed our name from Topform, Inc. to TrueVision
International, Inc. Our executive office is located at 1720 Louisiana Boulevard
N.E., Suite 100 Albuquerque, New Mexico 87110 and our telephone number is
(505) 256-3534. In this prospectus, "TrueVision", "we", "us" and "our" refer to
TrueVision International, Inc. and our consolidated subsidiaries, TrueVision
Laser Center of Albuquerque, Inc. and TrueVision of Nevada, Inc.
THE OFFERING
<TABLE>
<S> <C>
Securities that we are offering.............. 500,000 units, each unit consisting of two
shares of common stock and one common stock
purchase warrant exercisable to purchase one
share of common stock at an exercise price of
$10.80 per share.
Common stock outstanding before this 2,329,558 shares.
offering...................................
Common stock to be outstanding after this
offering................................... 3,329,558 shares.
Redeemable common stock purchase warrants to
be outstanding after this offering......... 500,000 redeemable common stock purchase
warrants included as a part of the units
offered by this prospectus.
Use of proceeds.............................. - Laser facilities development expenses;
- sales and marketing expenditures;
- facilities and other capital expenditures;
- expansion of internal operations;
- repayment of indebtedness; and
- working capital and general corporate
purposes.
Proposed Nasdaq SmallCap symbols
Common stock............................. "TRUU"
Redeemable warrants...................... "TRUU.W"
Units.................................... "TRUU.U"
</TABLE>
Unless stated otherwise, all information in this prospectus assumes:
- an initial public offering price of $18.10 per unit; and excludes
- 374,999 shares of common stock issuable upon the exercise of 374,999
incentive stock options, each exercisable to purchase one share of our
common stock at $.86 per share;
- 83,333 shares of common stock issuable upon the exercise of 83,333
stock options, each exercisable to purchase one share of our common
stock at $6.15 per share;
- 350,000 common stock purchase warrants currently outstanding, each
exercisable to purchase one share of our common stock at $8.40 per
share;
- the exercise of the underwriter's over-allotment option to purchase
75,000 units; and
- the exercise of the 50,000 representative's warrants.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data of our business. This
information is qualified by reference to, and should be read together with, the
historical financial data for the years ended September 30, 1998 and 1999 and
should be read in conjunction with our audited financial statements included
elsewhere in this prospectus. The data presented below should also be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and accompanying notes
appearing elsewhere in this prospectus.
The issuance of our common stock for the acquisition of True Vision
Albuquerque is accounted for as a reverse acquisition with a public shell. The
table reflects our statement of operations data as if the April 15, 1998
issuance of 1,944,444 shares of common stock for True Vision Albuquerque
occurred on October 1, 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------- -------------
<S> <C> <C>
Statement of operations data:
Revenues.................................................... $1,460,526 $3,377,478
Cost of revenues............................................ 894,134 2,294,216
Operating costs and expenses................................ 750,001 1,443,842
Loss from operations........................................ (183,609) (360,580)
Interest expense............................................ (117,955) (118,330)
---------- ----------
Net loss.................................................... $ (301,564) $ (842,693)
========== ==========
Basic and diluted earnings per share........................ $ (.14) $ (.37)
========== ==========
Shares used in computing basic and diluted earnings per
share..................................................... 2,127,820 2,264,187
========== ==========
</TABLE>
- ------------------------
- The following table includes a summary of our balance sheet at
September 30, 1999:
- on an actual basis;
- on a pro forma basis giving effect to the issuance during November 1999
of:
- 150,000 principal amount promissory notes bearing interest at 13% per
annum, due December 1, 2000 and the accrual of $84,402 in financing costs
from the transfer of 9,378 shares of common stock in conjunction with the
issuance of the promissory notes.
- as adjusted to give affect to, the issuance of:
- receipt of the net proceeds from the sale of 1,000,000 shares of common
stock and warrants for the purchase of 500,000 shares offered by us at an
offering price of $9.00 per share and $.10 per warrant,
- the repayment of the $1,250,000 principal amount promissory notes and
accrued interest, issued April through September 1999, bearing interest
at 13%, and
4
<PAGE>
- the repayment of $412,000 of accrued expenses from the proceeds of this
offering, which are primarily accrued consulting fees that were deferred
as well as a state sales tax liability accrued by our Albuquerque
subsidiary and bank overdrafts.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1999 AS
BALANCE SHEET DATA: ACTUAL PRO FORMA ADJUSTED
- ------------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Cash and cash equivalents........................ $ 1,495 $ 151,495 $6,126,494
Total working capital (deficit).................. (1,160,025) (925,623) 6,117,296
Total assets..................................... 1,957,326 2,191,728 7,572,647
Short term debt, current portion of long term
liabilities and current related party
obligations.................................... 1,658,754 1,658,754 408,754
Long term debt................................... 449,997 599,997 599,997
Total liabilities................................ 2,723,704 2,873,704 1,211,704
Stockholders' (deficit) equity................... $ (766,378) $(681,976) $6,360,943
</TABLE>
5
<PAGE>
RISK FACTORS
WE BEGAN PROVIDING OUR SERVICES IN APRIL 1998 AND HAVE A LIMITED OPERATING
HISTORY UPON WHICH YOU MAY EVALUATE OUR BUSINESS AND PROSPECTUS. Since we
started providing our services in April 1998, we have a limited operating
history. As a result, we have a limited basis upon which you may evaluate our
business and prospects. Our prospects must be considered in light of the risks,
expenses, delays, problems and difficulties frequently experienced by early
stage companies.
WE HAVE INCURRED NET LOSSES SINCE COMMENCING OUR BUSINESS AND EXPECT LOSSES
FROM OPERATIONS IN THE FUTURE. We have not achieved profitability and expect to
continue to incur operating losses for the foreseeable future. For the fiscal
year ended September 30, 1999, our net loss was $842,693 and our accumulated
deficit at that same date was $1,636,151. We expect to continue to incur
significant operating and capital expenditures and, as a result, we expect
significant net losses in the future and we will need to generate significant
revenues to achieve and maintain profitability. We will continue to need
additional capital in order to effectuate our business plan and meet our
operational challenges.
IF WE ARE UNABLE TO COMPLETE OUR PUBLIC OFFERING, ALTERNATE FUNDING WILL BE
NEEDED AND WE WILL HAVE TO MODIFY OUR BUSINESS OPERATIONS ACCORDINGLY. Based on
our current operating plan, we anticipate that the net proceeds of this offering
and cash provided by operations will allow us to meet our cash and capital
requirements for at least 12 months following the date of this prospectus. Our
accountants have included in a note in their report that our consolidated
financial statements have been prepared assuming we will continue as a going
concern. If appropriate financing is not obtained by us through our public
offering, we intend to modify our operations accordingly. We may require
additional funding sooner than anticipated. If we raise additional capital
through the sale of equity, including preferred stock, or convertible debt
securities, our stockholders may experience dilution.
We currently do not have a credit facility or any commitments for additional
financing. We cannot be certain that additional financing will be available when
and to the extent required. If adequate funds are not available on acceptable
terms, we may be unable to fund our expansion, develop or enhance our services
or respond to competitive pressures.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO ALLOCATE THE OFFERING PROCEEDS
AND YOU WILL LIKELY HAVE NO VOICE AS TO HOW OUR MANAGEMENT WILL USE THESE NET
PROCEEDS. We expect to use approximately 23.0%, or $1,716,000 of the net
proceeds from this offering for the repayment of existing indebtedness,
including the 13% promissory notes that we recently sold for short-term working
capital. We also expect to use total net proceeds of approximately $7,473,500
for the other purposes described under "Use of Proceeds." Our management will
have broad discretion to allocate the proceeds of this offering, including
proceeds currently specifically allocated as described in this prospectus, and
any other cash resources to such uses as they determine to be in our best
interests. The amounts actually allocated to each expense category and the
source of the cash so allocated, may vary significantly, depending on a number
of factors, including the amount of future revenue growth, the amount of cash
generated or used by our operations and the success of our marketing efforts for
our laser vision correction procedures.
A SIGNIFICANT AMOUNT OF THE NET PROCEEDS OF THIS OFFERING MAY BE USED TO
BENEFIT OUR MANAGEMENT AND OTHER INSIDERS. The allocation of the net proceeds
from this offering includes approximately 14.7% for working capital and general
corporate purposes and 23.0% for the repayment of existing indebtedness.
Substantial amounts of our working capital, including the working capital we
received from the sale of our 13% promissory notes due April 15, 2000, will be
applied towards the payment of salaries and related costs of our management
personnel. Accordingly, substantial amounts of the net proceeds we receive from
this offering may ultimately be used to benefit our officers, consultants or
other insiders.
6
<PAGE>
OUR CHIEF EXECUTIVE OFFICER HAS A CONFLICT OF INTEREST WITH TVLC FINANCE,
INC. AND MTE/TRIAD, INC., AFFILIATED COMPANIES THAT HAVE RELATIONSHIPS WITH US.
MR. HOMAN MAY HAVE TO DEVOTE MANAGEMENT TIME TO THESE AFFILIATED
COMPANIES. Mr. Homan, is an officer and director of TVLC Finance, Inc. and
MTE/Triad, Inc. Both of these companies have provided specialty financing to
enable us to finance our equipment. Mr. Homan also serves as an officer and
director of TrueVision Laser Centers, Inc., a predecessor company that has since
ceased active operations. Since these companies provide access to equipment
financing for us, we are dependent on Mr. Homan's determination that the terms
of equipment financing provided by these affiliated companies are no less
favorable than we could obtain from independent sources. Mr. Homan's role with
us could result in a conflict of interest at some time. These separate
responsibilities by Mr. Homan could potentially prevent him from devoting
full-time as our chief executive officer.
SINCE THE LASER REFRACTIVE SURGERY MARKET IS RELATIVELY NEW, WE DO NOT KNOW
IF OUR SERVICES WILL GENERATE MARKET ACCEPTANCE. The commercial market for
laser refractive and image enhancement surgery in the United States is
relatively new and we do not know if these procedures will generate widespread
market acceptance. Several factors may contribute to refractive surgery not
achieving broad market acceptance, which include:
- cost of the procedure;
- effectiveness of conventional eye correction technologies including eye
glasses and contact lenses;
- general resistance to surgery;
- availability of other surgical techniques;
- the short history of laser refractive surgery in the United States;
- side effects; and
- any resistance by third-party payors to reimburse patients for elective
laser vision correction.
POTENTIAL SIDE EFFECTS AND NEGATIVE LONG-TERM RESULTS OF LASER REFRACTIVE
SURGERY COULD DAMAGE THE DEMAND FOR OUR SERVICES. There are concerns about the
safety and efficacy of the performance of laser refractive surgery. These
concerns include:
- the predictability and stability of results;
- complications and side effects including:
- post-operative pain;
- corneal haze during healing;
- glare/halos;
- decrease in contrast sensitivity;
- temporary increases in intraocular pressure in reaction to post-procedure
medication;
- modest fluctuations in astigmatism and modest decreases in best corrected
vision;
- loss of fixation during the procedure;
- unintended over-or under-corrections; instability, reversion or regression
of effect; and
- corneal scars, corneal ulcers, and corneal healing disorders.
The occurrence of any of these or any other complications may damage the demand
for the services we offer.
7
<PAGE>
THE TECHNOLOGIES WE USE IN OUR LASER VISION CORRECTION PROCEDURES ARE
SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND COULD CAUSE US TO MAKE SIGNIFICANT
CAPITAL INVESTMENT IN NEW EQUIPMENT. Our market is characterized by rapid
technological changes. Newer technologies, techniques or products for the
treatment of refractive vision disorders, and the other services we offer, could
be developed with better performance than the excimer lasers and other
technologies that we use. The availability of new and better ophthalmic laser
technologies or other surgical or non-surgical methods for correcting refractive
vision disorders could require us to make significant investments in technology,
render our current technology obsolete and have a significant negative impact on
our business and results of operations.
WE MAY NOT COMPETE EFFECTIVELY WITH OTHER EYE CARE SERVICES COMPANIES THAT
HAVE MORE RESOURCES AND EXPERIENCE THAN US. Many of our competitors have
substantially greater financial, technical, managerial, marketing, and other
resources than we do may compete more effectively than we can. We compete with
NovaMed Eyecare Management, LLC, TLC The Laser Center, Inc., Clear Vision Laser
Centers, Inc., and other entities, including other refractive laser center
companies, hospitals, individual ophthalmologists and optometrists, other
surgery and laser centers, eye care clinics and providers of retail optical
products in offering our services and products. Our surgical procedures compete
with other surgical and non-surgical treatments for refractive disorders,
including eyeglasses, contact lenses, other types of refractive surgery, such as
radial keratotomy, and technologies currently under development. If our
competitors offer laser vision correction or other refractive surgery services
at lower prices than we do, we may have to lower the prices we charge, which
will adversely affect our results of operations.
THE DEMAND FOR OUR LASER REFRACTIVE SURGERY PROCEDURES MAY BE ADVERSELY
AFFECTED BY HEALTH CARE REFORM INITIATIVES. The continuing effort of government
regulators of health care services to contain or reduce the costs of health care
may reduce our revenues and profitability by increasing our regulatory burden or
increasing our administrative costs associated with delivering services to our
customers. We cannot predict the effect that health care reforms may have on our
business, and it is possible that any reforms will hurt our business.
SIGNIFICANT DECREASES IN EXCIMER LASER PRICES COULD HARM OUR BUSINESS BY
MAKING IT MORE ATTRACTIVE FOR EYE SURGEONS TO BUY THEIR OWN LASERS AND FORCE US
TO LOWER PRICES. A significant reduction in the price of excimer lasers could
reduce the demand for our services by making it economically more attractive for
eye surgeons to buy excimer lasers for themselves instead of utilizing our
centers. Also, excimer laser price decreases could force us to reduce our fees
in response to this reduction in demand or as a means to remain competitive with
other laser providers.
WE ARE DEPENDENT UPON A LIMITED NUMBER OF SUPPLIERS FOR OUR LASER SURGERY
EQUIPMENT AND WE DON'T HAVE A CONTINGENCY PLAN FOR ALTERNATIVE SUPPLIERS, SO IF
ANY OF THESE SUPPLIERS WERE UNABLE OR UNWILLING TO MEET OUR NEEDS, WE MAY NOT BE
ABLE TO EQUIP OUR CENTERS WITH THE APPROPRIATE TECHNOLOGY. We are dependent on a
small number of manufacturers for our supply of ophthalmic lasers. To our
knowledge, only three companies, Summit Technologies, Inc., Autonomous
Technologies Corporation and VISX, Inc. have been approved by the United States
Food and Drug Administration for commercial sale of excimer lasers in the U.S.
If any of these manufactures were for any reason to discontinue commercial sale
of ophthalmic lasers, or be unwilling or unable to meet our needs, we may not be
able to equip our centers with the appropriate technology.
WE MAY BE FORCED TO ALTER THE WAY WE MARKET OUR SERVICES AND THE MANNER IN
WHICH WE ENTER INTO RELATIONSHIPS WITH OUR EQUIPMENT PROVIDERS, SERVICE
PROVIDERS, DOCTORS, OPTOMETRISTS, AND OTHER HEALTH CARE PROVIDERS AS A RESULT OF
GOVERNMENT REGULATIONS. We are subject to extensive federal, state, local and
foreign laws, rules and regulations, including:
- restrictions on the approval, distribution, and use of medical devices;
- anti-kickback statutes;
8
<PAGE>
- fee-splitting laws;
- corporate practice of medicine restrictions;
- self-referral laws;
- anti-fraud provisions;
- facility license requirements and certificates of need;
- conflict of interest regulations; and
- sales and use taxes
Many of these laws and regulations are ambiguous, and courts and regulatory
authorities have provided little clarification. Moreover, state and local laws
vary from jurisdiction to jurisdiction. As a result, we may not always be able
to accurately interpret applicable law, and some of our activities could be
challenged.
Failure to comply with applicable FDA requirements could subject us, and the
doctors who use our centers to enforcement actions, including product seizure,
recalls, withdrawal of approvals and civil and criminal penalties. Further,
failure to comply with regulatory requirements, or any adverse regulatory action
could result in limitations or prohibitions on our use of excimer lasers. See
"Business--Government regulation."
OUR MANAGEMENT WILL CONTROL 38.5% OF OUR COMMON STOCK AFTER THIS OFFERING
AND THEIR INTERESTS MAY BE DIFFERENT FROM AND CONFLICT WITH YOURS AND AS A
RESULT YOU MAY HAVE NO EFFECTIVE VOICE IN OUR MANAGEMENT, INCLUDING THE ELECTION
OF DIRECTORS AND THE APPROVAL OF SIGNIFICANT CORPORATE TRANSACTIONS. Following
this offering, our executive officers and directors will beneficially own a
total of approximately 38.5%, 37.0% if the underwriter's over-allotment option
is exercised in full, of our outstanding common stock, assuming no exercise of
the redeemable common stock purchase warrants. Accordingly, if our management
acts together, they have the power to control the election of all of our
directors and the approval of significant corporate transactions for which the
approval of our stockholders is required. If you purchase our securities, you
may have no effective voice in our management.
PROVIDING LASER SURGERY PROCEDURES AND RELATED EYE CARE SERVICES ON OUR
PATIENTS COULD SUBJECT US TO MALPRACTICE, PRODUCT LIABILITY, AND OTHER CLAIMS
WHICH COULD EXCEED OUR INSURANCE COVERAGE OR FORCE US TO OBTAIN CASUALTY
INSURANCE WHICH MAY NOT BE AVAILABLE AT COMMERCIALLY REASONABLE
RATES. Providing our services to our patients subjects us to the potential that
significant physical injury will occur to patients at our centers and the
resulting risk of malpractice, product liability and other claims. Our insurance
may not be adequate to satisfy claims or protect us or our affiliated providers
against these claims. Furthermore, our insurance coverage may not continue to be
available at acceptable costs and terms.
WE ARE NOT LICENSED TO PRACTICE MEDICINE OR OPTOMETRY, SO IN ORDER FOR US TO
DELIVER OUR EYE CARE SERVICES, WE ARE DEPENDENT, IN PART, UPON OUR RELATIONSHIPS
WITH OUR MEMBER-PHYSICIANS AND OUR ABILITY TO ENTER INTO AFFILIATIONS WITH
LICENSED MEDICAL PROFESSIONALS. Since we do not practice medicine or optometry,
our activities are limited to establishing centers at which doctors and eye care
professionals that we employ, and others with whom we've established
affiliations, render eye care services. Accordingly, our success depends upon
our ability to attract talented physicians that we desire to employ and our
ability to develop relationships with affiliated physicians and to enter into
agreements with health care providers, including institutions, independent
physicians and optometrists, to render surgical and other professional services
at centers owned or managed by us. There can be no assurance that we will be
able to enter into these agreements with health care providers on satisfactory
terms, if at all. Our inability to enter into these affiliations would likely
limit our revenues, our services, and our ability to expand our operations.
9
<PAGE>
WE FINANCE THE PURCHASES OF OUR LASER SURGERY EQUIPMENT WHICH INCREASES OUR
LEVERAGE AND FINANCE COSTS AND IF WE DO NOT SATISFY OUR DEBT PAYMENTS WHEN DUE,
WE MAY BE FORCED TO FORFEIT OUR EQUIPMENT. We finance the purchases of our
excimer laser equipment. The use of leverage to finance our equipment increases
our risk of loss as opposed to if we borrowed a smaller portion or none of the
purchase price of this equipment. Our risk is increased because we must satisfy
these obligations on specific dates, regardless of our revenues. If we do not
meet our debt service payments when due, we may be forced to forfeit the
equipment securing the debt.
WE NEED THE CONTINUED AVAILABILITY OF THE EXPERTISE AND STRATEGIC PLANNING
OF OUR CHIEF EXECUTIVE OFFICER, JOHN C. HOMAN, AND OTHER KEY PERSONNEL,
EXPERIENCED IN THE LASER REFRACTIVE SURGERY INDUSTRY. We believe that the
efforts and industry knowledge of our senior management, key employees and
contractors, particularly that of our chief executive officer, John C. Homan, in
the laser refractive surgery industry, are essential to our operations and
growth. Mr. Homan is responsible for our strategic planning, and the loss of his
services would have an adverse affect on our long term operations. We have
entered into a three-year employment agreement with Mr. Homan, and have obtained
key man life insurance on the life of Mr. Homan in the amount of $1,000,000. If
we do not succeed in retaining or motivating our current personnel or in hiring
additional qualified employees, our business will be materially adversely
affected. In addition, competition for personnel in our industry, including the
doctors who perform our services, is intense and there can be no assurance that
we will be able to attract and retain the necessary personnel.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS. Many current installed computer systems
and software products only accept two digits to identify the year in any date.
Thus, the Year 2000 will appear as "00," which the system might consider to be
the Year 1900 rather than the Year 2000. This could result in system failures,
delays or miscalculations causing disruptions to our operations. Our failure to
correct a material Year 2000 problem could result in an interruption in, or a
failure of, some of our normal business activities or operations.
The patients at our eye surgery and laser centers and our affiliated eye
care providers pay a portion of their charges for eye care services with
Medicare or third party payor reimbursements. Some private insurance companies
also provide partial or full coverage for elective procedures. In the event
Medicare or private insurance companies have difficulty processing and paying
claims because of Year 2000 issues, this could have a material adverse effect on
our business, financial condition and results of operations.
DIRKS & COMPANY, INC.'S LACK OF EXPERIENCE AS AN UNDERWRITER MAY IMPAIR OUR
ABILITY TO DEVELOP A PUBLIC MARKET FOR OUR SECURITIES AND/OR MAINTAIN OUR NASDAQ
SMALLCAP STOCK MARKET LISTING. Dirks & Company, Inc., the representative of the
several underwriters, commenced operations in July 1997. Dirks & Company, Inc.
has co-managed or acted as an underwriter in only a limited number of public
offerings of securities. Dirks & Company, Inc.'s lack of experience may impair
our ability to develop a public market for our securities. We can not give
assurances that the representative will be able to act as a market maker or that
any broker dealer will become a market maker in our securities. If there are no
market makers for our securities, our securities may be delisted from the Nasdaq
SmallCap Stock Market.
THERE MAY BE SOME OF OUR VENDORS OR OTHER THIRD PARTIES THAT WE HAVE A
MATERIAL RELATIONSHIP WITH THAT ARE NOT YEAR 2000 COMPLIANT. The failure of
systems maintained by third parties to be Year 2000 compliant could cause us to
incur significant expense to remedy any problems, reduce our revenues from such
third parties or otherwise seriously damage our business.
10
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates, and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
"expects," "intends," "plans," "projects," "believes," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks and
uncertainties are described in "Risk Factors" and elsewhere in this prospectus.
We caution you not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this prospectus. We
are not obligated to update these statements or publicly release the result of
any revisions to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $7,473,500
from our sale of the 500,000 units offered by this prospectus, assuming an
initial public offering price of $18.10 per unit. If the underwriters exercise
their over-allotment option in full, we will receive net proceeds of
approximately $8,654,525. These amounts are after deducting estimated
underwriting discounts and commissions, and after fees and expenses of
approximately $400,000, payable by us. We intend to use the net proceeds as
follows:
<TABLE>
<CAPTION>
NET PERCENT
PROCEEDS OF TOTAL
---------- --------
<S> <C> <C>
Laser facilities development expenses.................. $2,800,000 37.5
Sales and marketing expenditures....................... 500,000 6.7
Facilities and other capital expenditures.............. 1,150,500 15.4
Expansion of internal operations....................... 200,000 2.7
Repayment of indebtedness.............................. 1,716,000 23.0
Working capital and general corporate purposes which
includes salaries, cost of additional personnel,
support and management systems, capital costs for
computers and related equipment...................... 1,107,000 14.7
---------- ----
Total.............................................. $7,473,500 100%
========== ====
</TABLE>
We intend to use approximately 37.5% of the net proceeds of this offering to
open three to five new TrueVision laser centers within the 12 months following
completion of the offering, and for the continuing development of our center in
Las Vegas, Nevada. Net proceeds allocated to those centers will primarily be
used for equipment purchases, including additional excimer laser units, as well
as facilities costs associated with opening new centers, such as leasing and
upfitting expenses for new centers.
Proceeds allocated to sales and marketing expenditures will include the
costs of radio, television, and other media spots designed to increase public
awareness of our laser vision correction surgery procedures and the benefits of
the procedures for our customers.
Facilities expansion and related capital expenditures relate to build out
expenses in our Albuquerque center, consisting primarily of construction costs
for upfitting additional office and patient facilities, and the cost of mobile
excimer laser equipment.
11
<PAGE>
A small portion of our net proceeds will be utilized for expansion of
internal corporate operations, which include expanding our computer network,
equipment for our corporate office facilities, software, and our Web site
development costs.
We intend to use approximately 23% of the net proceeds to repay an aggregate
principal amount of $1,250,000 of the promissory notes, due April 15, 2000, plus
all accrued interest at 13% yearly, as well as $412,000 of accrued expenses and
bank overdraft. These accrued expenses primarily include consulting fees that
have been deferred as well as state sales tax liabilities that have accrued in
Albuquerque during the last three years of operations and professional fees
incurred in our public offering. The net proceeds we received from the sale of
the promissory notes was primarily used for current operating expenses, expenses
of our public offering, and short-term working capital.
The remaining net proceeds, or approximately 14.7% of the net proceeds, will
be utilized as working capital for general corporate purposes. These purposes
include salaries, additional personnel, expansion costs of our operations,
support and management systems, as well as capital expenses for computers and
related equipment.
The proposed allocation of the net proceeds represents our management's best
estimate of the allocation of the net proceeds of the offering, based upon the
current status of our operations, our current plans and current economic
conditions. Our management may reallocate the net proceeds among the categories
listed above. We also may, when the opportunity arises, acquire or invest in
complementary businesses, products or technologies. However, we have no present
understandings, commitments or agreements with respect to any acquisition or
investment. Any net proceeds received from the sale of the underwriter's
over-allotment option will be allocated to working capital and general corporate
purposes.
Pending application of the net proceeds in the manner described above, we
intend to invest the net proceeds in short-term, interest bearing investment
grade securities.
DIVIDEND POLICY
We have never declared or paid any cash or stock dividends on our capital
stock. So long as the 13% promissory notes are outstanding, we are prohibited
from declaring any dividends on our capital stock. We intend to reinvest
earnings, if any, to fund the development and expansion of our business and, as
a result, we do not anticipate paying cash dividends on our common stock in the
foreseeable future. The declaration of dividends will be at the discretion of
our board of directors and will depend upon our earnings, capital requirements,
financial position, general economic conditions, and other pertinent factors.
12
<PAGE>
CAPITALIZATION
The following table sets forth our:
- actual capitalization as of September 30, 1999;
- our pro forma capitalization as of September 30, 1999 giving effect to;
- the issuance of $150,000 principal amount of promissory notes bearing
interest at the rate of 13%, due December 1, 2000 and the accrual of
$84,402 in financing costs from the transfer of 9,378 shares of common
stock in conjunction with the issuance of the promissory notes.
- pro forma as adjusted capitalization giving effect to:
- the sale of the 500,000 units offered by this prospectus at an assumed
offering price of $18.10 per unit, after deducting underwriting
commissions and estimated offering expenses,
- the payment of the promissory notes in the aggregate principal amount of
$1,250,000 and accrued interest at 13%,
- the repayment of $412,000 of accrued expenses, including consulting fees
that have been deferred as well as state sales tax liabilities that have
accrued in Albuquerque during the last three years of operations, bank
overdraft, and
- the application of the estimated net proceeds from this offering.
The following table should be read in conjunction with our consolidated
financial statements, related notes and other financial information included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ---------- -----------
<S> <C> <C> <C>
Short term debt, current portion of long term
liabilities and current related party obligations... $1,658,754 $1,658,754 $ 408,754
=========== ========== ===========
Long term debt........................................ $ 449,997 $ 599,997 $ 599,997
=========== ========== ===========
Stockholders' (deficit) equity:
Preferred stock, $.001 par value; 10,000,000
authorized, no shares issued...................... $ 0 $ 0 $ 0
----------- ---------- -----------
Common stock, $.001 par value; 100,000,000 shares
authorized; 2,329,558 issued and outstanding,
actual, 2,329,558 issued and outstanding, pro
forma; 3,329,558 issued and outstanding, as
adjusted.......................................... 2,330 2,330 3,330
Additional paid in capital.......................... 867,443 951,845 8,424,345
Accumulated deficit................................. (1,636,151) (1,636,151) (2,066,732)
----------- ---------- -----------
Total stockholders' (deficit) equity.............. (766,378) (681,976) 6,360,943
----------- ---------- -----------
Total capitalization.............................. $1,342,372 $1,576,775 $ 7,369,694
=========== ========== ===========
</TABLE>
- The preceding table does not include the exercise of:
- the underwriter's over-allotment option;
- the redeemable common stock purchase warrants;
- 350,000 common stock purchase warrants issued to the note holders;
- 50,000 representative's warrants; and
- 458,332 outstanding options.
13
<PAGE>
DILUTION
As of September 30, 1999, our pro forma net tangible book value, or deficit,
was $(1,485,458), or approximately $(.64) per share of common stock. Pro forma
net tangible book value, or deficit, per share represents the amount of our
total tangible assets less total liabilities divided by the number of shares of
common stock.
After giving effect to the sale of the 500,000 units offered by this
prospectus and after deducting the underwriting discount and estimated offering
expenses, net tangible book value at September 30, 1999, would have been
$6,151,541, or approximately $1.85 per share of our common stock. This
represents an immediate increase in net tangible book value of $2.49 per share
of common stock to our existing stockholders and an immediate dilution in net
tangible book value of $7.15 per share of common stock, or approximately 79.5%,
to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $9.00
Pro forma net tangible book value(deficit) prior to the
offering.................................................. $(.64)
Increase in net tangible book value per share attributable
to this offering.......................................... 2.49
-----
Pro forma, as adjusted, net tangible book value per share
after the offering........................................ 1.85
-----
Dilution of net tangible book value per share to new
investors................................................. $7.15
=====
</TABLE>
If the over-allotment is exercised in full, our pro forma as adjusted net
tangible book value at September 30, 1999 would have been $7,332,566, or $2.11
per share of common stock. This represents an immediate increase in net tangible
book value of $2.74 per share of common stock to existing stockholders and an
immediate dilution in net tangible book value of $6.89 per share of common
stock, or approximately 76.6% to new investors.
The following table summarizes, as of September 30, 1999, on a pro forma
basis, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing stockholders
and investors in this offering, and after giving effect to the sale of the
500,000 units offered by this prospectus, assuming an initial offering price of
$18.10 per unit. The calculations are based upon total consideration given by
new investors and existing stockholders before any deduction of underwriting
discounts, offering expenses payable by us, and does not include the purchase of
or any exercise of the redeemable common stock purchase warrants offered by this
prospectus.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 2,329,558 70% $ 538,067 5.61% $ .23
New investors........ 1,000,000 30% 9,050,000 94.39% $9.05
--------- ---- ---------- -------
Total............ 3,329,558 100% $9,588,067 100%
========= ==== ========== =======
</TABLE>
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our audited financial statements for the years ended
September 30, 1998 and 1999 included elsewhere in the prospectus and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The issuance of our common stock for the acquisition of True Vision
Albuquerque is accounted for as a reverse acquisition with a public shell. The
table reflects our statement of operations data as if the April 15, 1998
issuance of 1,944,444 shares of common stock for True Vision Albuquerque
occurred on October 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
---------------------------
1998 1999
---------- ----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $1,460,526 3,377,478
Cost of revenues............................................ 894,134 2,294,216
---------- ----------
Gross profit................................................ 566,392 1,083,262
Operating costs and expenses:
Sales consulting, and marketing........................... 47,048 401,088
General and administrative................................ 565,070 894,699
Depreciation.............................................. 137,883 148,055
---------- ----------
Total operating costs and expenses...................... 750,001 1,443,842
---------- ----------
(Loss) income from operations............................... (183,609) (360,580)
Interest expense............................................ (117,955) (118,330)
Expenses relating to debt financing and agreements to retire
stock options in preparation of proposed public
offering.................................................. 0 (363,783)
---------- ----------
Net loss.................................................... $ (301,564) $ (842,693)
========== ==========
Basic and diluted net loss per share........................ $ (.14) $ (.37)
========== ==========
Shares used in computing basic and diluted net loss per
share..................................................... 2,127,820 2,264,187
========== ==========
</TABLE>
- The following table includes a summary of our balance sheet at
September 30, 1999;
- on an actual basis;
- on a pro forma basis giving effect to the issuance during November 1999
of:
- $150,000 principal amount promissory notes bearing interest at 13%
yearly, due December 1, 2000 and the accrual of $84,402 in financing
costs from the transfer of 9,378 shares of common stock in conjunction
with the issuance of the promissory notes.
- as adjusted to give affect to, the issuance of:
- 1,000,000 shares of common stock and warrants for the purchase of 500,000
shares offered by us at an offering price of $9.00 per share and $.10 per
warrant,
- the repayment of the $1,250,000 principal amount promissory notes and
accrued interest, issued April through September 1999, bearing interest
at 13%, and
- the repayment of $412,000 of accrued expenses and bank overdraft in
connection with accrued consulting fees and a state sales tax liability
of our subsidiary accrued during the past three years, from the proceeds
of this offering.
15
<PAGE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1999
------------------------------------ YEAR ENDED
AS SEPTEMBER 30,
ACTUAL PRO FORMA ADJUSTED 1998
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Cash and cash equivalents................. $ 1,495 $ 151,495 $6,126,494 $ 2,176
Total working capital (deficit)........... (1,160,025) (925,623) 6,117,296 (560,886)
Total assets.............................. 1,957,326 2,191,728 7,572,647 480,325
Short term debt, current portion of long
term liabilities and current related
party obligations....................... 1,658,754 1,658,754 408,754 376,065
Long term debt............................ 449,997 599,997 599,997 413,312
Total liabilities......................... 2,723,704 2,873,704 1,211,704 1,066,366
Total shareholders' (deficit) equity...... $ (766,378) $(681,976) $6,360,943 $ (586,041)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND ACCOMPANYING NOTES AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a medical services company that focuses on delivering laser vision
correction surgical procedures and image enhancement procedures to consumers.
We were incorporated on January 19, 1988 as Topform, Inc. In April 1998
after acquiring 84% of the stock of TrueVision Laser Centers of Albuquerque,
Inc., hereinafter referred to as TVA, TVA's management became our management.
TrueVision Laser Centers of Albuquerque, Inc. was actively involved in the laser
vision correction industry since 1996. In October 1995 and in March 1996, the
United States Food and Drug Administration approved the use of excimer lasers
manufactured by Summit Technology, Inc. and VISX, Inc., to treat low to moderate
nearsightedness. In June, 1996, TrueVision Laser Center of Albuquerque, Inc.
opened the first excimer laser center in Albuquerque, New Mexico. In April of
1998, we acquired a controlling interest in TrueVision Laser Centers of
Albuquerque, Inc., which had been providing laser vision correction services
using the VISX excimer laser.
We perform laser vision correction surgery and other image enhancement
procedures through affiliated and employed physicians in our Albuquerque, New
Mexico and we began providing these same services in our Las Vegas, Nevada
centers in October 1999. We provide our doctors and optometrists with
state-of-the-art equipment and facilities as well as support services necessary
to perform vision correction and image enhancement procedures. To date, the
supply of our excimer lasers and related equipment has came from VISX and
Autonomous Lasers, Inc. through purchase and lease agreements that we have
entered into with each manufacturer. In the event that we would not be able to
obtain additional excimer lasers and related equipment from either VISX or
Autonomous, we believe that two alternative sources of supply will become
available before the end of 1999 when the FDA approves these manufacturers.
The following tables set forth, for the periods indicated, operating
information expressed as a percentage of revenue. The results of operations data
for the year ended September 30, 1999 are not necessarily indicative of the
results to be expected for future periods.
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------- -------------
<S> <C> <C>
Net revenues................................................ 100.0% 100.0%
Cost of revenues............................................ 61.2% 67.9%
Gross margin................................................ 38.8% 32.1%
Sales, consulting and marketing............................. 3.2% 11.9%
General and administrative expense.......................... 38.7% 26.5%
Depreciation expense........................................ 9.4% 4.4%
Total operating expenses.................................... 51.4% 42.7%
Income (loss) from Operations............................... (12.6%) (10.7%)
Interest income or Expense.................................. (8.1%) (3.5%)
Expenses relating to debt financing and agreements to retire
options in preparation of proposed public offering........ 0.0% (10.8%)
Net loss.................................................... (20.6%) (25.0%)
</TABLE>
17
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED SEPTEMBER 30, 1999 TO THE YEAR ENDED SEPTEMBER 30,
1998
REVENUES
Revenues increased to $3,377,478 for the year ended September 30, 1999 from
$1,460,526 for the year ended September 30, 1998. This increase of $1,916,952,
or 131% is primarily a result of increases in volume of laser vision correction
procedures performed at our Albuquerque facility which was offset by a decline
in average revenue per procedure of approximately $200.
COST OF REVENUES
Costs of revenues consist primarily of royalty fees, advertising and
marketing expenditures, rent, equipment maintenance, and professional fees. At
the present time, we pay $250 for each surgical procedure as a royalty fee. Cost
of revenues increased to $2,294,216 or 67.9% of revenues for the year ended
September 30, 1999 from $894,134, or 61.2% of revenues for the year ended
September 30, 1998. The increase of $1,400,082 or 157% was due to a decline in
average revenue per procedure as a result of more aggressive discounts offered
in connection with our expanded marketing efforts.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of salaries, wages and
related costs for general corporate functions, including finance, accounting,
facilities, legal and other fees for professional services. General and
administrative expenses increased to $894,699 for the year ended September 30,
1999 from $565,070 for the year ended September 30, 1998. As a percentage of
revenue, general and administrative costs decreased from 38.7% to 26.5%. This
was due to the fact that our operations began in April 1998 after the effective
date of our reorganization.
SALES, CONSULTING AND MARKETING
Sales, consulting and marketing expenses increased to $401,088 for the year
ended September 30, 1999 from $47,048 for the year ended September 30, 1998. As
a percentage of revenues, sales, consulting and marketing expenses increased
from 3.2% to 11.9% for the same periods. This increase of $354,040 is a result
of our commencement of our marketing efforts including the development of our
seminar series and media advertising events.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased to $148,055 for the year ended
September 30, 1999 from $137,883 for the year ended September 30, 1998. This
increase of $10,172, or 7.4% was due to surgical and medical equipment
purchases.
INTEREST EXPENSE
Interest expense increased from $117,955 to $118,330 for the year ended
September 30, 1998 and 1999, respectively. This increase of $375 was a result of
our increased borrowings during the later period.
EXPENSES RELATING TO DEBT FINANCING AND AGREEMENTS TO RETIRE STOCK OPTIONS
Expenses relating to debt financing and agreements to retire stock options
increased to $363,783 for the year ended September 30, 1999 due to the private
placement of our debt offering during April through September 1999 and
agreements entered into in preparation of our anticipated public offering.
18
<PAGE>
DEPOSITS AND PREPAID EXPENSES
Deposits and prepaid expenses were $340,978 for the year ended
September 30, 1999. This includes a $135,249 non-refundable deposit for the
purpose of a new facility for the Albuquerque center. This purchase is planned
for completion in January 2000, with renovations planned for an October 2000
occupancy date. An additional $43,633 of deposits relate to trade shows and
prepaid advertising costs which will be expensed in fiscal 2000.
Additionally, the Company has deposited $112,290 (non-refundable) for the
purchase of new lasers and $43,625 (non-refundable) for an operating lease of
laser equipment.
NET INCOME/LOSS
Our net loss for the year ended September 30, 1999 increased $541,129 from
$(301,564) for the year ended September 30, 1998 to $(842,693) for the same
period in 1999. The increase in our net loss is due to higher general and
administrative expenses, an increase in our costs of revenues, increased
marketing efforts for our Albuquerque center, and debt financing and expenses
for retiring stock options.
YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1997
REVENUES
Revenues increased to $1,460,526 for the fiscal year ended September 30,
1998 from $770,704 for the fiscal year ended September 30, 1997. This increase
in revenue of 89.5% is a result of an increase in the number of laser vision
correction procedures performed at our Albuquerque center, which was offset by a
decline in the average revenue per procedure.
COST OF REVENUES
Cost of revenues increased to $894,134 for the fiscal year ended
September 30, 1998 from $453,279 for the fiscal year ended September 30, 1997.
As a percentage of revenues, cost of revenues increased from 58.8% to 61.2% for
the same periods. This increase of $440,855 or 97.3% is primarily due to new
agreements negotiated with our primary physician provider group along with
increased discounts experienced in connection with expanded marketing efforts
during the latter part of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased to $565,070 for the fiscal
year ended September 30, 1998 from $274,641 for the fiscal year ended
September 30, 1997. As a percentage of revenue, general and administrative
expenses increased from 35.6% to 38.7%. This increase, is a result of increased
overhead expenses, the recognition of costs for services contributed by our
executive officers, and the recognition of costs associated with grants of
options and shares for services rendered by consultants.
SALES, CONSULTING AND MARKETING
Sales, consulting and marketing expenses declined to $47,048 for the year
ended September 30, 1998 from $99,787 for the fiscal year ended September 30,
1997. This decrease of $52,739, or 52.8% is due to a significant decline in
marketing expenses during the first six months of the fiscal year ended
September 1998.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $137,883 for the fiscal
year ended September 30, 1998 from $127,678 for the fiscal year ended
September 30, 1997. This increase of $10,205, or
19
<PAGE>
8.0% is a result of new equipment purchased in connection with expanded
marketing efforts during the second half of fiscal year 1998.
INTEREST EXPENSE
Interest expense increased to $117,955 for the year ended September 30, 1998
from $66,585 for the fiscal year ended September 30, 1997. This increase of
$51,370, or 77.1% is primarily a result of increased borrowings generated from
the financing costs of our excimer laser and ancillary equipment in our
Albuquerque center.
NET INCOME/LOSS
Our net loss for the fiscal year ended September 30, 1998 increased $12,685,
or 4.4% from $(288,879) for the fiscal year ended September 30, 1997 to
$(301,564) for the same period in 1998. This increase in our net loss is due to
an increase in general and administrative expenses incurred in the fiscal year
ended September 30, 1998 as compared to the fiscal year ended September 30,
1997, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through revenues and
capital recently raised in a private placement of 13% promissory notes and
common stock purchase warrants. As of September 30, 1999, we had a net bank
overdraft of $114,864. Cash flows used for operating activities was $478,171 for
the year ended September 30, 1999. Net cash used for investing activities was
$298,906 during the same period including $231,418 used in the purchase of
equipment as a result of our expanded operations. Net cash flows provided by
financing activities of $776,396 consist primarily of borrowings on promissory
notes payable and an increase in bank overdraft.
From April through September 1999, we completed a private placement in which
we sold $1,250,000 worth of promissory notes bearing interest at 13%, 350,000
common stock purchase warrants, each exercisable to purchase one share of our
common stock at an exercise price of $8.40 per share, and 34,384 shares of our
common stock. The promissory notes are due April 15, 2000 and we expect to pay
all principal and accrued interest on the promissory notes out of the net
proceeds of this offering. $700,000 of the aggregate amount of the private
placement was sold to subscribers that received 350,000 common stock purchase
warrants. $550,000 of the aggregate amount of the private placement was sold to
subscribers that received no warrants, but received a total of 34,384 shares of
our common stock. In a private placement to TVLC Finance, Inc. in November 1999,
we sold an additional promissory note due March 1, 2001 in the principle amount
of $150,000. This note accrues interest at 13% yearly until the note is due. As
a part of this private placement, one of our shareholders, as an accommodation
to us, agreed to transfer 9,378 shares of our common stock to two purchasers of
promissory notes issued by TVLC Finance, Inc. for the same principal amount.
Costs incurred in connection with the private placement include finders'
fees and legal and accounting expenses. Net proceeds of our private placement
were used primarily for payment of the costs and expenses associated with our
initial public offering and to pay development costs for our newest laser center
in Las Vegas, Nevada. Before the date of this prospectus, we were in default in
the payment of consulting fees due to our consultants, and our subsidiary,
TrueVision Laser of Albuquerque, Inc. was delinquent in the payment of sales
taxes covering the last three years of operations. We have paid a portion of the
overdue consulting fees from the proceeds of our private placement and have
allocated $412,000 from the net proceeds of our public offering to pay the
remaining consulting fees, the sales tax liability owed by our subsidiary and
bank overdraft. Short term bank overdrafts occurred due to the timing of our
receipts and disbursements.
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Based on our current operating plan, we anticipate that the net proceeds of
this offering, together with the cash flow from operations, will be sufficient
to fund our anticipated working capital and capital expenditures for the
12 months following completion of this offering. We intend to rely on these same
sources of capital to meet our facilities and equipment lease obligations for
the 12 months following the completion of the offering. We believe cash flow
from operations thereafter will be sufficient to meet our future expenditures
and that our current lease obligations will not have a material effect on our
costs of operations following our offering and during the terms of the
respective leases. Our accountants have included an emphasis of matter in their
report and a note to the consolidated financial statements that our consolidated
financial statements have been prepared assuming we will continue as a going
concern. If appropriate financing is not obtained by us through our public
offering, we intend to modify our operations accordingly. Our capital
requirements have grown since our inception and we expect our capital
requirements to continue to grow.
We currently offer a program for patient financing through various lenders.
We intend to expand that program over the next 12 months and may fund some or
all of this program ourselves. We believe we could find a third party lender,
either directly or through a finance company affiliated with our management,
TVLC Finance, Inc.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and software
products will need to accept four digit entries to distinguish 21(st)century
dates from 20(th) century dates. As a result, computer systems and/or software
used by many companies and governmental agencies may need to be upgraded to
comply with Year 2000 requirements or risk system failure or miscalculations
causing disruptions of normal business activities. Our services, operations,
customers, suppliers and service providers all rely on information technology
systems, using hardware and software, to function properly. This includes
readily apparent systems including those controlling the VISX excimer lasers as
well as less obvious systems, including those required to provide electricity to
our facilities.
SUPPLIERS: We believe that goods and services we routinely use in delivering
our services are readily available on comparable terms and conditions. We have
been surveying our suppliers about their Year 2000 compliance. VISX has advised
us that its lasers will remain fully functional from a medical standpoint
through the Year 2000 and beyond. However, VISX has determined that the laser
systems do not properly print or store patient report dates and procedures
performed in the Year 2000 and beyond. We have been informed that VISX believes
they are Year 2000 compliant as of the date of this prospectus. If our other
suppliers do not reply to our Year 2000 inquiries or cannot provide Year 2000
compliant products, we may need to locate alternative sources for goods or
services.
OPERATIONS: We have been gathering information from our vendors and making
an assessment of Year 2000 compliance for each of the major elements of our
internal information systems. Based upon the representations of these vendors,
we believe:
- Our operating systems, which include Microsoft Windows NT, Microsoft
Windows 98 and Microsoft Windows 95, are all Year 2000 compliant in their
latest versions, which we currently have installed.
- Our key applications, which include Compu-Link ophthalmic management
software for Windows, and Microsoft Office 97, have been updated to a
level of revision that is Year 2000 compliant. Our Toshiba DK280 phone
system is also Year 2000 compliant. Our computer hardware, which is all
personal computer based, is Year 2000 compliant. We have received
representations from the owners and managers of our Albuquerque, New
Mexico facility that such facility is Year 2000 compliant with regard to
building security, heating and lighting controls.
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COST TO ADDRESS YEAR 2000 ISSUES: We have not incurred significant costs to
date complying with Year 2000 requirements and we do not believe that we will
incur significant costs for these purposes in the foreseeable future. However,
we may spend more money than we have estimated, and this could have a material
adverse impact on our results of operations. At this stage in our assessment
process, we do not believe that the Year 2000 issue will materially impact our
financial position, results of operations or cash flows in future periods.
However, there can be no assurance that operating problems or expenses related
to the Year 2000 issue will not arise with our computer systems and software or
that our customers or suppliers will be able to resolve their Year 2000 issues
in a timely manner.
CONTINGENCY PLANS: Our failure to identify and correct a Year 2000 problem
could result in an interruption of normal business activities and operations. A
worst case Year 2000 scenario would be the failure of the VISX laser to properly
store patient report dates for procedures performed in the Year 2000 and beyond
and for that situation to not be resolved in a timely manner. We are prepared to
manually record such information and to manually prepare any necessary reports.
If our internal review and external surveys identifies any other problems that
are reasonably likely to occur, we will develop additional contingency plans to
minimize any impact on our business. However, despite our best efforts, we may
not anticipate all problems that may ultimately arise.
RECENTLY ISSUED ACCOUNTING STANDARDS
We believe that recently issued financial standards will not have a
significant impact on our results of operations, financial position, or cash
flows.
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BUSINESS
OVERVIEW
TrueVision International, Inc., through our operating subsidiaries,
TrueVision Laser Center of Albuquerque, Inc. and TrueVision of Nevada, Inc.,
provide laser vision correction and image enhancement procedures to individuals,
at our TrueVision centers. Our doctors, and those with which we are affiliated,
provide these services using state-of-the-art excimer laser technology. We also
offer patients ancillary image enhancement procedures and other vision
correction devices on a limited basis, including contact lenses. We acquired our
first TrueVision center in Albuquerque, New Mexico in April 1998 and opened our
second center in Las Vegas, Nevada in July 1999, where we began offering laser
vision correction procedures in October 1999.
CORPORATE BACKGROUND
We were incorporated on January 19, 1988 as Topform, Inc., in Delaware. On
March 16, 1999 we changed our name to TrueVision International, Inc. In
April 1998, through a stock purchase and reorganization, we acquired a
controlling interest in TrueVision Laser Centers of Albuquerque, Inc., which had
been providing laser vision correction services using the VISX, Inc. excimer
laser since June 1996. In July 1999, we opened our second center in Las Vegas,
Nevada, through our wholly-owned subsidiary, TrueVision of Nevada, Inc.
OUR STRATEGY
Our goal is to be a leading provider of laser vision correction and other
cosmetic procedures. In order to achieve this goal, we will implement the
following strategies:
- Expand our geographic presence by opening additional TrueVision centers;
- Equip our centers with state-of-the-art medical technologies;
- Recruit, employ and affiliate talented doctors and capitalize on these
physicians' relationships within their local communities;
- Increase our marketing and sales efforts to further penetrate our target
markets; and
- Expand our services to include ancillary cosmetic procedures and other
vision correction products that permit cross-marketing of our core
services.
OUR INDUSTRY
The laser vision correction industry has experienced dramatic growth during
the past two years. The total number of laser correction procedures performed in
the United States is forecasted to grow 450% from 200,000 in 1997 to 900,000 in
1999. Total sales for the laser vision correction industry have been over
$1.0 billion since approval of the excimer laser in the U.S. in October 1995.
However, despite the growth of this industry, the estimated number of vision
correction clients in 1998 represented less than 0.28% of the 150 million people
with refractive vision conditions in the U.S. We believe these figures
illustrate an untapped market for which we can offer our services.
COMMON REFRACTIVE VISION DISORDERS
Refractive vision disorders typically result from improper curvature of the
cornea relative to the size and shape of the eye. If the curvature of the cornea
is not precisely correct, it cannot properly focus the light passing through it
onto the retina. The result is a blurred image. The three most common refractive
vision disorders are:
- Myopia, also known as nearsightedness--images focus in front of the
retina, resulting in a blurred perception of distant objects;
- Hyperopia, also known as farsightedness--images focus behind the retina,
resulting in a blurred perception of near objects;
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- Astigmatism--images do not focus on any point due to the varying curvature
of the eye along different axes.
CORRECTIVE LASER VISION PROCEDURES
Currently, eyeglasses and contact lenses are the most common and traditional
means of correcting common vision disorders. Vision correction is achieved
through the use of corrective lenses over the eye. Laser vision correction
procedures are designed to reshape the outer layers of the cornea to correct
refractive vision disorders. Changing the curvature of the cornea with an
excimer laser, eliminates or reduces the need for corrective lenses. We use the
excimer laser in our centers which is approved to treat nearsightedness within
parameters of the optical power of the lens of the human eye, and is approved to
treat farsightedness within other parameters that measure the optical power of
the lens of the eye.
There are currently two outpatient procedures that we offer at our
TrueVision centers that use the excimer laser to correct common refractive
vision disorders. One is laser in-situ keratomileusis, commonly known as LASIK
and the other is photorefractive keratectomy, commonly known as PRK. Prior to
either LASIK or PRK, an assessment is made of the correction required to program
the excimer laser. Using a specially developed algorithm, the software of the
excimer laser then calculates the optimal number of pulses needed to achieve the
intended correction. The patient reclines in a chair, eyes focused on a fixed
target, while the doctor positions the patient's cornea for the procedure. An
eyelid holder is inserted to prevent blinking and topical anesthetic eye drops
are applied. The excimer laser emits energy in a series of pulses, with each
pulse lasting only several billionths of a second. High-energy ultraviolet light
produced by the excimer laser creates a non-thermal process known as ablation,
which removes tissue and reshapes the cornea without damaging adjacent tissue.
The amount of tissue removed depends upon the amount of corneal reshaping
required to correct the vision disorder.
The typical procedure takes 15 to 30 minutes from set-up to completion,
while the excimer laser is general used for less than 40 seconds. The front
surface of the eye is flatter when corrected for nearsightedness and steeper
when corrected for farsightedness. In effect, the change made in the middle or
periphery of the cornea is translated to the front surface of cornea and results
in vision correction. Following the procedure, a series of patient follow-up
visits are scheduled in our centers, with an optometrist or doctor, to monitor
the corneal healing process, to verify that there are no complications and to
test the amount of correction achieved by the laser vision correction procedure.
LASIK. LASIK was approved for commercial use in the U.S. in 1996.
Currently, the majority of laser vision correction procedures are LASIK, since
it is believed that LASIK generally allows for:
- More precise correction than PRK for higher levels of nearsightedness and
farsightedness, with or without astigmatism;
- Greater predictability of results;
- Shorter patient recovery times and less discomfort; and
- Decreased possibility of corneal regression.
In the LASIK procedure, a small flap of the cornea is raised by use of a
microkeratome, a tiny surgical blade with rapid oscillations. The laser is then
applied to the surface of the cornea under the flap and the flap is put back in
place. Generally, no bandage contact lens is required and the patient
experiences minimal discomfort. Generally, LASIK has the advantage of a quicker
recovery as compared to PRK. With LASIK, our experience has been that most
patients see well enough to drive a car the next day and heal completely within
one to three months. LASIK generally allows a doctor to treat both eyes in one
visit.
PRK. In PRK procedures, the doctor removes the thin layer of cells covering
the outer surface of the cornea, by applying the excimer laser pulses directly
to the surface of the cornea. Following the
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PRK procedure, a contact lens bandage is placed on the eye to protect it. The
patient typically experiences discomfort for up to 24 hours and blurred vision
for up to 72 hours until the epithelium, the outer surface of the cornea, heals.
To alleviate discomfort and promote corneal healing, a doctor will typically
prescribe topical pharmaceuticals. Although a patient usually experiences
improvement in clarity of vision within a few days following the procedure, it
usually takes one to three months for the full benefit of the PRK procedure to
be realized. Patients usually have one eye treated per visit.
OUR LASER VISION CORRECTION CENTERS
We operate one laser vision correction center in New Mexico and we opened a
second center in Las Vegas, Nevada in July 1999. We began offering laser vision
correction procedures in Las Vegas, in October 1999. We own 84% of the
TrueVision center in Albuquerque, New Mexico and operate it through affiliated
and employed doctors. We own 100% of the TrueVision center in Las Vegas, Nevada
and intend to operate it in essentially the same manner as our first center. Our
centers are supported by our fully credentialed doctors and optometrists who
perform pre-procedure evaluations, laser vision correction procedures, and
post-procedure follow-ups. We recently began offering medical services
considered to be "cosmetic" in nature, such as a skin renewal procedure that
removes fine lines and facial blemishes, that we believe we can effectively
cross-market to our vision correction patients.
We strive to meet the needs of our patients as well as our doctors and
optometrists. We recruit our doctors in several ways. Generally, we first
identify and meet with doctors within the community to demonstrate our technical
and marketing capabilities. We emphasize advertising programs, see referrals
from other doctors and specifically target local ophthalmologists in the
community. We prefer to contract with doctors to perform procedures at our
facilities and who can assist in the development of new patients for their
practice through our marketing programs. We provide our doctors and optometrists
with:
- STATE-OF-THE-ART EQUIPMENT AND FACILITIES. We provide our doctors with
the facilities, equipment, support services and state-of-the-art laser
technologies necessary to perform vision correction procedures. Our
doctors focus on treating patients without the burden of meeting the
financial, management, administrative, maintenance and regulatory
requirements associated with establishing and operating a laser vision
correction and image enhancement center.
Our two centers have a laser procedure room, an image enhancement treatment
room, a private examination room and a patient waiting area. In our
Albuquerque center, we are equipped with a VISX Star laser. We also have
corneal topography instruments, ophthalmic examination equipment, a
computer system, and standard office equipment. When fully operational, our
Las Vegas, Nevada center will have an autonmous laser and the same
ancillary medical equipment as the Albuquerque Center. We believe the
Autonomous laser has several enhancements, including an eye tracking
feature, which is useful to the laser technician and our doctors;
- A TRAINED TECHNICIAN AND SUPPORT STAFF. Staffing includes technicians who
assist the doctors during the laser vision correction and image
enhancement procedure. They also provide support services such as
sterilization of surgical instruments. The excimer laser manufacturer and
the microkeratome supplier, as well as the image enhancement equipment
manufacturers, certify our technicians. The center also has a medical
support director who supports our doctors and optometrists, and assists in
developing laser vision correction programs;
- OPPORTUNITIES FOR INCREMENTAL INCOME. The laser vision correction
procedure for each eye yields a procedure fee for the doctor. Doctors and
optometrists who perform pre-procedure evaluations or post-procedure
follow-ups also receive a professional fee for such services. Those
procedure and professional fees represent an incremental source of income
not subject to managed care or government reimbursement.
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We provide our patients with:
- ACCESS TO HIGHLY CREDENTIALED DOCTORS AND OPTOMETRISTS. Our doctors have
completed extensive FDA-mandated training and have met our qualification
criteria. Our centers are designed to create a patient friendly
environment and reduce any anxiety associated with laser vision correction
and image enhancement procedures. We believe our centers have an
aesthetically pleasing and comfortable waiting area and our center staff
is focused on addressing the needs of each patient;
- EDUCATIONAL CONSULTATIONS AND MATERIALS. The education process begins
with our initial contact with the patient potential patients receive a
free consultation focused on educating the patient on vision correction
procedures, how the procedure corrects a specific refractive vision
disorder and the results the patient should expect after the procedure.
Patients are given written materials and can view a video of the procedure
or witness an actual procedure during their initial visit. Similar
information is provided for image enhancement procedures. We believe that
an educated patient has realistic expectations and should be more
satisfied with procedure results;
- REGULARLY SCHEDULED POST-PROCEDURE FOLLOW-UPS. We strive towards 100%
patient satisfaction. We schedule post-procedure follow-ups with patients
to monitor procedure results. In those instances when the desired
correction is not achieved, the patient receives a follow up procedure at
no cost to the patient;
- AFFORDABLE FINANCING ALTERNATIVES. Laser vision correction and image
enhancement procedures are elective and generally not reimbursable by
third-party payers. We offer patients several financing alternatives and
in some circumstances promotional discounts. We have multiple payment
plans offered by an unaffiliated finance company. We also provide
information regarding installment plans, insurance coverage, home equity
loans and payment through employer-flexible benefit plans. In the majority
of the procedures financed, we bear no credit risk.
OUR INTELLECTUAL PROPERTY RIGHTS
We purchase or lease our excimer lasers and related laser equipment from
manufacturers of the excimer laser. Our ability to use the excimer laser to
perform laser vision correction procedures in our centers is derived from a
license agreement, that has been filed as an exhibit to our registration
statement, that governs the intellectual property rights covering the excimer
laser technology. We are able to license from the manufacturer all necessary
intellectual property rights associated with the laser and related equipment so
long as we are in conformity with the terms of each license agreement and so
long as we pay the royalty fee included as a part of each license agreement.
Patent rights covering the excimer laser equipment we use in our laser vision
correction procedures have been granted to the manufacturers of our excimer
lasers.
OUR SALES AND MARKETING STRATEGY
We are developing and implementing direct marketing campaigns. We believe
many of our competitors focus all of their resources on building affiliations
with eye care providers, and rely on doctor relationships to produce their
clients. Although our relationships with doctors is a key component of our
overall strategy, we focus much of our resources directly on the consumer and
attempt to create our own client relationships. Our "integrated marketing
protocol," a consumer oriented marketing program for our services, was developed
to focus our TrueVision staff on existing and prospective clients.
The heart of our marketing efforts is a seminar series. We hold seminars at
our centers. A television camera, mounted in the laser gives the audience a view
of exactly what the surgeon sees during the laser correction procedure.
Afterwards, both the doctor and the client are invited into the seminar to share
the experience and answer questions. We believe this aspect of our marketing
effort has been successful and as a result, in the Albuquerque center we have
scheduled over 123 seminars for 1999.
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We also attempt to refocus consumer demand. We seek out opportunities to
provide ancillary services and products targeted to drive our core business. We
offer related products, including sunglasses and contact lenses at our centers,
primarily as an accommodation to our customers. While meeting existing needs of
the consumers, we introduce our ancillary products in each of these locations.
For example, a contact lens client generally receives information on why laser
vision correction is a better option for most people. Further, we have developed
and are employing dedicated sales teams. Our marketing efforts include
developing and implementing programs that are focused on recruiting individual
clients as well as corporate accounts for our centers. Much of our current
efforts in expanding the number of our laser vision correction procedures
include local radio, television, and newspaper print advertisements explaining
the laser vision correction procedure to a prospective patient, and the costs
and benefits associated with each of our surgical procedures.
Our laser vision correction surgical procedures currently cost approximately
$3,925 for both eyes. Our ancillary medical services, such as the procedure we
use to remove fine lines and facial blemishes, is provided by us in a series of
procedures generally consisting of six, 20 minute visits, are currently offered
by us at an average package cost of between $600 and $900. TrueVision-employed
doctors deliver our services and are paid on the basis of the specified
salaries, with no additional fees. TrueVision-affiliated doctors are paid under
various facility fee arrangements, ranging from $700 to $800 for each eye.
COMPETITION
The market for laser vision correction and image enhancement surgery is
subject to intense competition. We compete with other entities, including
refractive laser center companies, hospitals, individual doctors, other surgery
and laser centers and manufacturers of laser equipment in offering such services
and access to related equipment. In addition, the laser vision correction and
other image enhancement surgical procedures provided at our centers compete with
more traditional non-surgical treatments for refractive conditions including
eyeglasses and contact lenses.
Eye care professionals interested in deploying excimer laser technology have
formed commercial enterprises in order to support the capital requirements for
acquiring the lasers and other necessary equipment. The industry today remains
highly fragmented, with most procedures performed by independent physician
groups. There are several laser vision correction companies developing national
operations. In addition, there are several eye care companies that feature
access to laser vision correction and other refractive surgery services as an
increasingly important component of their ophthalmic practice development
activities.
Our laser vision correction and image enhancement centers compete on the
basis of quality of patient care, reputation and price. Our principal corporate
competitors in the market for laser vision correction and other refractive
surgery include:
- TLC The Laser Center, Inc.;
- Laser Vision Centers, Inc.;
- ClearVision Laser Centers, Ltd.;
- LCA-Vision Inc.;
- NovaMed EyeCare, Inc.; and
- ARIS Vision, Inc.
The bases for competition in this market are:
- systems;
- pricing;
- strength of delivery network;
- strength of operational systems;
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- the degree of cost efficiencies and surgeries;
- marketing strength;
- information technology systems;
- managed care expertise;
- patient access; and
- quality assessment programs.
Many of our current and potential competitors have significantly greater
financial and human resources than we currently have, and as a result, we may be
at a competitive disadvantage to these current and potential competitors even
though we believe that we can successfully compete on the basis of our marketing
efforts, quality of patient care, our reputation and the price of our services.
Suppliers of conventional vision correction, which includes eyeglasses and
contact lenses, such as optometric chains, may also compete with us either by
marketing alternatives to laser vision correction or other refractive surgery
procedures or by purchasing excimer lasers and offering refractive surgery to
their customers.
GOVERNMENT REGULATION
As a participant in the health care industry, our operations and the
operations of our affiliated doctors and optometrists are subject to extensive
and increasing regulation by governmental entities at the Federal, state and
local levels. Many of these laws and regulations are subject to varying
interpretations. We believe courts and regulatory authorities have generally
provided little clarification. Moreover, state and local laws and
interpretations vary from jurisdiction to jurisdiction. As a result, we may not
always be able to accurately predict interpretations of applicable law. As a
result, some of our activities, or the activities of our affiliated providers,
could be challenged.
The regulatory environment in which we and our affiliated providers operate,
may change significantly in the future. In response to new or revised laws,
regulations or interpretations, we could be required to:
- revise the structure of our legal arrangements or the structure of our
fees;
- incur substantial legal fees, fines or other costs; or
- curtail our business activities, reducing the potential profit to us of
some of our legal arrangements. Any of these outcomes may have a material
adverse effect on our business, financial condition and results of
operations.
The following is a summary of some of the health care regulatory issues
affecting us, our affiliated eye care providers and our respective operations.
FEDERAL LAW
ANTI-KICKBACK STATUTE. The U.S. Federal anti-kickback statute prohibits the
knowing and willful solicitation, receipt, offer or payment of any direct or
indirect remuneration in return for the referral of patients or the ordering or
purchasing of items or services payable under Medicare, Medicaid or other
federal health care programs. Violations of this statute may result in criminal
penalties, including imprisonment or criminal fines of up to $25,000 per
violation, civil penalties of up to $50,000 per violation, and exclusion from
federal programs including Medicare or Medicaid.
SELF-REFERRAL LAW. Subject to limited exceptions, the Federal self-referral
law, known as the "Stark Law," prohibits physicians and optometrists from
referring their Medicare or Medicaid patients for the provision of "designated
health services" to any entity with which they or their immediate family members
have a financial relationship. "Financial relationships" include both
compensation and ownership relationships. "Designated health services" include
clinical laboratory services, radiology and ultrasound services, durable medical
equipment and supplies, and prosthetics, orthotics and prosthetic
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devices, as well as seven other categories of services. We do not provide
"designated health services." Our affiliated providers, however, do provide
limited categories of designated health services, specifically, ultrasound
services, such as A-scans and B-scans, and prosthetic devices, such as
eyeglasses and contact lenses furnished to patients following cataract surgery.
Violating the Stark Law may result in denial of payment for the designated
health services performed. This may also result in:
- civil fines of up to $15,000 for each service provided in connection with
a prohibited referral,
- a fine of up to $100,000 for participation in a circumvention scheme, and
- exclusion from the Medicare, Medicaid and other Federal health care
programs.
The Stark Law is a strict liability statute. Any referral made where a
financial relationship exists that fails to meet an exception constitutes a
violation of the law. To the extent that our affiliated professional entities
provide designated health services to Medicare and Medicaid beneficiaries, or
make or receive Medicare or Medicaid referrals for such services, the Stark Law
could be implicated.
STATE LAW
ANTI-KICKBACK LAWS. In addition to the Federal anti-kickback law, a number
of states have enacted laws, which prohibit the payment for referrals and other
types of anti-kickback arrangements. These state laws typically apply to all
patients regardless of their source of payment.
SELF-REFERRAL LAWS. In addition to the Federal Stark Law, a number of
states have enacted laws that require disclosure of or prohibit referrals by
health care providers to entities in which the providers have an investment
interest or compensation relationship. In some states, those restrictions apply
regardless of the patient's source of payment.
CORPORATE PRACTICE OF MEDICINE LAWS. A number of states have enacted laws
that prohibit the corporate practice of medicine. Those laws are designed to
prevent interference in the medical decision-making process by anyone who is not
a licensed physician. Many states have similar restrictions in connection with
the practice of optometry. Application of the corporate practice of medicine
prohibition varies from state-to-state. While some states may allow a
corporation to exercise significant management responsibilities over the
day-to-day operation of a physician or optometric practice, other states may
restrict or prohibit various activities.
FEE-SPLITTING LAWS. The laws of some states prohibit providers from
dividing with anyone, other than providers who are part of the same group
practice, any fee, commission, rebate or other form of compensation for any
services not actually and personally rendered. Penalties for violating these
fee-splitting statutes or regulations may include revocation, suspension or
probation of a provider's license, or other disciplinary action. If we expand
into a state with different or more restrictive laws, we may need to amend or
restrict some of our operations in order to ensure compliance with applicable
state laws, rules and regulations.
FACILITY LICENSURE AND CERTIFICATE OF NEED. We may be required to obtain
licenses from the state departments of health in states where we open or acquire
eye surgery and laser centers. Some states require a Certificate of Need, or
CON, prior to the construction or modification of an ambulatory surgery center,
such as our eye surgery and laser centers, or the purchase of medical equipment
in excess of an amount set by the state.
EXCIMER LASER REGULATION
Medical devices, such as the excimer lasers used in our eye surgery and
laser centers, are subject to regulation by the U.S. Food and Drug
Administration. Medical devices may not be marketed for commercial sale in the
U.S. until the FDA grants pre-market approval for the device.
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The FDA has not approved the use of an excimer laser to treat both eyes on
the same day, called a bilateral treatment. The FDA has stated that it considers
the use of the excimer laser for bilateral treatment to be a practice of
medicine decision, which the FDA is not authorized to regulate. Physicians,
including our affiliated physicians, widely perform bilateral treatment as an
exercise of professional judgment in connection with the practice of medicine.
Failure to comply with applicable FDA requirements could subject us, our
affiliated providers or laser manufacturers to enforcement action, product
seizures, recalls, withdrawal of approvals and civil and criminal penalties.
Further, failure to comply with regulatory requirements, or any adverse
regulatory action, including a reversal of the FDA's current position that the
"off-label" use of excimer lasers by physicians outside the FDA approved
guidelines is a practice of medicine decision, which the FDA is not authorized
to regulate, could result in a limitation on or prohibition of our use of the
excimer laser.
The marketing and promotion of laser vision correction and other image
enhancement surgical procedures in the U.S. is regulated by the FDA and the
Federal Trade Commission. The FDA and FTC have released a joint communique on
the requirements for marketing these procedures in compliance with the laws
administered by both agencies. The FTC staff also issued more detailed staff
guidance on the marketing and promotion of these procedures and has been
monitoring marketing activities in this area through a non-public inquiry to
identify areas that may require further FTC attention. Although the FDA does not
regulate surgeons' use of excimer lasers, the FDA actively enforces regulations
prohibiting the marketing of products for nonindicated uses and conducts
periodic inspections of manufacturers to determine compliance with good
manufacturing practice regulations. We believe that we conduct our operations in
compliance with these laws and regulations.
INSURANCE
We believe that the insurance coverage for our business is generally in
accordance with industry standards, including adequate coverage for premises
liability which we may incur in both of our centers. We believe our insurance
coverage is adequate in light of our business and the risks to which we are
subject. We maintain key man life insurance on the life of John C. Homan in the
amount of $1,000,000. We intend to obtain officers' and directors' liability
insurance coverage prior to the completion of this offering.
EMPLOYEES
As of December 22, 1999, we had 29 full-time and part-time employees. Of our
total number of employees,
- 14 are full-time and
- 15 are part-time.
Eight of these people work in our corporate offices, with five full-time
employees and three part-time employees. We have eight full-time and nine
part-time employees in our Albuquerque medical center, and one full-time and
three part-time employees in our Las Vegas center. Of these employees,
- five are administrative employees,
- four are clerical,
- seventeen are in our sales department, and
- three employees function as medical or medical-technical employees. We
have no collective bargaining agreement with any of our employees and our
management considers our relationships with our employees to be good.
We believe we will need to recruit 17 part-time and four full-time employees
to staff our growing needs in both of our existing centers. We intend that six
of the part-time employees and five of the
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full-time employees will be based in our Albuquerque center, and four part-time
and six full-time employees will be based in our Las Vegas center.
In addition to our employees, we have affiliate relationships with local
doctors who provide medical services to our patients. As of December 22, 1999,
we had three active member-affiliates for our Albuquerque center.
FACILITIES
We lease our principal executive office and our medical facilities in
Albuquerque, New Mexico. It consists of a total of approximately 5,000 square
feet, under three separate operating leases that have varying expiration dates.
We lease a 751 square foot facility adjacent to our Albuquerque center that
houses our call center under a month to month lease entered into on November 4,
1998, providing for a current monthly payment of $445.
On September 12, 1995, we leased 2,144 square feet of space adjacent to our
Albuquerque center to house additional medical personnel and a retail optical
dispensary. This facility has a lease term that ends November 30, 2000 and has a
current monthly rental obligation of $2,914.
On March 25, 1999, we entered into a sublease for an additional 2,079 square
feet in Albuquerque to house our corporate operations. This sublease terminates
on December 28, 2001 and has a current monthly obligation of $2,599. Our total
monthly lease obligations for our Albuquerque center are approximately $6,000
per month. We believe our facilities are adequate for our current business
operations in our Albuquerque center.
On July 21, 1999, we entered into a six month lease which commenced as of
August 1, 1999 for 4,000 square feet of space in Las Vegas, Nevada, with a
monthly rental obligation of $6,840 per month. This space temporarily houses our
Las Vegas TrueVision center until our permanent leased facility becomes
available. As of the date of this prospectus, our Las Vegas operations are still
conducted at this facility.
On July 30, 1999, we entered into a five-year lease agreement for our
permanent facilities in Las Vegas, which lease commences as of December 1, 1999
and consists of approximately 12,141 square feet of space and has a monthly
rental obligation of approximately $22,461 per month. Our lease gives us the
option of renewing the initial term of the lease for two additional five-year
terms. This lease agreement has been personally guaranteed by a principal
shareholder and consultant of ours until the earlier of three years from the
date of the lease or our receipt of at least $5,000,000 in gross proceeds from a
public offering. We believe these facilities are adequate for our current and
planned business operations in our Las Vegas center.
LEGAL PROCEEDINGS
We are not involved in any pending, or to our knowledge threatened, legal
proceedings. From time to time, we may become a party to various legal
proceedings arising in the ordinary course of business.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the accompanying exhibits and schedules. For further
information with respect to us and the securities offered by this prospectus,
reference is made to the registration statement and the accompanying exhibits
and schedules. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement are
not necessarily complete and are qualified in their entirety by reference to the
exhibits for a complete statement of their terms and conditions.
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The registration statement, including all amendments, exhibits and
schedules, may be inspected without charge at the offices of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street NW, Washington, D.C.
20549 and the Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street
NW, Washington, DC. 20549. The public may obtain information on the operations
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Securities and Exchange Commission also maintains a Web site
(http://www.sec.gov) through which the registration statement and other
information can be retrieved.
We have applied for listing of our securities on the Nasdaq SmallCap Market,
and upon listing, investors can obtain information about us on its Web site,
(http://www.nasdaqamex.com.)
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act and intend to
furnish our stockholders annual reports containing financial statements audited
by our independent accountants and to make available quarterly reports
containing unaudited financial statements for each of the first three quarters
of each fiscal year.
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MANAGEMENT
DIRECTORS AND OFFICERS
Our executive officers, directors, and key employees and their ages as of
December 22, 1999 are as follows.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- -------------------------------------------
<S> <C> <C>
John C. Homan.................. 47 Chairman of the Board, Chief Executive
Officer, Treasurer and Director
Frank J. Seifert............... 55 Secretary and Director
C. Richard Hullihen, Jr. ...... 73 Director
Allison W. Evans............... 36 Vice-President of Business Development and
Chief Financial Officer
Robert S. Helmer............... 45 Clinical Support Manager
Dr. Donald E. Rodgers.......... 58 Medical Director, TrueVision-Albuquerque
</TABLE>
JOHN C. HOMAN, co-founded TrueVision Laser Centers, Inc., in October 1995
and has served as its president and chief executive officer through the present
date. Since April 1998, Mr. Homan has served as our president and chief
executive officer. From October 1997 to the present, Mr. Homan has also been the
president and chief executive officer of TVLC Finance, Inc., a specialty finance
company, and since April 1997, he has served in those same roles with
MTE/Triad, Inc., a venture leasing company. In June 1995, Mr. Homan co-founded
Clear Vision Laser Centers, Inc., an early developer of laser surgery correction
facilities. From June 1994 through May 1995, Mr. Homan was the chief operations
officer of Cardiff Broadcasting, an operator of wireless cable television
systems in four states. TVLC Finance and MTE/Triad, which are controlled by
Mr. Homan, provide us with equipment financing and leasing services. Mr. Homan
may have to spend what he believes to be an immaterial amount of time to the
affairs of these other companies. Mr. Homan received a bachelor's degree in
accounting and marketing from the University of Akron in 1973 and received a
juris doctorate degree in 1977 from Cleveland-Marshall College of Law.
FRANK J. SEIFERT, was our executive vice president from May 1998 to August
1999 and became one of our consultants in August 1999. Mr. Seifert became a
director and our corporate secretary in April 1998. Mr. Seifert co-founded
TrueVision Laser Centers, Inc. with Mr. Homan in October 1995. From
October 1995 to April 1998, Mr. Seifert served as executive vice-president of
TrueVision Laser Centers, Inc. From April 1993 to the present, Mr. Seifert has
served on the board of directors and as president and chief executive officer of
American Natural Gas Corporation, and since July 1998, he has served as
president of Sheffield Equity Corporation, an early stage venture capital firm.
Mr. Seifert received a Bachelor of Arts degree in Business Administration and
Economics from St. Thomas College in 1966. Mr. Seifert received his juris
doctorate from the William Mitchell College of Law in 1970.
C. RICHARD HULLIHEN, JR., became one of our directors on September 9, 1999.
Mr. Hullihen has been retired since 1986. From June 1981 to October 1986,
Mr. Hullihen was a vice-president of Picker X-Ray Corporation and Picker's
successor, Picker International Corporation, where he spent a total of 34 years
in a number of positions. During the last 10 years, Mr. Hullihen has acted as a
general business consultant to a variety of medical facilities, companies, and
doctors involved in establishing nuclear magnetic resonance clinics. Most
recently, Mr. Hullihen consulted for Dynamic Digital Displays, Inc. and Advanced
Cryomagnetics, Inc. Mr. Hullihen earned his bachelor of science degree in
business management from Washington University in St. Louis, Missouri in 1950.
ALLISON W. EVANS, has been our vice-president of business development since
December 1998, while also serving as our chief financial officer. Ms. Evans
served as a director of marketing and advertising and controller of TrueVision
Laser Centers, Inc. from its inception in December 1995 through November, 1997,
and as its director of mergers and acquisitions from June 1997 through
December 1998. Up until joining us full-time in December 1998, Ms. Evans also
specialized as a business development consultant to various clients in the
multimedia entertainment and advertising industry. In 1995,
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Ms. Evans founded "The Success Exchange," a web-magazine and personal
development organization. Ms. Evans is a certified public accountant and started
her career at Ernst & Young in 1988. She earned her bachelor's degree in
business administration from St. Mary's College in 1985 and her masters in
business administration in marketing and finance from the University of San
Diego in 1988.
ROBERT S. HELMER, has been our clinical support manager in our Albuquerque
center since October 1998. Mr. Helmer is a graduate physician and surgical
assistant with 25 years of medical experience in emergency medicine, laser
medicine, dermatology, cosmetic surgery and hair transplant surgery. From
May 1998 until joining us, Mr. Helmer was a director and the president of the
International College of Skin-Care Specialists. From October 1991 to
October 1995, Mr. Helmer was a surgical assistant with Qualified Emergency
Specialists, Inc., in Cincinnati, Ohio, and from February 1991 to December 1991
was a surgical assistant and electrologist for Dermatology Associates of
Atlanta, Georgia. Mr. Helmer has been a certified ophthalmic laser technician
since September 1998 and a certified microkeratome technician since June 1999.
Mr. Helmer received his associate of applied science degrees as a physician's
assistant and surgical assistant in 1974 from the Cincinnati Technical College.
He is a member of the American Academy of Physicians Assistants.
DONALD E. RODGERS, M.D. has been our medical director in our Albuquerque
center since February 1999. Dr. Rodgers first began performing laser vision
correction at our center in June, 1997. Dr. Rodgers is a part-time medical
director for us and he will not devote full time to our operations. Since 1975,
Dr. Rodgers has been in private medical practice and is currently a partner with
the New Mexico Eye Clinic of Albuquerque, New Mexico, where his practice focuses
on cataracts, corneal transplants and keratorefractive surgery. Dr. Rodgers has
been performing refractive surgery since 1976. Dr. Rodgers is currently the
State Surgeon for the New Mexico National Guard having been appointed to that
position in 1990, where he holds the rank of Colonel in the U.S Army Medical
Corp. Dr. Rodgers served as the president of the New Mexico Society of
Ophthalmology from 1992 to 1993; president of the Medical Staff-Presbyterian
Hospital Albuquerque from 1990 to 1991; on the Medical Executive Committee for
St. Joseph's Hospital from 1981 to 1985; and in that same capacity with the
Presbyterian Hospital in Albuquerque from 1982 to 1991. From 1988 to 1995,
Dr. Rodgers was the Medical Advisor for the New Mexico Lions Eye Bank.
Dr. Rodgers received his medical degree in 1968 and his B.A. degree in 1963,
both from the University of New Mexico. Dr. Rodgers completed an internship at
the U.S. Naval Hospital in San Diego, California from 1968 to 1969 and completed
his residency in ophthalmology at that same facility from 1972 to 1975.
DIRECTORS' COMPENSATION
Our non-employee directors receive $1,000 for attendance at each meeting of
the board of directors or any committee of the board of directors and will be
reimbursed for their out-of-pocket expenses in connection with their attendance
at any such meeting. We anticipate that our board will meet at least twice each
year. No directors' fees have been paid to date.
BOARD COMPOSITION
Our board of directors consists of at least three members who serve as
directors for staggered terms that are divided into three classes. Class one
directors have a term expiring at the annual meeting next ensuing. Class two
directors have a term expiring one year after the class one directors. The third
class of directors have a term expiring two years after the class one directors.
There are no family relationships among any of our directors, officers or key
employees. We intend to appoint at least one additional director to our board of
directors, who will be an independent director, within 90 days after completion
of this offering. Each director holds office until their successor is duly
elected and qualified. Vacancies in the office of any director may be filled by
a majority of the directors then in office. Both of our outside directors will
serve as members of both committees.
Our president and chief executive officer is appointed by our board, and all
of our other executive officers are appointed by the president and chief
executive officer.
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We have agreed that for five years from the completion of this offering, the
representative of the underwriters may designate one person for election to our
board of directors. If this election is not exercised, the representative may
designate one person to attend all meetings of our board of directors. If the
representative chooses to designate a person to attend our directors' meetings,
we have agreed to reimburse that person for out-of-pocket expenses in connection
with their attendance.
COMMITTEES OF THE BOARD
Upon completion of this offering, the board of directors will establish two
standing committees, an audit committee and a compensation committee. Our audit
committee will:
- recommend to the entire board of directors the independent public
accountants to be engaged by us,
- review the plan and scope of our annual audit,
- review our internal controls and financial management policies with our
independent public accountants and
- review all related party transactions.
The compensation committee will review and recommend to our board:
- the compensation and benefits to be paid to our officers and directors,
- administer our stock option plan,
- approve the grant of options under the stock option plan and
- establish and review general policies relating to compensation and
benefits of our employees.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid during our fiscal
years ended September 30, 1998 and 1999 to our chief executive officer, John C.
Homan. No other executive officer received a salary and bonus in excess of
$100,000 in this year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------------- OTHER COMPENSATION
SALARY($) BONUS($) -----------------------------
------------------- ------------------- OTHER ANNUAL ALL OTHER
NAME AND POSITION 1998 1999 1998 1998 COMPENSATION COMPENSATION
- ----------------- ---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Homan, Chief
executive officer......... -0- $108,000 -0- -0- -- $45,000
</TABLE>
The aggregate compensation paid to all persons who served in the capacity of
a director or executive officer during the fiscal years that ended
September 30, 1998 and 1999, 3 persons, was $17,800 and $192,000, respectively.
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<PAGE>
OPTION GRANTS DURING THE YEARS
ENDED SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
PERCENT OF TOTAL OPTIONS
-----------------------------------------------------------------------------
NUMBER OF
SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN
GRANTED FISCAL YEAR
----------------------- ----------------------- EXERCISE EXPIRATION
NAME 1998 1999 1998 1999 PRICE($/SH) DATE
- ---- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
John C. Homan Chief executive
officer..................... 218,750 0 47.7% 0 $.86 April, 2008
</TABLE>
The aggregate number of options granted to all persons who served in the
capacity of a director or executive officer during the fiscal year that ended
September 30, 1998, 3 persons, was 277,083. In fiscal year 1999, we granted
83,333 options to Frank J. Seifert who is a consultant, a director and our
corporate secretary. These options and the shares underlying the options are
restricted as to exercise, voting rights and transferability, among other
things. Based on these restrictions management has valued these options at
$125,000. Mr. Homan's options granted during fiscal year ended September 30,
1998 were valued at $45,000.
The aggregate number of options granted to all officers and directors during
the fiscal year that ended September 30, 1998 was initially 1,177,084 options to
purchase 1,177,084 shares of common stock. In April 1999, all officers and
directors holding these options agreed to surrender a portion of their options.
During fiscal 1999 83,333 options granted to a former guarantor of certain of
the Company's debt were surrendered due to the release of the guarantor's
obligation. As of the date of this prospectus 458,332 options are outstanding,
374,999 of these options are fully vested. The remaining options vest
December 13, 2002.
EMPLOYMENT AGREEMENTS
On September 7, 1998, we entered into a three-year employment agreement with
John C. Homan agreeing to employ him as president and chief executive officer on
a full-time basis. On August 25, 1999, this employment agreement was amended.
The terms of Mr. Homan's employment agreement, as amended, provide for a base
salary for the fiscal year ended September 30, 1999 of $108,000 and a bonus,
within the discretion of our board of directors, that may be paid in cash or
common stock. The salary for each additional year is to be the greater of 125%
of Mr. Homan's base salary for the previous year or 75% of the previous year's
gross compensation.
Mr. Homan's employment agreement provides that he is entitled to receive
employee benefits as are generally made available to our other employees, which
currently include paid health care insurance. Mr. Homan's employment agreement
also entitles him to have us furnish for his business use a full-size car at our
expense. Mr. Homan is entitled to receive a minimum of five weeks of paid
vacation for the first year of the agreement, increasing one week each year up
to a maximum of ten vacation weeks per year. Mr. Homan has the right under the
agreement to accrue vacation time for up to three years after which he is then
entitled to receive cash compensation at his then current rate of compensation
in lieu of taking any or all of his vacation time.
During the term of the employment agreement, and for one year after
termination, Mr. Homan has agreed not to compete with our laser vision
correction business in any manner. If terminated from his employment for cause,
Mr. Homan is not entitled to the benefits of his employment agreement.
We entered into a management continuity agreement with Mr. Homan on
September 7, 1998 that provides for Mr. Homan's continued employment in his
roles as president and chief executive officer for three years following a
change of control of us. The management continuity agreement becomes effective
only if and when there is a change of control of us. Under this agreement,
Mr. Homan is
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<PAGE>
entitled to the same authority or status, and he is entitled to receive his base
annual salary and annual bonus in amounts which would equal the amounts he is
entitled to receive under his employment agreement. Mr. Homan is also entitled
to receive the same or similar employee benefits as he did under his employment
agreement. The management continuation agreement will automatically terminate on
Mr. Homan's 70(th) birthday, his death, the termination provisions in the
agreement, or when all rights and obligations under the agreement are satisfied.
If we were to terminate Mr. Homan without cause from the management
continuity agreement, we are obligated to pay him within 90 days of termination,
a lump sum cash payment equal to 300% of the sum of his highest annual base
salary prior to his termination, plus the highest value for his employee fringe
benefits, plus the highest bonus he received for any year during the three-year
period before termination. A similar lump sum cash payment is also required by
us within that same 90 day period for the value of Mr. Homan's employer
contributions made for his benefit during the last full fiscal year. If
Mr. Homan is terminated under this agreement without cause, his outstanding
unvested stock options immediately vest and become exercisable. If Mr. Homan is
terminated for cause as defined in the agreement, he is not entitled to any of
the above-described termination benefits.
CONSULTING AGREEMENTS
We entered into a consulting agreement with RB&A, LLC in which RB&A, LLC
agreed to provide us with long term strategic planning, management consulting
services, and marketing and finance expertise, in February 1998, and we amended
this agreement on August 25, 1999. The compensation as contemplated by the
February agreement for these services is $4,000 per month for a period of two
years ending February 2000. We defaulted in the payment of this monthly
consulting fee to RB&A, LLC immediately after entering into the agreement, but
remedied our default at the time we agreed to enter into the amended consulting
agreement.
In the August 25, 1999 amended consulting agreement, RB&A, LLC, agreed to
convert 416,667 options which had been granted to purchase 416,667 shares of
common stock into 20,000 shares of common stock, which were issued as of the
date of the amended consulting agreement. As part of the August 25, 1999
amendment, we agreed to pay a lump sum of $31,800 to RB&A, LLC for accrued and
unpaid monthly consulting fees of $76,000 and we agreed to pay additional
monthly consulting fees of $6,000 for four consecutive months beginning on
September 1, 1999. Instead of paying the $31,800 due to RB&A, LLC on
September 1, 1999, we amended our agreement on October 22, 1999 by agreeing to
deliver a demand promissory note in the amount of $43,800, which note now
accrues interest at 8% yearly on the unpaid balance.
Commencing on June 13, 1997, we entered into a series of four consulting
agreements with Dr. Howard Silverman, that provided for the payment for
consulting services provided to us by Dr. Silverman. Dr. Silverman, a retired
optometrist, provides information, planning, business and professional advice
relative to the services we provide in our vision correction centers. We
defaulted in the payment of approximately $90,000 in accrued consulting fees
that were due on a monthly basis to Dr. Silverman. Our obligations to
Dr. Silverman under the consulting agreement in the amount of $90,000 was
satisfied by our delivery to Dr. Silverman of our promissory note dated
September 30, 1999 in the amount of $90,000. Our promissory note accrues
interest at 9% yearly and is due March 1, 2001.
The first consulting agreement, dated June 13, 1997 provided for the payment
of a $5,000 per month consulting fee for a one-year period. The second
consulting agreement dated April 1, 1998 extended the term of the first
agreement, and provided for a monthly consulting fee to Dr. Silverman of $5,000
until March, 2001, and granted to Dr. Silverman an option to purchase 166,667
shares of our common stock at $.001 per share. In addition, and as a part of
Dr. Silverman's role with us, he agreed to guarantee some of our liabilities to
DVI Financial Services, Inc., which is a lease financing company that agreed to
finance our acquisition of an excimer laser used in our Albuquerque center. We
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<PAGE>
defaulted in the terms of the first and second consulting agreements with
Dr. Silverman by not paying the monthly consulting fees.
The third consulting agreement dated December 1, 1998 extended the second
agreement and provided for increased compensation, which compensation is
currently in effect. The third agreement carries an initial term of three years,
and provides that Dr. Silverman will receive a monthly consulting fee of $8,500
and that all unpaid, but accrued consulting fees in the amount of $90,000, would
be paid to Dr. Silverman on or before July 31, 1999, which amount has not yet
been paid to Dr. Silverman. The December 1, 1998 consulting agreement
re-affirmed the grant to Dr. Silverman of an option to purchase 166,667 shares
of our common stock at $.001 per share, and that such shares are to be
registered by us with the Commission under the Securities Act on the first
registration statement that we file with the Commission after we complete a
public offering, or if not registered within six months after the date of the
agreement, then Dr. Silverman's shares are to be registered by us on Form S-8 as
permissible under the Securities Act. Dr. Silverman exercised this option and,
in so doing, purchased 166,667 shares of our common stock.
The fourth consulting agreement was entered into on August 30, 1999, and
amended the registration rights provisions covering Dr. Silverman's 166,667
options to purchase 166,667 shares of common stock. As amended, Dr. Silverman
has the right to demand registration covering his 166,667 shares of common stock
no later than six months after the completion of an initial public offering of
our securities.
On August 23, 1999, we entered into a three year consulting agreement with
one of our directors and corporate secretary, and then executive vice president,
Frank J. Seifert, who agreed to provide business advice, investment banking
services, and the development of business opportunities for us. Mr Seifert, who
originally became a director in April 1998, resigned as our executive
vice-president effective August 23, 1999. We amended Mr.Seifert's consulting
agreement by entering into an amended and restated consulting agreement dated
December 13, 1999, which was subsequently amended on December 23, 1999.
Mr. Seifert agreed to deliver an unconditional continuing guarantee in favor of
DVI Financial Services, Inc. with respect to the financing agreements entered
into between our Albuquerque, New Mexico subsidiary and DVI Financial
Services, Inc. for the financing of our excimer laser equipment used in the
Albuquerque center. Mr. Seifert's guarantee continues until the balance of the
financing for our excimer laser equipment is fully paid to DVI Financial
Services, Inc. The consulting agreement specifies that Mr. Seifert is an
independent contractor for us and will provide his consulting services as
requested and supervised by our board of directors.
The consulting agreement provides that we will use our best efforts to cause
Mr. Seifert to be a member of the board of directors so long as his guarantee is
in effect, and he is entitled to receive reimbursement for all reasonable costs
incurred for his attendance at directors' meetings. As compensation for his
consulting services, we have agreed to pay Mr. Seifert $60,000 per year payable
in monthly installments of $5,000 in advance. We agreed to commence making these
monthly payments retroactively from June 1, 1999. Mr. Seifert is also entitled
to receive the same non-cash benefits as our other regular employees, such as
healthcare insurance benefits. Mr. Seifert is entitled to receive discretionary
awards of incentive stock options under our 1998 incentive stock option plan, or
any successor plan.
As the consideration for Mr. Seifert's agreement to guarantee our
obligations to DVI Financial Services, Inc., the consulting agreement granted to
him an option to purchase 83,333 shares of our common stock at an exercise price
of $6.15 per share. This option was initially granted on December 13, 1999 by an
amendment to our August 23, 1999 option agreement which amendment provides that
Mr. Seifert's options are not exercisable for a period of 36 months from the
date of the option and his voting rights over the shares of our common stock he
receives upon exercise of the options are restricted for a period of two years
after Mr. Seifert exercises his options. An amendment to Mr. Seifert's option
agreement on December 23, 1999 increased the exercise price of his options from
$4.50 per share to the current exercise price of $6.15 per share. Mr. Seifert
received these options in
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<PAGE>
connection with the delivery of his written guarantee to DVI Financial Services,
Inc. Mr. Seifert's shares underlying this option are subject to piggyback
registration rights which require us to register the 83,333 shares underlying
the option under the Securities Act on the next registration statement which we
may file under the Securities Act after the completion of this public offering,
and if not registered within six months after the date of the consulting
agreement, then Mr. Seifert has the right to require us to register his shares
on Form S-8 under the Securities Act, no later than seven months after the date
of his consulting agreement. Our obligations to Mr. Seifert under his consulting
agreement are current.
1998 INCENTIVE STOCK OPTION PLAN
On April 13, 1998, we adopted an incentive stock option plan under which we
approved the reservation and issuance of up to 1,979,167 shares of our common
stock for issuance under the plan. As of the date of this prospectus, we have
granted 458,332 options which are outstanding and which permit the option
holders to purchase 458,332 shares of our common stock. Our plan allows us to
grant incentive and non-qualified options to our officers and key executives.
Incentive stock options granted under the plan will not have an exercise price
less than 100% of the fair market value of the shares at the time the options
are awarded. Non-qualified stock options granted under the plan will not have an
exercise price less than 85% of their fair market value at the time of the
grant. The compensation committee of our board of directors determines the terms
of each option grant. Our plan provides for grants of options with a term of up
to 10 years which may have a cashless exercise provision that allows the holders
of the options to exercise the options and tender payment for the option shares
by surrendering a number of shares of common stock whose value would equal the
cash required to exercise an additional number of shares. The compensation
committee will administer the stock option plan.
In 1998, we originally granted 1,635,416 options to purchase the same number
of shares of our common stock. In April 1999, four holders of our incentive
stock options granted under the plan agreed to surrender 1,177,084 of their
options in exchange for our agreement to pay the holders a total of $117,708,
which is to be paid in equal quarterly installments over the course of 10
quarters beginning with the quarter ending September 30, 1999. This surrender of
a part of our outstanding incentive stock options along with surrender from our
former guarantor results in outstanding incentive stock options to purchase
374,999 shares of our common stock held by our officers, employees, and
directors. As of the date of this prospectus, these 374,999 options are
outstanding and fully vested, all with an exercise price of $.86 per share of
common stock. The 83,333 options granted during fiscal 1999 vest on
December 13, 2002 and have an exercise price of $6.15 per share of common stock.
The weighted average remaining contractual life of the option grants exceeds
8.8 years.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our restated certificate of incorporation and our by-laws contain provisions
that eliminate the personal liability of our directors to us or our stockholders
for monetary damages for breach of their fiduciary duty as a director to the
fullest extent permitted by the Delaware General Corporation Law, except for
liability for:
- any breach of their duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or which involve intentional;
- misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions;
- any act or omission occurring prior to March 1998; and
- any transaction from which the director derived an improper personal
benefit.
Our restated certificate of incorporation and by-laws also contain
provisions that require us to indemnify our directors and permits us to
indemnify our incorporators, directors and officers to the
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fullest extent permitted by Delaware law, including circumstances where
indemnification would be discretionary. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, and persons controlling us in connection with the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is unenforceable.
CERTAIN TRANSACTIONS
Mr. Homan, our president and chief executive officer, serves as president
and a director of TVLC Finance, Inc., a Nevada corporation. TVLC Finance is a
specialty finance company that provides patient financing and equipment leasing
to us at what we believe to be competitive rates to the market. TVLC Finance is
not a subsidiary or sister company of ours. In some cases, TVLC Finance provides
us with financing that may not be available to us from other sources.
TVLC Finance owns 96% of MTE/Triad, Inc., a Nevada corporation that has
provided equipment financing to our Albuquerque subsidiary. Mr. Homan is
president and a director of MTE/Triad and is the principal shareholder of that
company, owning 96% of its outstanding stock. Currently, the only equipment
financing in place through either TVLC Finance or MTE/Triad, Inc. relates to the
re-financing of our VISX excimer laser equipment in our Albuquerque center.
Originally, financing for the purchase of our excimer laser in Albuquerque was
provided by MTE/Triad through the syndication of a private placement offering
with doctors and optometrists in New Mexico, which raised a total of $170,000.
The remainder of the purchase price for our excimer laser was financed by the
manufacturer, VISX and through purchase money financing provided by InterAmerica
Bank in Albuquerque, New Mexico.
In October 1997, TVLC Finance provided $300,000 in additional financing
which was used to pay off the existing financing provided by VISX and
InterAmerica Bank. The refinancing provided by TVLC Finance resulted in an
assignment of the outstanding security interests to TVLC Finance. In
April 1998, DVI Financial, Inc., a specialty leasing company unaffiliated with
us, agreed to refinance the outstanding balance of the debt on our excimer laser
equipment. A portion of the original $300,000 financing from TVLC Finance was
used to acquire additional equipment used in our Albuquerque center. A balance
due to TVLC Finance of approximately $40,402 remained at the end of fiscal year
1999. A condition of this refinancing was TVLC Finance's assignment of its
existing security interest in the laser equipment to DVI Financial. At the time
of this refinancing arrangement, VISX agreed to subordinate its security
interest in the excimer laser in favor of DVI Financial, however, VISX retained
the right to disable or foreclose on the excimer laser system if we breach any
obligation in the VISX patent and software license covering the VISX excimer
laser.
By a promissory note we issued to TVLC Finance, Inc. on November 30, 1999,
we borrowed $150,000 from TVLC Finance, Inc., which accrues interest at the rate
of 13% yearly. All principal and interest due under this note is due
December 1, 2000. As a part of this transaction, we arranged for one of our
shareholders, Michael Thomas, to transfer a total of 9,378 shares of our common
stock to the purchasers of the promissory notes issued by TVLC Finance, Inc. As
a result of this transfer we have recorded financing costs of $84,402 which will
be amortized over the life of the notes. Mr. Thomas agreed to transfer 9,378 of
his shares of our common stock to the two purchasers of the promissory notes
issued by TVLC Finance, Inc. as an accommodation to us.
Presently, DVI Financial has outstanding financing of our VISX excimer laser
equipment in Albuquerque based on a 48 month loan and security agreement dated
March 17, 1998 which provides for 48 monthly payments of $9,088 that began
April 18, 1998 and continue for 48 successive months thereafter until the
balance is paid in full.
In settlement of a dispute between us and MTE/Triad regarding penalties for
unpaid interest due to MTE/Triad under our laser equipment lease dated July 1,
1997 that was owed by our Albuquerque subsidiary for the period July 1997
through April 1998, we agreed to issue 41,667 shares of our
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common stock to MTE/Triad. MTE/Triad agreed to waive any further penalties, fees
and interest that were due from the non-payment of the interest due upon its
receipt of the shares, a $50,000 cash payment which was due and was paid on or
about May 1, 1999, and a second cash payment of $120,000 is due on January 1,
2000. We entered in to a mutual general release agreement effective as of
April 15, 1999 which provided for payments to be made to MTE/Triad, Inc. by our
subsidiary, TrueVision Laser Center of Albuquerque, Inc., and the release of all
other liabilities arising under the laser equipment lease dated July 1, 1997
upon the receipt of the payments. Payments which we are obligated to make under
the terms of the mutual release and settlement agreement are current.
We entered into a consulting agreement with Dr. Howard Silverman on
April 1, 1998, one of our principal shareholders. As part of the consideration
to us, Dr. Silverman agreed to execute and deliver an unconditional continuing
guarantee in favor of DVI Financial Services, Inc., which guarantee was a
financing requirement imposed on us by DVI Financial at the time that we
re-financed the VISX excimer laser equipment we use in our Albuquerque center.
Dr. Silverman's guarantee was delivered to DVI Financial as set forth in
subordination and financing agreements dated February 24, 1998. As a part of
Dr. Silverman's compensation under his April 1, 1998 consulting agreement, we
granted him an option to purchase 166,667 shares of common stock at an exercise
price of $.001 per share which was immediately exercised. We subsequently
defaulted on Dr. Silverman's April 1, 1998 consulting agreement by our failure
to pay the $5,000 monthly consulting fees provided for in the agreement.
We then amended our consulting agreement with Dr. Silverman, and in that
amended agreement, we agreed to increase Dr. Silverman's monthly consulting fee
to $8,500 beginning July 31, 1999. Dr. Silverman was also to receive a lump sum
payment of $90,000 as a consulting fee, but Dr. Silverman accepted a promissory
note dated September 30, 1999 in the amount of $90,000 rather than the lump sum
payment. Our promissory note to Dr. Silverman accrues interest at 9% yearly and
all principal and interest under the Note is due on March 1, 2001.
Dr. Silverman's amended consulting agreement dated December 1, 1998 states that
so long as his guarantee is in effect, we are obligated to engage him or his
designee as a nonvoting advisor to our board of directors. Dr. Silverman is
entitled to receive notices of and be invited to our board of directors'
meetings, and is entitled to receive reimbursement for reasonable out of pocket
costs associated with his attendance at our board of directors' meetings.
Furthermore, Dr. Silverman is entitled to receive the same compensation that we
may pay to other non-employee directors attending our board of directors'
meetings.
As partial consideration for Dr. Silverman's consulting services under the
December 1, 1998 agreement, we re-affirmed our grant of an option to
Dr. Silverman to purchase 166,667 shares of our common stock, at an exercise
price of $.001 per share. This option includes demand registration rights
covering the shares underlying the options, which obligates us to register
Dr. Silverman's shares of common stock in our next available registration
statement filed with the Commission, or if we do not file any registration
statement within six months after the completion of a public offering, then we
are required to facilitate registration of Dr. Silverman's shares of common
stock by registering his shares on Form S-8.
On February 23, 1998, we entered in to a stock purchase agreement and plan
of reorganization. When we entered in to this agreement, TrueVision Laser
Centers, Inc. owned 84% of the stock of our subsidiary, TrueVision Laser Centers
of Albuquerque, Inc. Through this agreement, we purchased all of the outstanding
stock of our subsidiary from TrueVision Laser Centers, Inc. in exchange for
1,944,444 shares of our common stock and 1,944,444 warrants to purchase an
additional 1,944,444 shares of our common stock. Our purchase of the outstanding
stock of our subsidiary was consummated on April 15, 1998. As a part of this
agreement all of the warrants issued in the reorganization expired without
exercise on April 15, 1999.
As a part of our plan of reorganization, we granted to Wilber F. Noyes, our
then chief executive officer, a warrant to acquire 416,667 shares of our common
stock at an exercise price of $.86 per share. We subsequently defaulted on the
terms of Mr. Noyes' consulting agreement dated February 9, 1998 by
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not paying him all monthly consulting fees when they were due, which totaled
$76,000 as of August 1999. In order to cure any defaults in Mr. Noyes'
consulting agreement, we amended Mr. Noyes' agreement effective August 25, 1999.
In the amendment, Mr. Noyes surrendered all of his 416,667 unexercised options
to purchase 416,667 shares of our common stock in exchange for his receipt of
20,000 shares of our common stock, our payment to him of lump sum compensation
in the amount of $31,800 and a consulting fee of $6,000 per month for four
months following the date of the amended consulting agreement. In an amendment
to this agreement dated October 22, 1999, Mr. Noyes agreed to accept our
promissory note for the $43,800 payment due to him.
On August 23, 1999, we entered into a three year consulting agreement with
one of our directors and our corporate secretary, Frank J. Seifert, who has
agreed to provide business advice, investment banking services, and the
development of business opportunities for us. As a part of his services,
Mr. Seifert agreed to deliver an unconditional continuing guarantee in favor of
DVI Financial Services, Inc. with respect to the financing agreements entered
into between our subsidiary and DVI Financial Services, Inc. for the financing
of our excimer laser equipment used in the Albuquerque center. Mr. Seifert's
guarantee continues in effect until the financing provided by DVI Financial
Services, Inc. for our excimer laser equipment is paid in full. The consulting
agreement specifies that Mr. Seifert is an independent contractor for us and
will provide his consulting services as requested and supervised by our board of
directors.
The consulting agreement provides that we will use our best efforts to cause
Mr. Seifert to be a member of the board of directors so long as his guarantee is
in effect, and he is entitled to receive reimbursement for all reasonable costs
incurred for his attendance at directors' meetings. As compensation for his
consulting services, we have agreed to pay Mr. Seifert $60,000 per year payable
in monthly installments of $5,000 in advance. We agreed to commence making these
monthly payments retroactively from June 1, 1999. Mr. Seifert is also entitled
to receive the same non-cash benefits as our other regular employees, such as
healthcare insurance benefits. Mr. Seifert is entitled to participate in
discretionary awards of incentive stock options under our 1998 Incentive Stock
Option Plan, or any successor plan.
As the consideration for Mr. Seifert's agreement to guarantee our
obligations to DVI Financial Services, Inc., the consulting agreement granted to
him an option to purchase 83,333 shares of our common stock at an exercise price
of $6.15 per share. This option was initially granted on December 13, 1999 by an
amendment to our August 23, 1999 option agreement which amendment provides that
Mr. Seifert's options are not exercisable for a period of 36 months from the
date of the option and his voting rights over the shares of our common stock he
receives upon exercise of the options are restricted for a period of two years
after Mr. Seifert exercises his options. An amendment to Mr. Seifert's option
agreement on December 23, 1999 increased the exercise price of his options from
$4.50 per share to the current exercise price of $6.15 per share. Mr. Seifert's
shares underlying this option are subject to demand registration rights which
require us to register the 83,333 shares underlying the option under the
Securities Act on the next registration statement which we may file under the
Securities Act after the completion of this public offering, and if not
registered within six months after the date of the consulting agreement, then
Mr. Seifert has the right to require us to register his shares on Form S-8 under
the Securities Act, no later than seven months after the date of his consulting
agreement. We are current with regards to our obligations to Mr. Seifert under
his consulting agreement.
On April 23, 1999, we entered into a five year capital lease agreement with
the New Mexico Eye Clinics, in which Dr. Donald E. Rodgers is a partner.
Dr. Rodgers is the medical director in our Albuquerque center. This lease
agreement provides for our lease from Dr. Rodgers of a microkeratome, which is
medical equipment used with our excimer laser. The lease provides that we are to
pay $1,250 per month to the New Mexico Eye Clinics on the value of the medical
equipment, which was established at $46,250. The financing costs on this capital
lease of 17.25% yearly plus the total amount of our lease payments over the
course of the five year lease, will require us to pay a total of $75,000 to
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the New Mexico Eye Clinics for this leased equipment. The lease obligation is
due in April, 2004 and payment of the lease obligation is secured by a lien on a
portion of the excimer laser and related equipment.
On July 1, 1997, our Albuquerque subsidiary entered into an equipment lease
with MTE/ Triad, Inc. covering our lease of some medical equipment, including a
VISX excimer laser used in our Albuquerque center. This agreement provides that
our subsidiary was to pay monthly rental to MTE Triad, Inc. for the use of the
equipment at the rate of $7,600 per month for a term of five years. Our
subsidiary defaulted on the payment terms of this equipment lease when it failed
to pay all monthly rental payments, accrued interest and late penalties. As a
consequence of this default, our Albuquerque subsidiary entered into a mutual
general release agreement with MTE/Triad, Inc. and TrueVision Laser
Centers, Inc. on April 15, 1999 in full settlement of the default by our
subsidiary in the payment of interest and other payments in accordance with an
equipment lease. The effect of this mutual general release was that our
subsidiary admitted that it defaulted in the payment of interest and penalties
under the July 1, 1997 lease and agreed to remedy all defaults by the delivery
to MTE/Triad, Inc. of 41,667 shares of our common stock and the payment of
$50,000 on or about May 1, 1999 and an additional payment of $120,000 due on or
about January 1, 2000.
TVLC Finance, Inc., a separate company controlled by Mr. Homan, entered into
a financing arrangement with us that relates to some of the equipment used in
our Albuquerque center. We delivered a promissory note to TVLC Finance, Inc.
bearing interest at 16.5% with interest and principal payable in monthly
installments of approximately $1,475 per month. This note is secured by some of
our equipment and is due in full in September, 2002. As of September 30, 1999,
the principal balance we owed on this note was $40,402.
Mr. Homan also serves as president and a director of TrueVision Laser
Centers, Inc. From December 1995 to April 15, 1998, Mr. Homan developed laser
vision correction centers through his affiliattion with TrueVision Laser
Centers, Inc. Until April 15, 1998, TrueVision Laser Centers, Inc. held an 84%
ownership interest in TrueVision Albuquerque that was then acquired by us under
the agreement and plan of reorganization. As of the date of the agreement,
TrueVision Laser Centers, Inc. ceased operations. It is, however, precluded from
operating laser vision centers in competition with us.
We have advanced to Mr. Homan as of September 30, 1999, the sum of $62,006
for business expenses that he anticipated incurring during the previous fiscal
year. As of that date, Mr. Homan's advances were still due to us, but we have
not made any demand on Mr. Homan for the repayment of those advances. This
advance is non-interest bearing and the balance of the advances are due and
payable to us by Mr. Homan upon our demand, although Mr. Homan has agreed to
repay the balance due on these advances within 90 days after the date we
complete this public offering. We advanced TVLC Finance, Inc. and TrueVision
Laser Centers, Inc. a total of $13,601 as of September 30, 1999, for expenses
which those two companies agreed to pay on our behalf. These advances are due
back to us and are due and payable on our demand and are non-interest bearing.
We have not made a demand for repayment of these advances to either TVLC Finance
or TrueVision Laser Centers, Inc.
All future material affiliated transactions and loans will be made or
entered into on terms that are no less favorable to us than those that can be
obtained from unaffiliated third parties. All future material affiliated
transactions and loans, and any forgiveness of loans, will be approved by a
majority of our independent directors who do not have an interest in the
transaction and who have access, at our expense, to independent legal counsel.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of the date of this prospectus. The information
in this table provides the beneficial ownership for:
- each person known by us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock;
- each of our directors and executive officers; and
- our executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner is the same
as our principal office location at 1720 Louisiana Boulevard, Suite 100,
Albuquerque, New Mexico 87110. Unless otherwise indicated, the individuals in
this table have sole voting and investment power with respect to all shares
shown as beneficially owned by them. Beneficial ownership is determined in
accordance with the rules and regulations of the Securities and Exchange
Commission.
The number of shares beneficially owned by a person and the percentage
ownership of that person includes shares of our common stock issuable upon
exercise of options and warrants held by that person, but not those held by any
other persons, that are currently exercisable or exercisable within 60 days from
the date of this prospectus.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT BENEFICIALLY OWNED
BENEFICIALLY --------------------------------
NAMES AND ADDRESS OF BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------- ----------------- --------------- --------------
<S> <C> <C> <C>
John C. Homan.............................. 885,417 34.7% 25.0%
Frank J. Seifert...........................
751 7th Ave. San Diego, CA 92101 350,000 15.0 10.5
Allison W. Evans........................... 132,407 5.5 3.9
Robert S. Helmer........................... -0- -0- -0-
C. Richard Hullihen........................ -0- -0- -0-
Howard Silverman........................... 391,667 16.8 11.8
TrueVision Laser Centers, Inc. ............
751 7th Avenue, Suite M
San Diego, CA 92101 654,370 28.1 19.7
Dr. Donald E. Rodgers...................... 83,333 3.5 2.4
All directors and executive officers as a
group (5 persons)........................ 1,451,157 52.3% 38.5%
</TABLE>
- ------------------------
The number of shares beneficially owned in the preceding table is adjusted
by the following:
The number of shares beneficially owned by Mr. Homan includes 218,750
fully-vested options, which expire in April 2008, and that are exercisable at
$.86 per share, and 41,667 shares of our common stock held by MTE/Triad, Inc.,
which is under the investment control of Mr. Homan. Mr. Homan is the chief
executive officer and the sole director of MTE/Triad, Inc. No other of our
officers or directors have any ownership or control of MTE/Triad, Inc. The table
does not include the 654,370 shares of our common stock that Mr. Homan has
investment control over in his capacity as the chief executive officer of
TrueVision Laser Centers, Inc. Mr. Homan is the chief executive officer and one
of three directors of TrueVision Laser Centers, Inc. The other two directors of
TrueVision Laser Centers, Inc. are Frank J. Seifert, one of our consultants and
a principal shareholder, and Gary A. Rasmussen.
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Mr. Homan, Mr. Seifert and Allison W. Evans, our chief financial officer, are
all shareholders of TrueVision Laser Centers, Inc.
The number of shares beneficially owned by Mr. Seifert does not include
64,257 shares held by TrueVision Laser Centers, Inc. in which Mr. Seifert is a
director, but over which he has no investment control. The number of shares also
does not include Mr. Seifert's 83,333 options that do not vest until
December 2002.
The number of shares beneficially owned by Ms. Evans includes 58,333
fully-vested options, which expire in January 2009, and that are exercisable at
$.86 per share, but does not include 4,796 shares held by TrueVision Laser
Centers, Inc. in which Ms. Evans is a shareholder, but over which she has no
investment control.
The number of shares beneficially owned by Dr. Rodgers includes 83,333
fully-vested options, which expire in April 2008, and that are exercisable at
$.86 per share.
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DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of (a) 100,000,000 shares of common
stock, $.001 par value per share and (b) 10,000,000 shares of preferred stock,
$.001 par value per share, the rights and preferences of which may be
established from time to time by our board of directors.
As of October 20, 1999, there were 2,329,558 shares of our common stock
issued and outstanding, and no shares of our preferred stock outstanding.
The description of our securities are summaries and do not contain all the
information that may be important to you. For more complete information, you
should read our certificate of incorporation and all amendments, and the form of
promissory note and warrants issued by us in April through September 1999, which
are all filed as exhibits to the registration statement of which this prospectus
forms a part.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and there are no cumulative voting
rights. Accordingly, holders of a majority of the shares of our common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by our board of directors out of
funds legally available, subject to any preferential dividend rights of any
outstanding shares of preferred stock. Upon the liquidation, dissolution or
winding up of us, holders of our common stock are entitled to share in our
assets remaining after the payment of all liabilities and liquidation
preferences on any outstanding shares of preferred stock. Holders of our common
stock have no:
- preemptive,
- subscription,
- redemption or
- conversion rights, and there are no redemption or sinking fund provisions
applicable to our common stock. All outstanding shares of common stock
are, and the shares offered by us in this offering will be, when issued
and paid for, duly authorized, validly issued, fully paid and
non-assessable. The rights, preferences and privileges of holders of our
common stock are subject to, and may be adversely affected by, the rights
of the holders of shares of any series of preferred stock that we may
designate and issue in the future.
PREFERRED STOCK
Our board of directors has the authority, without stockholder approval, to
issue up to an aggregate of 10,000,000 shares of preferred stock, in one or more
series. The board may fix the rights, preferences, privileges and restrictions
of the shares of each series, including dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences, and to fix the
number of shares constituting any series and the designations of these series.
These shares may have rights senior to our common stock. The issuance of
preferred stock may have the effect of delaying or preventing a change of
control of us. The issuance of preferred stock could decrease the amount of
earnings and assets available for distribution to the holders of our common
stock or could adversely affect the rights and powers, including voting rights,
of the holders of our common stock. We have no present plans to issue any shares
of preferred stock.
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REDEEMABLE COMMON STOCK PURCHASE WARRANTS
GENERALLY. Each warrant entitles the registered holder to purchase, at any
time commencing 12 months after the date of this prospectus until 60 months
after the date of this prospectus, one share of common stock at a price equal to
$10.80.
REDEMPTION PROVISIONS. Commencing 12 months after the date of this
prospectus, we may redeem the warrants, in whole but not in part, at $.10 per
warrant on 30 days' prior written notice. The warrants may only be redeemed if
the average closing sale price of our common stock as reported on the Nasdaq
SmallCap Stock Market equals or exceeds $18.00 for any 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day prior to
the date of notice of redemption. Since we have the right to redeem the warrants
under these circumstances, this may impact a decision as to if and when to
exercise the warrants. If we decide to redeem the warrants, holders will loose
their rights to purchase the underlying shares of common stock unless the
warrant is exercised before we redeem them. The holder of any warrant may
exercise the warrant by surrendering the certificate representing the warrant to
the warrant agent, with the subscription form properly completed and executed,
together with payment of the exercise price. No fractional shares will be issued
upon the exercise of the warrants. The exercise price of the warrants bears no
relationship to any objective criteria of value and should in no event be
regarded as an indication of any future market price of the securities offered
in this offering.
ADJUSTMENTS. The exercise price of the warrants and the number of shares of
common stock that may be issued upon the exercise of the warrants will be
adjusted upon the occurrence of specific events, including stock dividends,
stock splits, combinations or reclassifications of the common stock.
Additionally, an adjustment would be made in the case of a reclassification or
exchange of common stock, consolidation or merger of us with or into another
corporation, other than a consolidation or merger in which we are the surviving
corporation, or sale of all or substantially all of our assets, in order to
enable warrant holders to acquire the kind and number of shares of stock or
other securities or property receivable in such event by a holder of the number
of the number of shares of common stock that might otherwise have been purchased
upon the exercise of the warrant.
TRANSFER, EXCHANGE AND EXERCISE. The warrants are in registered form and
may be presented to the warrant agent for transfer, exchange or exercise at any
time on or prior to their expiration date, at which time they will be void and
have no value. The warrants may not be exercised until 12 months after the date
of this prospectus. If a market for the warrants develops, the holder may sell
the warrants instead of exercising them. There can be no assurance, however,
that a market for the warrants will develop or, if developed, will continue.
MODIFICATION OF WARRANTS. We and the warrant agent may make such
modifications to the warrants as we deem necessary and desirable that do not
adversely affect the interests of the warrant holders. We may, in our sole
discretion, lower the exercise price of the warrants for a period of no less
than 30 days on not less than 30 days' prior written notice to the warrant
holders and the representative. Modification of the number of securities
purchasable upon the exercise of any warrant, the exercise price, other than as
provided in the preceding sentence, and the expiration date with respect to any
warrant requires the consent of at least two-thirds of the warrant holders.
The redeemable common stock purchase warrants included in the units offered
by this prospectus are not exercisable unless, at the time of exercise, we have
a current prospectus covering the shares of common stock issuable upon exercise
of the warrants, and the shares have been registered, qualified or deemed to be
exempt under the securities laws of the state of residence of the exercising
holder of the warrants. Although we have agreed to use our best efforts to keep
a registration statement covering the shares of common stock issuable upon the
exercise of the warrants effective for the term of the warrants, if we fail to
do so for any reason, the warrants may be deprived of value.
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The common stock and warrants included in the units offered by this
prospectus are detachable and separately transferable 30 days following
completion of this offering. Purchasers may buy warrants in the aftermarket or
may move to jurisdictions in which the shares underlying the warrants are not so
registered or qualified during the period that the warrants are exercisable. In
that event, we would be unable to issue shares to those holders desiring to
exercise their warrants, and these holders would have no choice but to attempt
to sell the warrants in a jurisdiction where a sale is permissible or allow the
warrants to expire unexercised.
PROMISSORY NOTES
We sold $1,250,000 in the aggregate principal amount of 13% promissory notes
due April 15, 2000 from April through September 1999 in a private placement.
$700,000 of the aggregate amount of the private placement was sold to investors
that received 350,000 common stock purchase warrants. $550,000 of the aggregate
amount of the private placement was sold to subscribers that received no
warrants, but received a total of 34,384 shares of our common stock.
The promissory notes are unsecured and represent a general debt obligation
of ours, and, are subordinate to any existing senior indebtedness we have
outstanding. Each promissory note bears interest from the date of issuance at a
rate of 13% yearly. Interest is payable on the earlier of April 15, 2000 or the
closing of an initial public offering of our securities. Payment of principal
and accrued interest will be paid directly to the person in whose name the
promissory note is registered on the note register maintained by us. We issued
the promissory notes in denominations of $5,000 units, with each $5,000 note
including 2,500 common stock purchase warrants entitling the warrant holder to
purchase 2,500 shares of our common stock at an exercise price of $8.40 per
share. All noteholders that purchased notes in our private placement in August
and September 1999 received an aggregate of 34,384 shares of our common stock
instead of receiving warrants to purchase our common stock. Holders may transfer
the notes by surrendering them for transfer at the office of our registrar,
together with such written instrument of transfer as we may require, including
without limitation, an opinion of counsel, satisfactory to us, provided at the
cost of the transferring holder.
We may redeem the promissory notes at our option, at any time, in whole or
in part, without penalty. If we elect to redeem less than all of the promissory
notes, we will select which promissory notes to redeem, using such method as we
determine is fair and appropriate. The notes describe events of default in the
event that we fail to pay the principal and interest when due, failure to
perform any other covenants for 60 days after written notice specifying the
default and allowing us to remedy the default, if we file bankruptcy or
insolvency proceedings, or enter into a reorganization. Our rights and
obligations and the rights of the note holders may be modified under some
circumstances. In addition, the holders of not less than seventy-five percent,
75%, in aggregate principal amount of outstanding notes may consent to a
postponement of any interest payment for a period not exceeding three years from
its due date.
During the time the notes remain outstanding, we can not declare or pay any
cash dividends or dividends in kind on our shares of common stock other than
dividends payable solely in shares of our common stock.
In November 1999, we sold a promissory note due March 1, 2001 in the
principal amount of $150,000 and which accrue interest at 13% yearly until the
note is due. Our note was sold to TVLC Finance, Inc., which in turn sold two
promissory notes in the principal amount of $150,000 that also accrues interest
13% yearly. As a part of this transaction, one of our shareholders, Michael
Thomas, agreed to transfer 9,378 shares of our common stock to the purchasers of
the TVLC Finance, Inc. notes as an accommodation to us.
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WARRANTS
With respect to the first $700,000 aggregate amount of promissory notes
purchased in our private placement, we issued to each $5,000 promissory
noteholder 2,500 common stock purchase warrants entitling holders to purchase up
to 2,500 shares of our common stock at a price of $8.40 per share. We issued a
total of 350,000 warrants in our private placement, entitling the warrant
holders to purchase an aggregate of 350,000 shares of our common stock. The
warrants may be exercised in full or in part on or before April 15, 2004, but
can not be exercised for 12 months following their date of issuance. These
warrants may only be exercised upon payment in cash, and upon payment of the
exercise price, the holder of a warrant will receive one share of common stock
for each warrant exercised. The warrants include features for adjustment in the
event of a common stock split, stock dividend, reverse common stock split,
merger, consolidation or other similar change in our capital structure.
Holders of the warrants have no voting rights until such time as the
warrants are exercised and our underlying common stock is issued to the holder.
Upon the issuance of our common stock to the holders of the warrants, the
holders shall have the same rights as any other shareholder owning our common
stock.
THE REPRESENTATIVE'S WARRANTS
We have agreed to issue to the representative and/or its designees, at the
closing of this offering, for a total of $5.00, five year warrants to purchase
100,000 shares of common stock and/or 50,000 redeemable common stock purchase
warrants. The representative's warrants are exercisable at any time during a
period of four years commencing at the beginning of the second year after their
issuance an exercise price of $10.80 per share of common stock and $0.12 per
redeemable common stock purchase warrant. The shares of common stock, redeemable
warrants and shares of common stock underlying the redeemable warrants issuable
upon exercise of the representative's warrants are identical to those offered to
the public and the securities underlying the representatives warrants are being
registered in this offering. The representative's warrants contain anti-dilution
provisions providing for adjustment of the number of securities issuable upon
the exercise of the warrants under specific circumstances, including stock
dividends, stock splits, mergers, acquisitions and recapitalizations. The
holders of the representative's warrants will have no voting, dividend or other
stockholder rights solely for being a holder of the warrants.
For a period of five years after the completion of our initial public
offering, the holders of the representative's warrants and/or the shares of
common stock underlying the representative's warrants have piggyback
registration rights covering the underlying shares, at our expense, except as to
fees and expenses of the holders' counsel and selling commissions applicable to
those shares. In addition, for a five year period from the completion of our
initial public offering, upon demand by the holders of at least a majority of
the representative's warrants or of the underlying shares, the holders of the
representative's warrants and of the underlying shares, have a right to demand a
one time registration of the shares of common stock underlying the
representative's warrants. The cost of these registrations are at our expense,
except as to fees and expenses of the holders' counsel and selling commissions
applicable to the warrants and the shares.
OPTIONS FROM OUR 1998 STOCK OPTION PLAN
Several of our officers and directors were previously granted incentive
options to purchase our common stock from our 1998 stock option plan. There are
currently 374,999 fully-vested options outstanding entitling the holders to
purchase 374,999 shares of our common stock at an exercise price of $.86 per
share and 83,333 options outstanding that vest in December 2002 entitling the
holder to purchase 83,333 shares of our common stock at an exercise price $6.15
per share. All outstanding incentive stock options expire 10 years from the date
of grant, which means that our outstanding
49
<PAGE>
options will expire between April 16, 2008 and December 2009. The incentive
stock options granted under the 1998 stock option plan permit a cashless
exercise of the options, which means the holder may exercise the options and
tender payment for the option shares by surrendering a number of shares of
common stock whose value would equal the cash required to exercise an additional
number of options.
REGISTRATION RIGHTS
We are obligated to register the shares of common stock issuable upon
exercise of the warrants and the shares of common stock issued to the promissory
note holders in our private placement in registration statements filed with the
Securities and Exchange Commission. The shares are entitled to one-time
piggyback registration rights on the first registration statement filed by us
after we become a public company. We are also obligated to provide a one-time
demand registration covering the warrant shares if we do not file a registration
statement covering the shares before December 31, 1999. Registration rights are
subject to cutbacks that may be imposed by the underwriters involved in our
registrations.
If we file a registration statement as a result of the piggyback or demand
registration rights given to the holders of these warrants, we may register our
shares of common stock in a single registration statement to cover all of our
warrant holders' registration rights. The holders of our common stock then shall
be entitled to sell our common stock simultaneously with and upon the terms and
conditions as the securities sold for our own account sold under the
registration statement, subject to limitations that may be reasonably imposed by
the underwriter, receipt of minimum proceeds, and other terms of the
registration rights provisions of the warrant and the registration statement.
The holders of 458,332 of our outstanding incentive and non-qualified stock
options granted under the 1998 stock option plan, also were granted registration
rights consistent with the above described piggyback registration rights,
entitling them to register 458,332 shares of our common stock underlying their
incentive and non-qualified stock options.
The holders of 50,000 representative's warrants will also have demand and
piggyback registration rights.
TRANSFER AGENT AND REGISTRAR
We have made application to appoint Continental Stock Transfer & Trust
Company, New York, New York as our transfer agent, warrant agent, and registrar.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for any of our
securities and there can be no assurance that a significant public market for
any of our securities will be developed or sustained after this offering. Sales
of substantial amounts of our common stock in the public market after this
offering, or the possibility of those sales occurring could adversely affect the
prevailing market price for our securities and our ability to raise equity
capital in the future.
Upon completion of this offering, there will be 3,329,558 shares of our
common stock outstanding, assuming no exercise of the underwriter's
over-allotment option or any exercise of the redeemable common stock purchase
warrants. The 1,000,000 shares of common stock included in the units being
offered by this prospectus will be freely tradable without restriction under the
Securities Act, unless purchased by an affiliate of ours, as that term is
defined under the rules and regulations of the Securities Act, which will be
subject to the resale limitations of Rule 144 under the Securities Act.
The remaining 2,329,558 shares of our common stock are considered
"restricted securities" as defined in Rule 144. These shares were issued in
private transactions and have not been registered
50
<PAGE>
under the Securities Act and may not be sold unless registered under the
Securities Act or sold under an exemption from registration, such as the
exemption provided by Rule 144.
In general, under Rule 144, beginning 90 days after the completion of this
offering, a person, or persons whose shares are aggregated, who has beneficially
owned restricted shares for at least one year, including the holding period of
any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of:
- one percent, or approximately 33,295 shares following this offering, of
the number of shares of our common stock then outstanding; or
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
ours at any time during the 90 days preceding a sale, and who has beneficially
owned the shares for at least two years, including the holding period of any
prior owner who is not an affiliate of ours, would be entitled to sell those
shares under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Beginning 90 days after the completion of this offering, shares of common
stock issuable upon exercise of options granted by us prior to the effective
date of the registration statement will be eligible for sale in the public
market under the terms of Rule 701 under the Securities Act, subject to the
lock-up agreements described below. In general, Rule 701 permits resales of
shares issued under compensatory benefit plans commencing 90 days after the
issuer becomes subject to the reporting requirements of the Securities Exchange
Act in reliance upon Rule 144, but without compliance with restrictions,
including the holding period requirements, contained in Rule 144.
Holders of 350,000 common stock purchase warrants to purchase an aggregate
of 350,000 shares of our common stock have piggyback and demand registration
rights with regard to the shares issuable upon exercise of these warrants.
Additionally, holders of 34,384 shares of our common stock issued in connection
with our August and September 1999 private placement have piggyback and demand
registration rights. Additionally, holders of 458,332 options to purchase an
aggregate of 458,332 shares of our common stock have piggyback and demand
registration rights with regard to the shares underlying those options. These
option and warrant holders could require us to register the shares issuable upon
exercise of the warrants and options and such shares would then be freely
tradable, subject to the lock-up agreements described below. All of our
securityholders have waived their registration rights with respect to this
offering.
We and all of our existing stockholders, except our shareholders that
received 34,384 shares of our common stock in our private placement in August
and September 1999, our executive officers and directors, have agreed that, for
a period of 12 months from the completion of this offering, we and they will
not, without the prior written consent of Dirks & Company, Inc.:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock.
Our shareholders that received the 34,384 shares of common stock in our
private placement agreed to this same resale limitation for a period of six
months.
51
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below,
have agreed through Dirks & Company, Inc. as the representative of the
underwriters, to purchase from us, and we have agreed to sell to the
underwriters, the aggregate number of units set forth opposite their respective
names:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF UNITS
- ------------ ---------------
<S> <C>
Dirks & Company, Inc......................................
-------
Total............................................... 500,000
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters under that agreement depend on various conditions, including;
- the absence of any material adverse change in our business;
- the absence of any event that has materially disrupted or in the
representative's opinion will in the immediate future materially adversely
disrupt the financial markets;
- the absence of our default under any of our agreements or contracts;
- the continued truth of the statements made in this prospectus;
- the absence of any event that in the representative's opinion that would
make it inadvisable to proceed with this offering, and
- the receipt of certificates, opinions and letters from us, our counsel and
our independent public accountants.
This section contains the material conditions upon which the underwriting
agreement depends, although we direct you to the underwriting agreement, the
form of which is filed in an exhibit to the registration statement, of which
this prospectus forms a part for a complete list of the conditions of the
underwriters' obligations.
The underwriters are committed to take and to pay for all of the units
offered by this prospectus, if any are purchased. In the event of a default by
any of the underwriters, the purchase commitments of the non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.
The underwriters will offer the units to the public at the public offering
price set forth on the cover page of this prospectus. The underwriters may allow
some dealers concessions of not more than $ per unit. The underwriters also
may allow, and those dealers may re-allow, a concession of not more than
$ per unit to some other dealers. The public offering price, concessions, and
re-allowances may be changed after the completion of this offering.
We have granted to the underwriters an option, exercisable within 45 days
after the effective date of the registration agreement, to purchase up to an
additional 150,000 shares of common stock and/or 75,000 redeemable common stock
purchase warrants at the initial public offering price less the underwriting
discounts and non-accountable expenses allowance. The underwriters may exercise
this option only to cover over-allotments, if any. If any shares and/or warrants
are purchased in connection with this option, the underwriters will purchase the
shares and/or warrants in approximately the same proportion as set forth above.
We have agreed to indemnify the underwriters and their controlling persons
against some liabilities, as more fully set forth in the underwriting agreement,
including liabilities under the Securities Act, and to contribute to payments
the underwriters and their controlling persons may be required to make.
52
<PAGE>
We have also agreed to pay to the representative, a non-accountable expense
allowance equal to three percent of the gross proceeds of this offering, $25,000
of which has been paid to date.
We have also agreed to pay all expenses in connection with qualifying the
securities under the laws of those states that the representative may designate,
including fees and expenses of counsel retained for these purposes by the
representative, and the costs and expenses in connection with qualifying the
offering with the National Association of Securities Dealers, Inc.
The representative of the underwriters has informed us that the underwriters
do not expect sales of the units offered by this prospectus to be made to
discretionary accounts to exceed five percent of the total number of units
offered.
We and all of our existing stockholders, except our shareholders that
received 34,384 shares of our common stock in our private placement in August
and September 1999, our executive officers and directors, have agreed that, for
a period of 12 months from the completion of this offering, we and they will
not, without the prior written consent of Dirks & Company, Inc.:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock.
Our shareholders that received the 34,384 shares of common stock in our
private placement agreed to this same resale limitation for a period of six
months.
We have agreed to issue and sell to the representative of the underwriters
and/or its designees, for nominal consideration, five-year warrants to purchase
100,000 shares of our common stock and/or 50,000 redeemable common stock
purchase warrants. The representative's warrants are exercisable for a period of
four years commencing one-year after the date of issuance at a price equal to
$10.80 per share of common stock and $0.12 per redeemable common stock purchase
warrant. The representative's warrants contain anti-dilution provisions
providing for adjustments of the exercise price and the number of shares
issuable upon exercise, upon the occurrence of specific events, including stock
dividends, stock splits, and recapitalizations. The representative's warrants
contain demand and piggyback registration rights relating to the shares of
common stock issuable upon exercise of these warrants. For the life of the
representative's warrants, the representative will have the opportunity to
profit from a rise in the market price of our shares of common stock. The
representative's warrants are restricted from sale, transfer, assignment or
hypothecation for the one year period from the date of this prospectus, except
to officers or partners of the underwriters and members of the selling group
and/or their officers or partners.
We have agreed to grant the representative a right of first refusal for a
period of three years after the completion of this offering for any sale of
securities made by us or any of our subsidiaries.
We have agreed that for five years from the completion of this offering, the
representative may designate one person for election to our board of directors.
In the event that the representative elects not to exercise this right, then it
may designate one person to attend all meetings of our board of directors. The
representative has not yet exercised this right to designate this person. We
have agreed to reimburse the representative's designee for all out-of-pocket
expenses incurred in connection with the designee's attendance at meetings of
our board of directors. As a result of our agreements with the representative of
the underwriters, the representative will continue to have influence over us
following the completion of this offering.
Prior to this offering, there has been no public market for any of our
securities. The initial public offering price of the units offered by this
prospectus and the terms of redeemable common stock
53
<PAGE>
purchase warrants will be determined by negotiations between the representative
and us. Among the factors considered in determining the price include:
- prevailing market conditions,
- the history of and the prospects for the industry in which we compete,
- an assessment of our management,
- our prospects, and
- our capital structure.
The offering price does not necessarily bear any relationship to our assets,
results of operations or net worth. There can be no assurance that an active
trading market will develop for any of the securities offered by this
prospectus, or that such securities will trade in the public market at or above
the initial public offering price.
The representative, on behalf of the underwriters, may engage in:
- over-allotments,
- stabilizing transactions,
- syndicate covering transactions and
- penalty bids. An over-allotment involves syndicate sales in excess of this
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the shares of common stock and/or
warrants being offered so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of
the shares of common stock in the open market after the distribution has
been completed in order to cover syndicate short positions. Penalty bids
permit the representative to reclaim a selling concession from a syndicate
member when the shares of common stock and warrants originally sold by the
syndicate member are purchased in a syndicate covering transaction and
penalty bids may cause the price of the shares of common stock to be
higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq SmallCap Stock Market or
otherwise, and if commenced, may be discontinued at any time. In addition,
the underwriters may engage in passive market making transactions in our
securities on the Nasdaq SmallCap Stock Market in accordance with
Rule 103 of Regulation M. Neither we nor the underwriters make any
representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
securities offered by this prospectus.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of our securities offered
in this prospectus. These actions include purchasing the securities to cover
some or all of a short position of any of the securities maintained by the
representative and the imposition of penalty bids.
LEGAL MATTERS
The validity of the shares of common stock and the redeemable common stock
purchase warrants being offered by this prospectus will be passed upon for us by
Gregory Bartko, Esq., of the Law Offices of Gregory Bartko, Atlanta, Georgia,
our legal counsel. Orrick, Herrington & Sutcliffe LLP, New York, New York is
representing the underwriters.
EXPERTS
Our financial statements as of September 30, 1998 and 1999 and for the years
ended September 30, 1998 and 1999 included in this prospectus have been so
included in reliance on the report of Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, San Diego, California, independent
auditors, given on the authority of such firm as experts in auditing and
accounting.
54
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................ F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1998 and
1999.................................................... F-3
Consolidated Statements of Operations for the years ended
September 30, 1998
and 1999................................................ F-4
Consolidated Statements of Changes in Shareholders'
Deficit for the years ended September 30, 1998 and
1999.................................................... F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1998 and 1999............................. F-6-F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-8-F-25
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
TrueVision International, Inc.
San Diego, California
We have audited the consolidated balance sheets of TrueVision
International, Inc. and Subsidiaries (the "Company") as of September 30, 1998
and 1999, and the related consolidated statements of operations, changes in
shareholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TrueVision
International, Inc. and Subsidiaries as of September 30, 1998 and 1999, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has suffered
recurring losses, has limited capital resources and a working capital deficit.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
<TABLE>
<S> <C>
San Diego, California PANNELL KERR FORSTER
November 17, 1999 (except for Certified Public Accountants
notes 11, 12 and 15 as to which A Professional Corporation
the date is December 13, 1999)
</TABLE>
F-2
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,176 $ 1,495
Accounts receivable, net of allowance for doubtful
accounts of $24,833 and $30,629 at September 30, 1998
and 1999, respectively.................................. 59,353 261,156
Inventory................................................. 520 19,240
Deposits and prepaid expenses............................. -- 162,104
Due from related parties.................................. 30,119 75,607
Deferred offering costs................................... -- 217,499
Deferred financing costs, net of accumulated amortization
of $86,275.............................................. -- 376,581
---------- -----------
Total current assets.................................. 92,168 1,113,682
---------- -----------
NONCURRENT ASSETS:
Property and equipment, net of accumulated depreciation... 388,157 519,970
Deposits and prepaid expenses............................. -- 178,874
Deferred compensation..................................... -- 125,000
Logo design, net of accumulated depreciation of $2,200.... -- 19,800
---------- -----------
Total noncurrent assets................................... 388,157 843,644
---------- -----------
Total assets.......................................... $ 480,325 $ 1,957,326
========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Bank overdraft............................................ $ 7,732 $ 116,319
Accounts payable and accrued liabilities.................. 120,880 280,463
Sales tax payable......................................... 148,377 218,171
Due to related parties.................................... 224,474 187,761
Short-term debt........................................... -- 1,250,000
Current portion of long-term debt......................... 77,675 86,818
Current portion of capital lease obligations to related
parties................................................. 63,998 81,956
---------- -----------
Current portion of notes payable to related parties....... 9,918 52,219
---------- -----------
Total current liabilities............................. 653,054 2,273,707
LONG-TERM LIABILITIES:
Due to related parties.................................... -- 70,625
Long-term debt, net of current maturities................. 236,709 157,514
Capital lease obligations to related parties.............. 134,940 99,875
Notes payable to related parties.......................... 41,663 121,983
---------- -----------
Total long-term liabilities........................... 413,312 449,997
---------- -----------
Total liabilities..................................... 1,066,366 2,723,704
---------- -----------
Commitments and contingencies (Note 11)
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 10,000,000 shares
authorized; none issued and outstanding................. -- --
Common stock, $.001 par value, 100,000,000 shares
authorized; issued and outstanding: 2,233,507 and
2,329,558 shares at September 30, 1998 and 1999,
respectively............................................ 2,234 2,330
Additional paid-in capital................................ 205,183 867,443
Accumulated deficit....................................... (793,458) (1,636,151)
---------- -----------
Total shareholders' deficit........................... (586,041) (766,378)
---------- -----------
Total liabilities and shareholders' deficit........... $ 480,325 $ 1,957,326
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Revenues.................................................... $1,460,526 $3,377,478
Costs and expenses:
Cost of revenues.......................................... 894,134 2,294,216
General and administrative................................ 565,070 894,699
Sales, consulting and marketing........................... 47,048 401,088
Depreciation.............................................. 137,883 148,055
---------- ----------
Total costs and expenses.................................. 1,644,135 3,738,058
---------- ----------
Loss from operations........................................ (183,609) (360,580)
Other expenses:
Interest expense.......................................... (117,955) (118,330)
Expenses relating to debt financing and agreements to
retire stock options in preparation of proposed public
offering................................................ -- (363,783)
---------- ----------
Total other expenses...................................... (117,955) (482,113)
---------- ----------
Net loss.................................................... $ (301,564) $ (842,693)
========== ==========
Basic and diluted net loss per share........................ $ (.14) $ (.37)
========== ==========
Shares used to compute basic and diluted net loss per
share..................................................... 2,127,820 2,264,187
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1997.............. 2,051,215 2,051 3,594 (491,894) (486,249)
Issuance of common stock for consulting
services (Notes 12 and 14)........... 15,625 16 13,422 -- 13,438
Exercise of stock option granted for
loan guarantee (Notes 12 and 14)..... 166,667 167 143,167 -- 143,334
Contributed services of executive
officers (Notes 12 and 14)........... -- -- 45,000 -- 45,000
Net loss............................... -- -- -- (301,564) (301,564)
--------- ------ -------- ----------- ---------
Balance, September 30, 1998.............. 2,233,507 2,234 205,183 (793,458) (586,041)
Issuance of common stock per settlement
agreement (Note 12).................. 41,667 42 47,858 -- 47,900
Issuance of common stock in exchange
for the retirement of a warrant and
the settlement of accrued consulting
services (Note 12)................... 20,000 20 179,980 -- 180,000
Issuance of common stock in conjunction
with the issuance of promissory notes
(Notes 8 and 12)..................... 34,384 34 309,422 -- 309,456
Issuance of stock option granted for
loan guarantee (Note 12)............. -- -- 125,000 -- 125,000
Net loss............................... -- -- -- (842,693) (842,693)
--------- ------ -------- ----------- ---------
Balance, September 30, 1999.............. 2,329,558 $2,330 $867,443 $(1,636,151) $(766,378)
========= ====== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(301,564) $(842,693)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Bad debts............................................... 28,032 5,796
Depreciation and amortization........................... 137,883 148,055
Amortization of deferred financing costs................ -- 86,275
Interest on long term debt and obligations to related
parties............................................... 101,198 30,808
Issuance of common stock and options for consulting and
other services........................................ 156,605 180,000
Contributed services of executive officers.............. 45,000 --
Options surrendered by directors in exchange for debt... -- 117,708
Changes in operating assets and liabilities:
Increase in accounts receivable......................... (73,937) (207,599)
Decrease (increase) in inventory........................ 2,600 (18,720)
Increase in deposits and prepaid expenses............... -- (340,978)
Increase in accounts payable and accrued liabilities.... 1,707 293,383
Increase in sales tax payable........................... 106,236 69,794
--------- ---------
Net cash flows provided by (used in) financing
activities.............................................. 203,760 (478,171)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (21,579) (231,418)
Increase in trademarks and copyrights..................... -- (22,000)
Increase in due from related parties...................... (30,119) (45,488)
--------- ---------
Net cash flows used in investing activities............... (51,698) (298,906)
--------- ---------
Cash flows from financing activities:
Increase in deferred offering and financing costs......... -- (370,899)
Increase in bank overdraft................................ 4,747 108,587
Borrowings from related parties........................... 26,537 --
Borrowings on short-term debt............................. -- 1,250,000
Borrowings on long-term debt.............................. 350,000 --
Borrowings on notes payable to related parties............ 360,000 --
Repayments on short-term debt............................. (304,295) --
Repayments on due to related parties...................... (215,115) (66,704)
Repayments on capital lease obligations to related
parties................................................. -- (63,357)
Repayments on long-term debt.............................. (54,477) (70,052)
Repayments on notes payable to related parties............ (317,700) (11,179)
Issuance of common stock on exercise of option............ 167 --
--------- ---------
Net cash flows (used in) provided by operating
activities.............................................. (150,136) 776,396
--------- ---------
Net increase (decrease) in cash............................. 1,926 (681)
Cash at beginning of period................................. 250 2,176
--------- ---------
Cash at end of period....................................... $ 2,176 $ 1,495
========= =========
</TABLE>
F-6
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................ $ 52,221 $ 64,198
========= =========
Income taxes............................................ $ -- $ --
========= =========
Supplemental disclosure of noncash investing and financing
activities:
Payments due on capital lease obligation to related
party included in amounts due to related parties...... $ 89,979 $ --
========= =========
Issuance of common stock in conjunction with the
issuance of promissory notes.......................... $ -- $ 309,456
========= =========
Issuance of common stock in settlement of penalties and
interest on late payment of installments on capital
lease obligation to related party (see Note 12)....... $ -- $ 47,900
========= =========
Borrowings on capital lease obligation to related
party................................................. $ -- $ 46,250
========= =========
Issuance of notes payable to related parties in
settlement of accrued consulting fees................. $ -- $ 133,800
========= =========
Issuance of stock option granted for loan guarantee..... $ -- $ 125,000
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
TrueVision International, Inc. (the "Company") (formerly Topform, Inc.) was
incorporated in the state of Delaware on January 19, 1988. The Company, through
its operating subsidiaries, provides laser vision correction and image
enhancement procedures to individuals with refractive vision conditions. The
Company's ophthalmologists and optometrists, and those with which the Company is
affiliated, provide laser vision services using excimer laser technology. The
Company also offers patients ancillary image enhancement procedures and other
vision correction devices, including eye glasses and contact lenses on a limited
basis.
Effective April 15, 1998 (the "Exchange Date"), the shareholders of the
Company and the shareholders of TrueVision Laser Centers of Albuquerque, Inc., a
New Mexico corporation ("TVA") approved a stock purchase agreement and plan of
reorganization (the "TVA reorganization"). See Note 2 for shares exchanged in
the TVA reorganization. The TVA reorganization and merger transaction, pursuant
to Internal Revenue Code Section 368 (a)(1)(B), was effected between the Company
as the "legal acquiror" and TVA, the "target corporation". At the time of the
TVA reorganization the Company was a public shell which was not trading and was
not subject to any reporting requirements under sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended. The TVA reorganization resulted in
the Company acquiring 84% of the outstanding capital stock of TVA, and TVA
becoming an operating subsidiary of the Company. Management of TVA prior to the
reorganization has now become the Company's management. Effective March 16,
1999, the Company changed its name from Topform, Inc. to TrueVision
International, Inc. The reorganization has been accounted for as a reverse
acquisition with a public shell. Accordingly, the accompanying consolidated
financial statements have been presented as if TVA had always been a part of the
Company.
Prior to the Exchange Date, the Company was inactive since inception. TVA
operates an ophthalmic laser vision correction center in Albuquerque, New
Mexico. Doctors in the local eye community own 16% of TVA.
In April 1998, the shareholders of the Company approved a 4-for-1 reverse
split of the Company's common stock, and in March 1999, the shareholders of the
Company approved a 2.4-for-1 reverse split of the Company's common stock. Number
of shares and per share amounts have been restated as though the transactions
occurred on September 30, 1997.
In January 1999, the Board of Directors amended the Company's certificate of
incorporation to authorize 10,000,000 shares of $.001 par value Preferred stock.
In May 1999, the Board of Directors authorized management of the Company to
file a Registration Statement with the Securities and Exchange Commission
permitting the Company to sell shares of common stock to the public ("IPO"). The
Company anticipates the sale of 1,000,000 shares of common stock. The
anticipated proceeds will be used to retire short term debt, acquire additional
lasers and expand the Company's operations. There is no guarantee that the
proposed IPO will be consummated or that the IPO, if consummated, will provide
proceeds to fund the transactions described above.
In August 1999, the Company formed two wholly-owned subsidiaries, TrueVision
of Nevada, Inc. and TrueVision Medical Associates, Inc.
F-8
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FISCAL YEAR
The Company's year end for financial reporting purposes is September 30.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements consolidate the accounts of the
Company and its majority-owned subsidiary, TrueVision Laser Centers of
Albuquerque, Inc., and its wholly-owned subsidiaries, TrueVision of
Nevada, Inc. and TrueVision Medical Associates, Inc. Minority interest in TVA's
losses have been absorbed by the Company as they are non-recourse. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash, accounts
receivable, amounts due from related parties, bank overdraft, accounts payable
and accrued liabilities, sales tax payable, short-term debt and amounts due to
related parties approximate fair value due to the immediate short-term maturity
of these financial instruments.
The fair value of the Company's long-term debt, capital lease obligation and
note payable to related party approximates the carrying amount based on the
current rates offered to the Company for debt of the same remaining maturities
with similar collateral requirements.
INVENTORY
Inventory, consisting of key cards to operate the excimer laser, is stated
at the lower of cost (determined on a first-in, first-out basis) or market.
PROPERTY, EQUIPMENT AND LOGO DESIGN
Property, equipment and logo design are recorded at cost. Depreciation and
amortization is calculated on a straight-line basis over the estimated useful
lives of the assets which range from three to five years.
REVENUE RECOGNITION
Revenues are generated by the vision correction procedures performed at the
Company's laser center. Follow-up corrective procedures for customer
satisfaction, consisting of retreatment, are performed when necessary. The
Company recognizes revenues when the vision correction procedures are performed.
CONCENTRATION RISK
The Company's revenues are generated by the vision correction procedures
performed at the laser centers in Albuquerque, New Mexico and Las Vegas, Nevada.
If the demand for this procedure decreased or if the Company's ability to
continue to provide this service was impaired, the Company's revenue source
would be severely impacted.
F-9
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION RISK (CONTINUED)
The Company is dependent on a small number of manufacturers for the supply
of its excimer laser and related equipment. If any of these manufacturers were
unable to continue to provide this equipment, the Company's revenue generating
ability would be severely impacted.
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This statement allows entities to measure
compensation costs related to awards of stock-based compensation, using either
the fair value method or the intrinsic value method. The Company has elected to
account for stock-based compensation programs using the intrinsic value method.
See Note 12 for the proforma disclosures of the effect on net loss and net loss
per share.
LONG-LIVED ASSETS
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of the impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121
effective October 1, 1996. No impairment of long-lived assets has been
recognized as of September 30, 1999.
ADVERTISING COSTS
The Company charges the cost of advertising to expense as incurred.
Advertising costs for the years ended September 30, 1998 and 1999, were
approximately $23,500 and $188,500, respectively.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
NET LOSS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock. SFAS No. 128 supercedes
the provisions of APB No. 15, and requires the presentation of basic earnings
per share and diluted earnings per share. The Company has adopted the provisions
of SFAS No. 128 effective October 1, 1996.
F-10
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE (CONTINUED)
Basic net loss per share excludes dilution and is computed by dividing net
loss by the weighted average number of common shares outstanding during the
reported periods. Diluted net loss per share reflects the potential dilution
that could occur if stock options and other commitments to issue common stock
were exercised.
COMPREHENSIVE INCOME
The FASB recently issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components. The Company adopted this statement effective
October 1, 1996. For the years ended September 30, 1998 and 1999, the Company
had no items that were required to be recognized as components of comprehensive
income.
SEGMENT INFORMATION
The FASB recently issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement requires companies to report
certain information about operating segments. The Company adopted this statement
effective October 1, 1996. For the years ended September 30, 1998 and 1999, the
Company had only one operating segment, laser vision correction. For the years
ended September 30, 1998 and 1999, the Company operated in the geographic area
of the State of New Mexico, and in September 1999 commenced operations in the
geographic area of the State of Nevada.
MANAGEMENT'S PLANS FOR FUTURE OPERATIONS AND FINANCING
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company was
inactive since inception through the Exchange date. At present, the Company's
working capital plus limited capital resources will not be sufficient to meet
the Company's objectives as structured. The Company estimates it needs
substantial new capital to achieve its operations as planned, and plans to seek
up to $9 million in equity financing via a Form SB-2 offering pursuant to the
Securities Act of 1933. In the event financing is not obtained the Company will
adjust its corporate infrastructure to reflect current operations. This would
include the elimination of all corporate staff, the termination of two leases in
Albuquerque, the subleasing of the expanded office space in Las Vegas, Nevada
planned for January 2000 and the extension of the existing lease on the Las
Vegas facility.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 2--REORGANIZATION
In connection with the TVA reorganization, the Company issued 1,944,444
shares (95%) of its common stock, plus 1,944,444 warrants (the "Warrants"), each
warrant exercisable to purchase one share of common stock at an exercise price
of $0.86 per share, in exchange for 84,000 shares (84%) of TVA. None of the
above Warrants were redeemed and all of the Warrants expired unexercised on
April 15, 1999.
NOTE 3--DEPOSITS AND PREPAID EXPENSES
Deposits and prepaid expenses consist of the following at September 30, 1998
and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Current:
Deposits for purchase of excimer lasers,
non-refundable
(see Note 11)....................................... $ -- $112,290
Prepaid advertising costs............................. -- 23,286
Other prepayments..................................... -- 26,528
-------- --------
$ -- $162,104
======== ========
Noncurrent:
Deposit for building, non-refundable.................. -- 135,249
Deposit on operating lease............................ -- 43,625
-------- --------
$ -- $178,874
======== ========
</TABLE>
NOTE 4--DEFERRED OFFERING COSTS
Deferred offering costs in the amount of $217,499 originated from the
Company's anticipated IPO. If the IPO is not consummated, the deferred offering
costs will be written-off in the period the IPO is abandoned.
NOTE 5--DEFERRED FINANCING COSTS
Deferred financing costs in the amount of $462,856 originated from the issue
of the Debt Instruments from April to September 1999, including finders' fees,
(see Note 8) and are being amortized over the period from the date of issue
through April 15, 2000 or the date of repayment. Accumulated amortization was
$86,275 at September 30, 1999.
F-12
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 6--PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of September 30, 1998
and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Excimer laser and related equipment..................... $595,965 $723,199
Furniture and fixtures.................................. 68,816 175,916
Leasehold improvements.................................. 9,413 26,964
Motor vehicle........................................... 17,505 43,288
-------- --------
691,699 969,367
Less accumulated depreciation........................... (303,542) (449,397)
-------- --------
Net property and equipment.............................. $388,157 519,970
======== ========
</TABLE>
The Company expenses maintenance costs as they are incurred. Subsequent to
year-end, a motor vehicle with a cost of $25,783 was destroyed and the Company
has filed an insurance claim to recover the cost.
NOTE 7--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following as of
September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Trade accounts payable.................................. $120,880 $203,113
Accrued interest........................................ -- 22,350
Accrued legal fees...................................... -- 55,000
-------- --------
$120,880 $280,463
======== ========
</TABLE>
F-13
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 8--SHORT-TERM DEBT
Short-term debt consists of the following as of September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Subordinated promissory notes, bearing interest at
13%. Principal is due on April 15, 2000 and interest
is payable on the earlier of April 15, 2000 or the
closing of an initial public offering of the Company's
securities. The notes issued during the period
April 1999 to July 1999, totaling $700,000, included
common stock purchase warrants for the purchase of an
aggregate of 350,000 shares of common stock at an
exercise price of $8.40 per share. The notes issued
during the period August 1999 to September 1999,
totaling $550,000, included an aggregate of 34,384
shares of common stock which were issued instead of
issuing common stock purchase warrants. Management has
valued these shares at $9.00 per share based on the
proximity of the anticipated IPO. ................... $ -- $1,250,000
======== ==========
</TABLE>
NOTE 9--LONG-TERM DEBT
Long-term debt consists of the following as of September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Secured loan, bearing interest at 11.25% with interest
and principal payable in monthly installments of
approximately $9,100. The note is secured by a first
security interest in the excimer laser and related
equipment, and personal guarantees of certain of the
Company's directors. The note is due in
March 2002. ......................................... $314,384 $ 244,332
Less: Current portion................................. (77,675) (86,818)
-------- ----------
$236,709 $ 157,514
======== ==========
</TABLE>
See Note 10 for aggregate maturities of long-term obligations.
F-14
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 10--RELATED PARTY TRANSACTIONS
DUE FROM RELATED PARTIES
Amounts due from related parties consists of the following as of
September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Unsecured advances to the CEO. The advances are
non-interest bearing and due on demand. ........... $ 27,663 $ 62,006
Other................................................. 2,456 13,601
-------- ----------
$ 30,119 $ 75,607
======== ==========
</TABLE>
DUE TO RELATED PARTIES
Amounts due to related parties consists of the following as of
September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Installments in arrears on capital lease obligation to
MTE/ Triad, Inc., a corporation controlled by the
Company's CEO, (including accrued interest of
approximately $36,000 and $22,000, respectively), plus
penalties and interest on late payment of
approximately $30,000 and $12,500 for the years ended
September 30, 1998 and 1999, respectively. .......... $161,530 $ 140,678
Amount due to members of the Board of Directors for
surrendering a portion of certain stock options
previously granted to them by the Company. The total
amount due to the directors as a result of the above
surrender is to be paid in ten equal quarterly
installments. The installments were to begin in
September 1999 and be paid through December 2001. No
payments were made as of September 30, 1999. ........ -- 117,708
Amounts due to TrueVision Laser Centers, Inc. ("TVLC")
for cash advances and payment of expenses on behalf of
the Company and TVA. The amounts are non-interest
bearing and due on demand. .......................... 62,944 --
-------- ----------
224,474 258,386
Less: Current portion................................. (224,474) (187,761)
-------- ----------
$ -- $ 70,625
======== ==========
</TABLE>
F-15
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
CAPITAL LEASE OBLIGATIONS TO RELATED PARTIES
Capital lease obligations to related parties consists of the following as of
September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Capital lease obligation to MTE/Triad, Inc., a
corporation controlled by the Company's CEO, bearing
interest at 15.5% with interest and principal payable
in monthly installments of approximately $7,600. The
note is secured by a portion of the excimer laser and
related equipment and is due in June 2001. .......... $198,938 $ 135,581
Capital lease obligation to a doctor optionholder,
bearing interest at 17.25% with interest and principal
payable in monthly installments of approximately
$1,250. The note is secured by a portion of the
excimer laser and related equipment and is due in
April 2004. ......................................... -- 46,250
-------- ----------
198,938 181,831
Less: Current portion................................. (63,998) (81,956)
-------- ----------
Capital lease obligations to related parties,
long-term portion................................... $134,940 $ 99,875
======== ==========
</TABLE>
F-16
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consists of the following as of
September 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Secured promissory note to TVLC Finance, Inc., a
corporation controlled by the CEO of the Company,
bearing interest at 16.5% with interest and
principal payable in monthly installments of
approximately $1,475. The note is secured by a
portion of the excimer laser and related equipment
and is due in September 2002. ..................... $ 51,581 $ 40,402
Demand note to consultant shareholder, bearing
interest at 8%. ................................... -- 43,800
Promissory note to a consultant shareholder, bearing
interest at 9%, with interest and principal payable
on maturity in March 2001. ........................ -- 90,000
-------- ----------
51,581 174,202
Less: Current portion................................. (9,918) (52,219)
-------- ----------
Notes payable to related parties, long-term........... $ 41,663 $ 121,983
======== ==========
</TABLE>
Aggregate maturities of long-term obligations (which consists of long term
debt, amounts due Board of Directors members for surrender of options, and notes
payable to related parties) at September 30 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
- ----------- --------
<S> <C>
2000........................................................ $186,120
2001........................................................ 243,125
2002........................................................ 106,997
2003........................................................ --
2004........................................................ --
Thereafter.................................................. --
--------
$536,242
========
</TABLE>
F-17
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 11--COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its corporate office facility and its Albuquerque laser
vision correction center under a non-cancelable operating lease that expires in
December 2001 and calls for monthly payments of $10,576. The Company also leases
facilities in Las Vegas under non-cancelable operating leases that expire in
January 2000 and November 2004 and call for monthly payments of $6,840 and
$22,641, respectively. The Company also leases certain of its property and
equipment from MTE\Triad, Inc. and a doctor optionholder, both related parties,
through capital leases that expire in June 2001 and April 2004, respectively.
Capitalized leases included in property and equipment amounted to approximately
$270,000 and $320,000, before accumulated depreciation of approximately $72,000
and $124,000 as of September 30, 1998 and 1999, respectively. Minimum future
obligations under these leases as of September 30 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, CAPITAL OPERATING
- ------------------------- -------- ----------
<S> <C> <C>
2000.................................................. $105,995 $ 380,686
2001.................................................. 83,246 475,820
2002.................................................. 15,000 279,489
2003.................................................. 15,000 271,692
2004.................................................. 8,750 271,785
Thereafter............................................ -- 45,282
-------- ----------
Total minimum lease payments.......................... 227,991 $1,724,754
======== ==========
Amount representing interest.......................... 46,160
--------
Present value of minimum lease payments............... $181,831
========
</TABLE>
Rent expense under the non-cancelable operating leases was $35,432 and
$85,060 for the years ended September 30, 1998 and 1999, respectively.
PURCHASE ORDERS
In June 1999, the Company ordered two additional excimer lasers and paid
deposits of $112,290 against an aggregate purchase price of approximately
$1,025,000. These deposits are non-refundable.
CONSULTING AGREEMENTS
In February 1998, the Company entered into a consulting agreement with a
shareholder for advisory services. The compensation for these services is $4,000
per month for a period of two years ending in February 2000. At September 30,
1998 the Company was in default on this agreement. During August 1999, the
Company amended this agreement as follows: the consultant surrendered all of his
416,667 unexercised options to purchase 416,667 shares of common stock and
accrued consulting fees of $76,000, in exchange for 20,000 shares of common
stock, payments totaling $12,000 and a demand note amounting to $43,800 (See
Note 10). The shares issued to the consultant have been valued at $9.00 per
share. Accordingly the Company has recognized additional compensation costs of
$159,800.
F-18
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONSULTING AGREEMENTS (CONTINUED)
In April 1998, the Company entered into a consulting agreement with a
shareholder for advisory services beginning in July 1998. The compensation for
these services increases from $5,000 per month to $8,500 per month effective
July 1999. The term of the agreement is three years ending in July 2001. The
agreement was entered into in conjunction with the grant of an option in return
for a loan guarantee (see Note 12). The Company defaulted on the agreement
during the year ended September 30, 1998, and as of September 30, 1999, the
Company executed a note payable to the consultant shareholder in an amount of
$90,000 to cure the default (see Note 10).
In August 1999, the Company entered into a consulting agreement with a
director. The compensation is $5,000 per month effective June 1999. The term of
the agreement is three years ending June 2002. The agreement was entered into in
conjunction with the grant of an option in return for the director agreeing to
deliver an unconditional continuing guarantee in favor of DVI Financial
Services, Inc. with respect to the financing agreements entered into between TVA
and DVI Financial Services, Inc. This guarantee continues until the balance of
the applicable financing is fully paid to DVI Financial Services, Inc. (see
Note 9). The agreement was amended in December 1999 (see Notes 12 and 15).
EMPLOYMENT AGREEMENT
During September 1998, the Company entered into a three year employment
agreement with the President and Chief Executive Officer. The agreement provides
for a base salary, and a bonus within the discretion of the Company's Board of
Directors, based on the profitability of the Company, which may be paid in cash
or common stock. The salary adjusts each year and is to be the greater of the
previous year's base salary plus 25% or 75% of the previous year's gross
compensation. In conjunction with this agreement the President has agreed not to
compete with the Company's laser vision correction business during the term of
his employment and for one year after termination.
The Company also entered into a management continuity agreement with the
President that provides for his continued employment as President and Chief
Executive Officer for three years following a change in control of the Company.
If the President is terminated without cause during the three year period the
Company is obligated to pay him within 90 days of termination a lump sum cash
payment equal to 300% of the sum of his highest annual base salary prior to his
termination, plus the highest value for his employee fringe benefits, plus the
highest bonus he received for any year during the three-year period before
termination. A similar lump sum cash payment is also required by the Company
within that same 90 day period for the value of the President's employer
contributions made for his benefit during the last full fiscal year. If the
President is terminated under this agreement without cause, his outstanding
unvested stock options immediately vest and become exercisable. No amounts are
due if the President is terminated with "cause" as defined in the agreement.
This agreement becomes effective only upon the change in control of the Company.
AFFILIATE RELATIONSHIPS
Local doctors who submit appropriate credential information and are approved
by the Company are permitted to use the Company's facility. The doctors are
required to provide proof of medical
F-19
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
AFFILIATE RELATIONSHIPS (CONTINUED)
malpractice insurance and contractually hold the Company harmless from claims
arising from the doctors' use of the Company's facilities. In addition, the
Company has purchased additional medical malpractice insurance to cover Company
technicians.
SALES TAX LIABILITY
TVA was delinquent in the payment of state sales taxes during the years
ended September 30, 1997, 1998 and 1999. The accrual for the unpaid taxes as of
September 30, 1998 and 1999, is shown on the accompanying balance sheet as sales
tax payable. The Company has enrolled in the New Mexico "tax amnesty program"
and accordingly has not recorded any accrual for tax penalties as of
September 30, 1999.
NOTE 12--SHAREHOLDERS' EQUITY
STOCK, OPTIONS AND WARRANTS ISSUED FOR CASH
In April 1999, the Board of Directors approved the Company's offer and
issuance of a maximum of $1,000,000 of its 13% subordinated promissory notes
(the "Debt Instruments") due April 15, 2000 attached with non-detachable common
stock purchase warrants entitling the holder to purchase additional shares of
the Company's common stock at an exercise price of $8.40 per share. During
August and September 1999 the Company elected to increase its offering of these
promissory notes to $1,250,000. The Debt Instruments issued during the period
April 1999 to July 1999, totaling $700,000, included common stock purchase
warrants for the purchase of an aggregate of 350,000 shares of common stock at
an exercise price of $8.40 per share. The Debt Instruments issued during August
and September 1999, totaling $550,000, included an aggregate of 34,384 shares of
common stock which were issued instead of issuing warrants to purchase common
stock. Management has valued these shares at $9.00 per share based on the
proximity of the anticipated initial public offering. Interest due on these
promissory notes is payable on the earlier of April 15, 2000 or the closing of
an initial public offering of the Company's securities.
STOCK, OPTIONS AND WARRANTS ISSUED FOR SETTLEMENT OF DEBT
In April 1999, TVA and TVLC entered into a mutual general release agreement
with MTE/ Triad, Inc. ("MTE") for the settlement by TVLC of TVA's installments
in arrears on capital lease obligation to MTE plus penalties and interest on
late payment, as described in Note 10. The terms of the agreement provide for
the issuance of 41,667 shares of TVI common stock to MTE, and the payment by
TVLC of $170,000 to MTE, $50,000 of which was paid in May 1999 and the balance
of $120,000 is due in January 2000. The amount settled by TVLC on behalf of TVA
is included in amounts due to related parties.
STOCK, OPTIONS AND WARRANTS ISSUED FOR SERVICES
In April 1998, the Company issued 15,625 shares of common stock to a
shareholder in settlement of consulting expenses incurred by the shareholder on
behalf of the Company. Compensation expense
F-20
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED)
STOCK, OPTIONS AND WARRANTS ISSUED FOR SERVICES (CONTINUED)
recognized by the Company amounted to approximately $13,400 and was based on
management's estimate of the fair value of the Company's shares on the date of
issue. Management's estimate of the fair value was based on the value attributed
to shares in the TVA reorganization.
In April 1998, the Company granted a consultant and shareholder an option to
purchase 166,667 shares of common stock in return for a loan guarantee for the
Company in connection with a financing agreement with another corporation. The
options were granted at an exercise price of $.001 per share and were
immediately exercised. Compensation expense recognized by the Company amounted
to approximately $143,000 and was based on management's estimate of the fair
value of the Company's shares on the date of grant. Management's estimate of the
fair value was based on the value attributed to shares in the TVA
reorganization. In addition to the grant of options, the Company also entered
into a consulting agreement with the shareholder (see Note 11).
During 1996, the Company granted the former CEO (and a consultant) of the
Company a warrant to purchase 416,667 shares of common stock at an exercise
price of $.86 per share, in exchange for assistance provided to the Company.
This warrant was retired in exchange for the issuance of 20,000 shares of common
stock. Management has valued these shares at $9.00 per share based on the
proximity of the anticipated initial public offering (see Note 11).
CONTRIBUTED SERVICES OF EXECUTIVE OFFICERS
For the period from the Exchange Date through September 30, 1998, the
executive officers of the Company contributed services with a fair value of
$45,000, at no cost. This amount is included in additional paid-in capital and
in general and administration expenses for the year ended September 30, 1998.
STOCK OPTION PLANS
In 1998, the Company adopted an incentive stock option plan (the Plan) under
which options to purchase up to 458,332 shares of common stock may be granted to
officers, employees or directors of the Company, as well as consultants,
independent contractors or other service providers of the Company. Incentive
options may be granted at an exercise price equal to the fair market value of
the shares on the date of the grant. The Plan provides for grants of options
with a term of up to 10 years with a "cashless exercise" provision whereby the
holder may exercise the option and tender payment for the option shares by
surrendering a number of shares of common stock whose value would equal the cash
required to exercise an additional number of options.
In 1998, pursuant to the Plan, the Company granted options to purchase
458,332 shares of common stock to officers, employees and directors under the
Plan. These options have an exercise price of $.86.
In April 1999, the Board of Directors surrendered a portion of certain stock
options previously granted to them by the Company pursuant to the Plan, in
exchange for $.10 per option surrendered. The total amount due to the directors
as a result of the above surrender is $117,708, to be paid in ten
F-21
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLANS (CONTINUED)
equal quarterly installments. This amount is included in "Expenses relating to
debt financing and agreements to retire stock options in preparation of proposed
public offering". The stock option figures above have been restated as though
the surrender took place on the date the options were granted.
In August 1999, the Company granted a shareholder an option to purchase
83,333 shares of common stock in return for a loan guarantee for the Company in
connection with a financing agreement with another corporation (see Note 9 and
"consulting agreements" Note 11). In December 1999, the agreement was amended
and the options were granted at an exercise price of $6.15 per share (see
Note 15). The Company has recorded deferred compensation costs and a related
increase to additional paid-in capital of $125,000 for the difference between
the grant price and the deemed fair market value of the Company's common stock
of $7.65 per share at the date of grant. Such compensation costs will be
recognized on a straight line basis over the vesting period of the options,
which is three years from the grant date. Management's estimate of the fair
value of $7.65 per share is lower than the anticipated initial public offering
price of $9.00 per share due to (i) the restrictive nature of such options
including lack of voting rights for two years from the exercise of the option,
future vesting, restrictions on transferability of the option and the underlying
shares; and (ii) there has been no public market for the common stock of the
Company.
Companies that do not choose to adopt the expense recognition rules of SFAS
No. 123 will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion (APB) No. 25, but are required to provide
pro forma disclosures of the compensation expense determined under the
fair-value provisions of SFAS No. 123. APB No. 25 requires no recognition of
compensation expense for most of the stock-based compensation arrangements
provided by the Company, namely, broad-based employee stock purchase plans and
option grants where the exercise price is equal to the market price at the date
of the grant.
The Company has elected to account for incentive grants and grants under its
Plan following APB No. 25 and related interpretations. Accordingly, no
compensation costs have been recognized for incentive options for the years
ended September 30, 1998 and 1999. The Company has adopted the disclosure
provisions of SFAS No. 123 effective October 1, 1996. Under SFAS No. 123, the
fair value of each option granted during the years ended September 30, 1998 and
1999 was estimated on the measurement date utilizing the then current fair value
of the underlying shares, as estimated by management, less the exercise price
discounted over the average expected life of the options of 10 years, with an
average risk free interest rate ranging between 5% and 6%, price volatility of
.1 and no dividends.
F-22
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLANS (CONTINUED)
Had compensation cost for all awards been determined based on the fair value
method as prescribed by SFAS No.123, reported net (loss) and net (loss) per
common share would have been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
------------- -------------
<S> <C> <C>
Net (loss):
As reported...................................... $(301,564) $ (842,693)
Pro forma........................................ $(456,986) $ (842,693)
Basic and diluted net (loss) per share:
As reported...................................... $ (.14) $ (.37)
Pro forma........................................ $ (.21) $ (.37)
</TABLE>
A summary of the activity of the stock options for the years ended
September 30, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of period.... -- $-- 458,332 $0.86
Granted............................... 458,332 0.86 83,333 6.15
Forfeited............................. -- -- (83,333) 0.86
Expired............................... -- -- -- --
------- --------- ------- ---------
Outstanding at end of period.......... 458,332 $0.86 458,332 $1.82
======= ========= ======= =========
Exercisable at end of period.......... 458,332 $0.86 374,999 $0.86
======= ========= ======= =========
Weighted-average fair value of options
granted during the period........... $0.34 $4.22
========= =========
Weighted-average remaining contractual
life of options outstanding at end
of period........................... 9.6 years 8.8 years
</TABLE>
F-23
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 13--INCOME TAXES
Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for financial
reporting and the amounts used for income tax purposes. The tax effect of
temporary differences consisted of the following as of September 30:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 315,900 $ 659,000
--------- ---------
Gross deferred tax assets............................. 315,900 659,000
Less valuation allowance.............................. (274,700) (601,000)
--------- ---------
41,200 58,000
Deferred tax liabilities, equipment................... (41,200) (58,000)
--------- ---------
$ -- $ --
========= =========
</TABLE>
Realization of deferred tax assets is dependant upon sufficient future
taxable income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income. As the
achievement of required future taxable income is uncertain, the Company recorded
a valuation allowance. The valuation allowance increased by $90,200 and $326,300
from 1997 and 1998, respectively.
As of September 30, 1999, the Company has net operating loss carryforwards
for both federal and state income tax purposes. Federal and state net operating
loss carryforwards totaling approximately $1,656,000 expire as follows: $199,000
in 2011, $282,000 in 2012, $298,000 in 2018 and $877,000 in 2019. Due to federal
and state laws, the availability of the operating loss carryforwards are limited
due to a cumulative change in the Company's ownership resulting in a change in
control. The Company had such a change during the year ended September 30, 1998.
The Company has not yet calculated the limitation of the utilization of the net
operating loss carryforwards.
A reconciliation of the effective tax rates with the federal statutory rate
is as follows for the years ended September 30:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Income tax benefit at 35% statutory rate.............. $(105,000) $(287,900)
Change in valuation allowance......................... 90,200 326,300
Nondeductible expenses................................ 18,000 1,000
State income taxes, net............................... (4,000) (39,500)
Other................................................. 800 100
--------- ---------
$ -- $ --
========= =========
</TABLE>
NOTE 14--RESTATEMENT
The financial statements at September 30, 1998 have been restated to account
for additional compensation expense of $45,000 recorded by the Company as a
result of contributed services by
F-24
<PAGE>
TRUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1999
NOTE 14--RESTATEMENT (CONTINUED)
executive officers (see Note 12), additional consulting expense of $10,938 and
$128,334 recorded by the Company on the issue of 15,625 shares of common stock
to a shareholder and the grant of 166,667 options to purchase 166,667 shares of
common stock, which were exercised, to a consultant and shareholder (see
Note 12).The result of these items increased the net loss for the year ended
September 30, 1998 by $184,272 and net loss per share by $.09.
NOTE 15--SUBSEQUENT EVENTS
In November 1999, the Company issued a promissory note in the amount of
$150,000 to TVLC Finance, Inc., a corporation controlled by the CEO of the
Company. The note bears interest at 13%, and interest and principal are payable
on maturity in December 2000. TVLC Finance, Inc. in turn issued $150,000 of
promissory notes with the same terms as those issued by the Company. In
conjunction with these transactions, the Company arranged for one of its
shareholders to transfer 9,378 shares of the Company's common stock to the
purchasers of the promissory notes issued by TVLC Finance, Inc. Accordingly, the
Company will record deferred financing costs in the amount of $84,402 based on
the anticipated initial public offering price of $9 per share, which will be
amortized over the period from the date of issue through the maturity date.
In December 1999, the Company amended the August 1999 consulting agreement
entered into with a director in conjunction with the grant of an option in
return for the director agreeing to deliver an unconditional continuing
guarantee in favor of DVI Financial Services, Inc. (see Note 9 and "consulting
agreements" Note 11). The agreement was amended as follows: (i) the term of the
consulting agreement was extended to December 2002; (ii) the exercise price of
the option was increased from $.86 to $6.15; (iii) the vesting period increased
from being immediately exercisable to vesting three years from the date of
grant; and (iv) the option was restricted as to transferability and the shares
lack voting rights for two years from the exercise of the option.
F-25
<PAGE>
[Inside back cover of prospectus depicts two
photographic charts, one depicting a diagram of
laser vision correction of myopia--ablation
depth and the second depicting excimer laser
correction of hyperopia--ablation depth.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON, OR ANY OTHER PERSON TO PROVIDE YOU
WITH DIFFERENT INFORMATION OR REPRESENT ANYTHING THAT IS NOT CONTAINED IN THIS
PROSPECTUS. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE ACCURATE AS OF THE
DATE ON THE FRONT COVER OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION,
RESULTS OF OPERATIONS, AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. THIS
PROSPECTUS IS AN OFFER TO SELL ONLY THE UNITS, AND COMPONENTS THEREOF, OFFERED
BY THIS PROSPECTUS, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT
IS LAWFUL TO DO SO.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Cautionary Note Regarding Forward-
Looking Statements.................. 11
Use Of Proceeds....................... 11
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations....................... 17
Business.............................. 23
Management............................ 33
Certain Transactions.................. 40
Principal Stockholders................ 44
Description Of Securities............. 46
Shares Eligible For Future Sale....... 50
Underwriting.......................... 52
Legal Matters......................... 54
Experts............................... 54
Index To Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 2000, 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS THAT
BUY, SELL OR TRADE THE UNITS, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
500,000 UNITS CONSISTING OF
TWO SHARES OF COMMON STOCK
AND ONE REDEEMABLE COMMON
STOCK PURCHASE WARRANT.
[LOGO]
---------------------
PROSPECTUS
---------------------
DIRKS & COMPANY, INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent of the company. The
Delaware General Corporation Law provides that Section 145 is not exclusive of
any other rights to which those seeking indemnification may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. Article XII of the Registrant's Amended Articles of Incorporation
dated March 16, 1999, provides for indemnification by the Registrant of its
directors, officers and employees to the fullest extent permitted by the
Delaware General Corporation Law.
Section 102(b) of the Delaware General Corporation Law permits a corporation
to provide in its certificate of incorporation that a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. The Registrant's Certificate of Incorporation
eliminates the personal liability of directors to the furthest extent
permissible under the Delaware General Corporation Law.
The Registrant has obtained directors' and officers' insurance providing
indemnification for certain of the Registrant's directors, officers and
employees against certain liabilities, prior to the effectiveness of this
offering.
Reference is also made to the underwriting agreement filed as Exhibit 1.1 to
the Registration Statement for information concerning the Underwriters'
obligation to indemnify the Registrant and its officers and directors in certain
circumstances, and our obligation to indemnify the underwriters. Insofar as
indemnification for liabilities arising under the Securities Act 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.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with this offering are
as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 3,694
Nasdaq SmallCap Stock Market Listing Fee.................... $ 3,775
NASD Filing Fee............................................. $ 2,122
Accounting Fees and Expenses*............................... $ 70,000
Printing and Engraving*..................................... $100,000
Legal Fees and Expenses*.................................... $145,000
Blue Sky Fees and Expenses*................................. $ 30,000
Transfer Agent and Registrar Fees*.......................... $ 10,000
Miscellaneous Expenses*..................................... $ 35,409
--------
Total*................................................ $400,000
========
</TABLE>
- ------------------------
* Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Registrant has sold and issued the
following unregistered securities in transactions which were exempt from
registration under the Securities Act of 1933, pursuant to Section 4(2) of the
Securities Act, as they were transactions not involving a public offering:
Pursuant to the Registrant's Stock Purchase Agreement and Plan of
Reorganization dated February 23, 1998, the Registrant issued 1,944,444 shares
of common stock and 1,944,444 warrants to purchase an additional 1,944,444
shares of common stock in a transaction which was exempt from registration under
the Securities Act under Section 4(2) of the Securities Act. The Stock Purchase
Agreement and Plan of Reorganization obligated us to issue these shares of
common stock to purchase the shares of common stock of TrueVision Laser Center
of Albuquerque, Inc. that were at that time owned by TrueVision Laser Centers,
Inc., which at that time owned 84% of the outstanding capital stock of
TrueVision Laser Center of Albuquerque, Inc. Prior to the effective date of the
Stock Purchase and Plan of Reorganization, we were not affiliated with the
purchaser of these shares. Before we entered into the agreement and issued the
shares and warrants, we made available to the purchaser all material information
regarding our business, operations and financial affairs. All of the
Registrant's warrants issued in the reorganization expired without exercise on
April 15, 1999 and are no longer outstanding.
Pursuant to an amended consulting agreement between Wilbur F. Noyes,
formerly our chief executive officer, and us dated August 25, 1999, we issued
20,000 shares of our common stock to Mr. Noyes, in a transaction that was exempt
from registration pursuant to Section 4(2) of the Securities Act. The shares of
common stock issued to Mr. Noyes were issued in settlement of our default under
the terms of Mr. Noyes' previous consulting agreements with us. In exchange for
his shares of common stock, Mr. Noyes provided consulting services to us during
the term of his consulting agreements, including long term strategic planning,
management consulting services, and marketing and finance expertise.
Pursuant to a consulting agreement we entered into with Dr. Howard Silverman
on April 1, 1998, one of our principal shareholders, we granted a common stock
purchase warrant to Dr. Silverman entitling him to purchase 166,667 shares of
our common stock at an exercise price of $.001 per share as a part of his
compensation for consulting services rendered to us. We issued 166,667 shares of
common stock to Dr. Silverman at the time he exercised his common stock purchase
warrant. Our grant of the common stock purchase warrant and the subsequent
issuance of the common stock underlying the warrant were transactions exempt
from registration pursuant to Section 4(2) of the Securities Act.
II-2
<PAGE>
Dr. Silverman, as one of our consultants and an accredited investor, has an
ongoing business relationship with us and our management. When he received his
common stock purchase warrant, and when he exercised the warrant, Dr. Silverman
had full access to our business plans, financial statements and financial
projections. Dr. Silverman also had access to any other corporate information he
requested when he received his warrants and shares. As partial consideration for
his warrant and the shares received after exercising the warrant, Dr. Silverman
delivered his unconditional continuing personal guarantee in favor of DVI
Financial Services, Inc., a company that provided us with financing for the
excimer laser we have in our Albuquerque center. Dr. Silverman, a retired
optometrist, provides us with consulting services, business planning, and
professional advice relative to the service we provide in our vision correction
centers.
In a private placement to accredited investors between April 1999 and
August 1999, which was exempt from registration under the Securities Act
pursuant to Rule 506 of Regulation D promulgated thereunder, the Registrant
offered and sold $1,250,000 principal amount 13% promissory notes due April 15,
2000, with noteholders that purchased between April 1999 and July 1999 also
receiving 2,500 bridge warrants for each $5,000 in principal amount of
promissory notes, which warrants are exercisable to purchase 2,500 shares of our
common stock at $8.40 per share, and noteholders that purchased in August 1999
receiving 1,563 shares of our common stock for each $25,000 in principal amount
of promissory notes. In the aggregate the purchasers of our notes in
August 1999 received 34,384 shares of our common stock.
In a private placement to TVLC Finance, Inc. in November 1999, we sold a
promissory note due March 1, 2001 in the principal amount of $150,000 and which
accrues interest at 13% yearly until the note is due. The offer and sale of this
promissory note is exempt from registration under Section 4(2) of the Securities
Act of 1933. As a part of this transaction, we arranged for one of our
shareholders Michael Thomas, to transfer a total of 9,378 shares of our common
stock to the purchasers of the promissory notes issued by TVLC Finance, Inc.
Mr. Thomas agreed to transfer these shares as an accomodation to us. The
transfer of Mr. Thomas' 9,378 shares of common stock to the purchasers of the
TVLC Finance, Inc. promissory notes is exempt from registration under
Section 4(1) and/or Section 4(2) of the Securities Act of 1933.
ITEM 27. EXHIBITS.
a. The following Exhibits are filed as a part of this registration
statement pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
1.0 Form of Underwriting Agreement
1.2 Form of Representative's Warrant Agreement, including Form
of Representative's Warrant**
1.3 Form of Public Warrant Agreement**
3.1 Articles of Incorporation of Registrant**
3.2 Amendment to Articles of Incorporation of Registrant**
3.3 Certificate of Renewal of Charter Dated July 5, 1995**
3.4 Certificate of Renewal of Charter Dated February 2, 1998**
3.5 By-laws of the Registrant**
3.6 Amended and Restated Bylaws of the Registrant**
3.7 Amended and Restated Bylaws of the Registrant dated
November 26, 1999
3.8 Articles of Incorporation of TrueVision Laser Center of
Albuquerque, Inc.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
3.9 Articles of Incorporation of TrueVision of Nevada, Inc.**
4.3 Specimen of Common Stock Certificate
4.4 Specimen of Common Stock Purchase Warrant
4.5 Form of 13% Promissory Note Due April 15, 2000**
4.6 Promissory Note dated November 30, 1999 to TVLC Finance,
Inc.**
4.7 Form of Common Stock Purchase Warrant**
4.8 Specimen of Unit Certificate
5.0 Opinion of Gregory Bartko, Esq.
10.0 Employment Agreement for John C. Homan Dated September 7,
1998**
10.1 Amended Employment Agreement for John C. Homan Dated August
25, 1999**
10.2 Consulting Agreement for Frank J. Seifert Dated August 23,
1999**
10.3 Amended and restated consulting agreement for Frank J.
Seifert dated December 13, 1999**
10.4 Amended and restated consulting agreement for Frank J.
Seifert dated December 23, 1999
10.5 Non-statutory Stock Option Agreement for Frank J. Seifert
dated December 13, 1999**
10.6 Amended Non-statutory Stock Option Agreement for Frank J.
Seifert dated December 23, 1999
10.7 Consulting Agreement for Howard P. Silverman Dated June 13,
1997**
10.8 Consulting Agreement for Howard P. Silverman Dated April 1,
1998**
10.9 Consulting Agreement for Howard P. Silverman Dated December
1, 1998**
10.10 Amended Consulting Agreement for Howard P. Silverman Dated
August 30, 1999**
10.11 Promissory Note by TrueVision International, Inc. to Howard
P. Silverman Dated September 30, 1999**
10.19 Ophthalmologist Membership Agreement Dated August 16, 1999
Between TrueVision Laser Center of Albuquerque, Inc. and
Dr. Stuart Cooper
10.20 Agreement Between TrueVision International, Inc. and New
Mexico Eye Clinics dated April 23, 1999
23.0 Consent of Gregory Bartko, Esq. (included in opinion filed
as Exhibit 5.0)
23.1 Consent of Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, San Diego,
California, independent auditors
24.0 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")**
27.0 Financial Data Schedule**
</TABLE>
- ------------------------
* To be filed by amendment
** Previously filed
ITEM 28. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the undersigned Registrant has been advised that in the opinion of the
II-4
<PAGE>
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 undersigned Registrant of expenses incurred or
paid by a director, officer or controlling person of the undersigned 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 undersigned 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.
(b) The undersigned Registrant in all instances will provide to the
Underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the undersigned Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of the registration statement as of the time it was
declared effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned 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;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining 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.
II-5
<PAGE>
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 for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Albuquerque, New Mexico, on the 23rd day of December,
1999.
<TABLE>
<S> <C> <C>
TRUEVISION INTERNATIONAL, INC.
By: /S/ JOHN C. HOMAN
-----------------------------------------
John C. Homan
CHIEF EXECUTIVE OFFICER
</TABLE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JOHN C. HOMAN Chief Executive Officer and
------------------------------------------- Director (Principal December 23, 1999
John C. Homan Executive Officer)
* Executive Vice President
------------------------------------------- and Director December 23, 1999
Frank J. Seifert
* Chief Financial Officer
------------------------------------------- (Principal Financial and December 23, 1999
Allison Evans Accounting Officer)
* Director
------------------------------------------- December 23, 1999
C. Richard Hullihen
/s/ JOHN C. HOMAN
-------------------------------------------
*John C. Homan
As Power of Attorney
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- -----------------------
<C> <S>
1.0 Form of Underwriting Agreement
1.2 Form of Representative's Warrant Agreement, including Form
of Representative's Warrant**
1.3 Form of Public Warrant Agreement**
3.1 Articles of Incorporation of Registrant**
3.2 Amendment to Articles of Incorporation of Registrant**
3.3 Certificate of Renewal of Charter Dated July 5, 1995**
3.4 Certificate of Renewal of Charter Dated February 2, 1998**
3.5 By-laws of the Registrant**
3.6 Amended and Restated Bylaws of the Registrant**
3.7 Amended and Restated Bylaws of the Registrant dated
November 26, 1999
3.8 Articles of Incorporation of TrueVision Laser Center of
Albuquerque, Inc.**
3.9 Articles of Incorporation of TrueVision of Nevada, Inc.**
4.3 Specimen of Common Stock Certificate
4.4 Specimen of Common Stock Purchase Warrant
4.5 Form of 13% Promissory Note Due April 15, 2000**
4.6 Promissory Note dated November 30, 1999 to TVLC Finance,
Inc.**
4.7 Form of Common Stock Purchase Warrant**
4.8 Specimen of Unit Certificate
5.0 Opinion of Gregory Bartko, Esq.
10.0 Employment Agreement for John C. Homan Dated September 7,
1998**
10.1 Amended Employment Agreement for John C. Homan Dated August
25, 1999**
10.2 Consulting Agreement for Frank J. Seifert Dated August 23,
1999**
10.3 Amended and restated consulting agreement for Frank J.
Seifert dated December 13, 1999**
10.4 Amended and restated consulting agreement for Frank J.
Seifert dated December 23, 1999
10.5 Non-statutory Stock Option Agreement for Frank J. Seifert
dated December 13, 1999**
10.6 Amended Non-statutory Stock Option Agreement for Frank J.
Seifert dated December 23, 1999
10.7 Consulting Agreement for Howard P. Silverman Dated June 13,
1997**
10.8 Consulting Agreement for Howard P. Silverman Dated April 1,
1998**
10.9 Consulting Agreement for Howard P. Silverman Dated December
1, 1998**
10.10 Amended Consulting Agreement for Howard P. Silverman Dated
August 30, 1999**
10.11 Promissory Note by TrueVision International, Inc. to Howard
P. Silverman Dated September 30, 1999**
10.19 Ophthalmologist Membership Agreement Dated August 16, 1999
Between TrueVision Laser Center of Albuquerque, Inc. and
Dr. Stuart Cooper
10.20 Agreement Between TrueVision International, Inc. and New
Mexico Eye Clinics dated April 23, 1999.
23.0 Consent of Gregory Bartko, Esq. (included in opinion filed
as Exhibit 5.0)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- -----------------------
<C> <S>
23.1 Consent of Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, San Diego,
California, independent auditors
24.0 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")**
27.0 Financial Data Schedule**
</TABLE>
- ------------------------
* To be filed by amendment
** Previously filed
<PAGE>
Exhibit 1.0
OH&S DRAFT
12/23/99
500,000 UNITS, EACH UNIT CONSISTING OF
TWO SHARES OF COMMON STOCK AND
ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
TRUEVISION INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
New York, New York
___________, 1999
DIRKS & COMPANY, INC.
As Representative of the
Several Underwriters listed
on Schedule A hereto
520 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
TrueVision International, Inc., a Delaware corporation (the
"Company") confirms its agreement with Dirks & Company, Inc. ("Dirks") and each
of the several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom Dirks is acting as representative
(in such capacity, Dirks shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective number of
units ("Units") set forth in Schedule A hereto, each Unit consisting of two (2)
shares of the Company's Common Stock, $0.001 par value ("Common Stock") and one
(1) redeemable common stock purchase warrant (the "Redeemable Warrants"). Each
Redeemable Warrant is exercisable for one share of Common Stock. The Common
Stock and Redeemable Warrants comprising the Units will be separately tradable
upon thirty (30) days from the effective date of this offering and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on [____________], 2000 [twelve months after the date of
the Prospectus] until [______________], 2004 [five years after the date of the
Prospectus], unless previously redeemed by the Company, at an initial exercise
price of $9.60 per share [120% of the initial public offering price of the
Common Stock]. The Redeemable Warrants may be redeemed by the Company, in whole
but not in part, at a redemption price of $.10 per warrant at any time
commencing [__________],
<PAGE>
2000 [twelve months after the date of the Prospectus] on thirty (30) days' prior
written notice, provided that the average closing sale price of the Common Stock
as reported on the American Stock Exchange equals or exceeds $16.00 [200% of the
IPO price of the Common Stock] per share, for any twenty (20) days within a
period of thirty (30) consecutive trading days ending on the fifth (5th) trading
day prior to the date of the notice of redemption, all in accordance with the
terms and conditions of the Warrant Agreement (herein defined).
Upon the Representative's request, as provided in Section 2(b)
of this Agreement, the Company shall also issue and sell to the Underwriters up
to an additional 150,000 shares of Common Stock and/or 75,000 additional
Redeemable Warrants for the purpose of covering over-allotments, if any (the
"Option Securities"). The shares of Common Stock issuable upon exercise of the
Redeemable Warrants are hereinafter referred to as the "Warrant Securities." The
Company also proposes to issue and sell warrants to the Representative (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
100,000 Shares of Common Stock and/or 50,000 Redeemable Warrants. The redeemable
Common Stock purchase warrants issuable upon exercise of the Representative's
Warrants are hereinafter sometimes referred to herein as the "Representative's
Redeemable Warrants." The Representative's Redeemable Warrants are identical to
the Redeemable Warrants. The shares of Common Stock issuable upon exercise of
the Representative's Warrants and the shares of Common Stock issuable upon
exercise of the Representative's Redeemable Warrants and the Representative's
Redeemable Warrants are sometimes collectively referred to herein as the
"Representative's Securities." The Firm Securities, the Option Securities, the
Representative's Warrants, the Representative's Redeemable Warrants, the
Representative's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with,
the Representative as of the date hereof, and as of the Closing Date
(hereinafter defined) and the Option Closing Date (hereinafter defined), if any,
as follows:
(i) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333-86981),
including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Firm Securities and the
Option Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of
the Act, and the rules and regulations (the "Regulations") of the
Commission under the Act. The Company will not file any other
amendment to said registration statement which the Representative
shall have objected to in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the
prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including,
but not limited to those documents or
2
<PAGE>
information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b)
of Rule 430(A) of the Regulations), is hereinafter called the
"Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(ii) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of
any Preliminary Prospectus, the Registration Statement or the
Prospectus or any part of any thereof and no proceedings for a stop
order suspending the effectiveness of the Registration Statement or
any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary
Prospectus, Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the
Rules and Regulations, and none of the Preliminary Prospectus,
Registration Statement or Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein and necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in
conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus. The Company has filed all reports, forms or
other documents required to be filed under the Act or the Exchange
Act and the respective Rules and Regulations thereunder, and all such
reports, forms or other documents, when so filed or as subsequently
amended, complied in all material respects with the Act and the
Exchange Act and the respective rules and regulations thereunder.
(iii) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date and each
Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales
by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be
stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the
Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of
any Underwriters expressly for use in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
3
<PAGE>
(iv) Each of the Company, the Company's majority owned
subsidiary, TrueVision Laser Center of Albuquerque, Inc., a New
Mexico Corporation ("TVLCA"), and the Company's wholly-owned
subsidiary TrueVision of Nevada, Inc., a Nevada Corporation ("TVN"
and together with TVLCA are hereinafter referred to individually as a
"Subsidiary" and collectively as the "Subsidiaries"), has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of its incorporation. Each of the Company
and the Subsidiaries is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing. The Company
owns, directly or indirectly, eighty-four percent (84%) of the
outstanding capital stock of TVLCA and one-hundred percent (100%) of
the outstanding capital stock of TVN, and all of such shares have
been validly issued, are fully paid and non-assessable, were not
issued in violation of any preemptive rights, and except as set forth
in the Prospectus, are owned free and clear of any liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever. Each of the Company
and the Subsidiaries has all requisite corporate power and authority,
and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its
business as described in the Prospectus; each of the Company and the
subsidiaries is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state and local laws, rules
and regulations; and each of the Company and the Subsidiaries has not
received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company or the
Subsidiaries. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and
regulations on the Company's and the Subsidiaries' businesses as
currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances in
which they were made, not misleading.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Securities" and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's Warrant Agreement and
the Warrant Agreement (as defined in Section 1(a)(xxxiii) of this
Agreement) and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform or, when
issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the
Prospectus. All issued
4
<PAGE>
and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the
holders thereof have no rights of rescission with respect thereto,
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The Securities to
be sold by the Company hereunder and pursuant to the Representative's
Warrant Agreement and the Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof and the
Representative's Warrant Agreement of the Securities to be sold by
the Company hereunder, the Underwriters will acquire good and
marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever asserted against
the Company or any affiliate of the Company.
(vi) The consolidated financial statements of the Company
and the Subsidiaries, together with the related notes and schedules
thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and
the results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply
and the pro forma and the as-adjusted financial information included
in the Registration Statement and Prospectus presents fairly on a
basis consistent with that of the audited financial statements
included therein, what the Company's pro forma and as-adjusted
capitalization would have been for the respective periods and as of
the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been
prepared in conformity with generally accepted accounting principles
and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial
or otherwise, or in the earnings, position, prospects, stockholders'
equity, value, operation, properties, business, or results of
operations of the Company and the Subsidiaries, whether or not
arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company and the Subsidiaries
conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings
"Prospectus Summary," "Selected Consolidated Financial Data,"
"Capitalization," "Dilution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly
presents, on the basis stated in the Prospectus, the information set
forth therein, have been derived from or compiled on a basis
consistent with that of the audited financial statements included in
the Prospectus.
5
<PAGE>
(vii) Each of the Company and the Subsidiaries (i) has
paid all federal, state, local, and foreign taxes for which it is
liable, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information
returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and
payable, and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i)
the issuance by the Company of the Securities, (ii) the purchase by
the Underwriters of the Firm Securities and Option Securities from
the Company, and the purchase by the Representative of the
Representative's Warrants from the Company, (iii) the consummation by
the Company of any of its obligations under this Agreement or the
Representative's Warrant Agreement, or (iv) resales of the Firm
Securities and the Option Securities in connection with the
distribution contemplated hereby.
(ix) Each of the Company and the Subsidiaries maintains
insurance policies, including, but not limited to, general liability
and property insurance, which insures the Company, the Subsidiaries
and their respective employees, against such losses and risks
generally insured against by comparable businesses. None of the
Company nor the Subsidiaries (A) has not failed to give notice or
present any insurance claim with respect to any matter, including but
not limited to the Company's business, property or employees, under
the insurance policy or surety bond in a due and timely manner, (B)
does not have any disputes or claims against any underwriter of such
insurance policies or surety bonds or has not failed to pay any
premiums due and payable thereunder, or (C) has not failed to comply
with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any
Subsidiary.
(x) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same),
or involving the properties or business of, the Company or the
Subsidiaries which (i) questions the validity of the capital stock of
the Company, this Agreement, the Representative's Warrant Agreement
or the Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement or the Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all material
respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company and the Subsidiaries
taken as a whole.
6
<PAGE>
(xi) The Company has full legal right, power and authority
to authorize, issue, deliver and sell the Securities, enter into this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally,
(ii) as enforceability of any indemnification or contribution
provisions may be limited under applicable laws or the public
policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceedings may be brought. None of the Company's
issue and sale of the Securities, execution or delivery of this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement and the
Prospectus, and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(xii) No consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, this Agreement, the
Representative's Warrant Agreement and the Public Warrant Agreement,
the performance of this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person
may have for the issue and/or sale of any of the Securities, except
such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws and the rules of
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the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the Underwriters' purchase and distribution of the
Securities and the Representative's Warrants to be sold by the
Company hereunder.
(xiii) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other
documents filed as exhibits to the Registration Statement to which
the any of the Company or the Subsidiaries is a party or by which it
may be bound or to which any of its assets, properties or business
may be subject have been duly and validly authorized, executed and
delivered by the Company or the Subsidiaries, and constitute the
legal, valid and binding agreements of the Company or the
Subsidiaries, enforceable against each of them in accordance with
their respective terms. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate
in all material respects and fairly present the information required
to be shown with respect thereto by Form SB-2, and there are no
agreements, contracts or other documents which are required by the
Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or
filed as required, and the exhibits which have been filed are in all
material respects complete and correct copies of the documents of
which they purport to be copies.
(xiv) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and the
Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, neither the Company nor the Subsidiaries has (i)
issued any securities or incurred any liability or obligation, direct
or contingent, for borrowed money, (ii) entered into any transaction
other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of
its capital stock of any class, and there has not been any change in
the capital stock, or any material change in the debt (long or short
term) or liabilities or material adverse change in or affecting the
condition, financial or otherwise, earnings, prospects, stockholders'
equity, value, operations, properties, business or results of
operations of the Company or the Subsidiaries.
(xv) No default exists in the due performance and
observance of any term, covenant or condition of any license,
contract, indenture, mortgage, installment sale agreement, lease,
deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase
order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to
which any of the Company or the Subsidiaries is a party or by which
any of the Company or the Subsidiaries may be bound or to which the
property or assets (tangible or intangible) of any of the Company or
the Subsidiaries is subject or affected.
(xvi) Each of the Company and the Subsidiaries has
generally enjoyed a satisfactory employer-employee relationship with
its employees and is in compliance with all federal, state, local,
and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving any of the Company or
the Subsidiaries by the U.S. Department of Labor, or any other
governmental agency
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responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. There is no unfair labor practice
charge or complaint any of the Company or the Subsidiaries pending
before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against
or involving any of the Company or the Subsidiaries or any
predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of any of the Company or the
Subsidiaries, and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing
collective bargaining agreements any of the Company or the
Subsidiaries. No labor dispute with the employees of the Company
exists, or is imminent.
(xvii) None of the Company nor any of the Subsidiaries
maintains, sponsors or contributes to any program or arrangement that
is an "employee pension benefit plan," an "employee welfare benefit
plan," or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). None of the Company nor any of the Subsidiaries maintains or
contributes, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the
Code, which could subject the Company or the Subsidiaries to any tax
penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating
that such ERISA Plan and the attendant trust are qualified
thereunder. None of the Company nor any of the Subsidiaries has never
completely or partially withdrawn from a "multiemployer plan."
(xviii) None of the Company, the Subsidiaries, nor any of
its or their respective employees, directors, stockholders, partners,
or affiliates (within the meaning of the Rules and Regulations) of
any of the foregoing has taken or will take, directly or indirectly,
any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or
otherwise.
(xix) None of the patents, patent applications,
trademarks, service marks, service names, trade names and copyrights
and none of the licenses and rights to the foregoing presently owned
or held by any of the Company or the Subsidiaries, are in dispute or
are in any conflict with the right of any other person or entity.
Each of the Company and the Subsidiaries (i) owns or has the right to
use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, patent applications,
trademarks, service marks, service names, trade names and copyrights,
technology and licenses and rights
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with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed right of any
person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability
whatsoever to make any payment by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, patent
application, trademark, service mark, service names, trade name,
copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or
circumstances that may give rise to the same) against the Company
which challenges the exclusive rights of the Company and the
Subsidiaries with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or
licenses or rights to the foregoing used in the conduct of its
business, or which challenge the right of the Company and the
Subsidiaries to use any technology presently used or contemplated to
be used in the conduct of its business.
(xx) Each of the Company and the Subsidiaries owns and has
the unrestricted right to use all trade secrets, know-how (including
all other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), inventions, technology, designs,
processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") that
are material to the development, manufacture, operation and sale of
all products and services sold or proposed to be sold by any of the
Company or the Subsidiaries, free and clear of and without violating
any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the
possibility exists that other persons or entities.
(xxi) Each of the Company and the Subsidiaries has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus,
to be owned or leased by it free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and
payable.
(xxii) Pannel Kerr Forster, Certified Public Accountants,
A Professional Corporation ("Pannel Kerr Forster"), whose report is
filed with the Commission as a part of the Registration Statement,
are independent certified public accountants as required by the Act
and the Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally
binding and enforceable agreements ("Lock-Up Agreement") pursuant to
which all of the officers and directors of the Company, holders of
Common Stock and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock have agreed (i) not
to, directly or indirectly, offer, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate, distribute or
otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or
10
<PAGE>
evidencing any right to purchase or subscribe for any shares of
Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than twelve (12) months following
the effective date of the Registration Statement without the prior
written consent of the Representative and the Company, and, (ii) for
a period extending twenty-four (24) months following the effective
date of the Registration Statement, that all sales of such securities
issued by the Company shall be made through the Underwriter in
accordance with its customary brokerage policies. In addition, the
Company shall not sell or offer for sale any of its securities for a
period of twelve (12) months from the effective date of the
Registration Statement without the consent of the Representative
except pursuant to options and warrants issued on the effective date
of the Registration Statement. The Company will cause the Transfer
Agent, as defined below, to mark an appropriate legend on the face of
stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(xxiv) There are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the
Company, the Subsidiaries, or any of its or their respective
officers, directors, stockholders, partners, employees or affiliates
that may affect the Underwriters' compensation, as determined by the
NASD.
(xxv) The Units, the Common Stock and the Redeemable
Warrants have been approved for quotation on the Nasdaq SmallCap
Stock Market.
(xxvi) None of the Company, the Subsidiaries, nor any of
its or their respective directors, officers, employees, agents, or
any other person acting on behalf of the Company or the Subsidiaries,
has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of any of
the Company or the Subsidiaries (or assist any of the Company or the
Subsidiaries in connection with any actual or proposed transaction)
which (a) might subject any of the Company of the Subsidiaries, or
any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b)
if not given in the past, might have had a materially adverse effect
on the assets, business or operations of any of the Company or the
Subsidiaries, or (c) if not continued in the future, might adversely
affect the assets, business, operations or prospects of any of the
Company of the Subsidiaries. The Company's and each Subsidiary's
internal accounting controls are sufficient to cause each of the
Company and the Subsidiaries to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
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(xxvii) Each of the Company and the Subsidiaries confirms
as of the date hereof that it is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba, and each of the Company and
the Subsidiaries further agrees that if it or any affiliate commences
engaging in business with the government of Cuba or with any person
or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the
Company's, or any affiliate's, business with Cuba or with any person
of affiliate located in Cuba changes in any material way, each of the
Company and the Subsidiaries will provide the Department notice of
such business or change, as appropriate, in a form acceptable to the
Department.
(xxviii) Except as set forth in the Prospectus, no
officer, director or stockholder of any of the Company or the
Subsidiaries, or any "affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Rules and Regulations) of
any of the foregoing persons or entities has, either directly or
indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold
or are proposed to be furnished or sold by any of the Company or the
Subsidiaries, or (B) purchases from or sells or furnishes to any of
the Company or the Subsidiaries any goods or services, or (ii) a
beneficial interest in any contract or agreement to which any of the
Company or the Subsidiaries is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or any
Subsidiary, and any officer, director, or Principal Stockholder (as
such term is defined in the Prospectus) of the Company or any
Subsidiary, or any partner, affiliate or associate of any of the
foregoing persons or entities.
(xxix) Any certificate signed by any officer of the
Company or any Subsidiary, and delivered to the Representative or to
Underwriters' Counsel (as defined herein) shall be deemed a
representation and warranty by the Company to the Representative as
to the matters covered thereby.
(xxx) The minute books of each the Company and the
Subsidiaries have been made available to the Representative and
contain a complete summary of all meetings and actions of the
directors, stockholders, audit committee, compensation committee and
any other committee of the Board of Directors of each of the Company
and the Subsidiaries, respectively, since the time of its
incorporation, and reflects all transactions referred to in such
minutes accurately in all material respects.
(xxxi) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of
the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement
to be filed by the Company or to require the Company to file a
registration statement under the Act and
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<PAGE>
no person or entity holds any anti-dilution rights with respect to
any securities of the Company.
(xxxii) The Company has as of the effective date of the
Registration Statement (i) entered into employment an agreement with
John C. Homan in the form filed as an Exhibit to the Registration
Statements, and (ii) purchased term key-man insurance on the like of
John C. Homan in the amount of $1,000,000, which policy names the
Company as sole beneficiary thereof.
(xxxiii) Each of the Company and the Subsidiaries has
entered into a warrant agreement, substantially in the form filed as
Exhibit 1.3 to the Registration Statement (the "Warrant Agreement"),
with Continental Stock Transfer & Trust Company, in form and
substance satisfactory to the Underwriter, with respect to the
Redeemable Warrants and providing for the payment of warrant
solicitation fees. The Warrant Agreement has been duly and validly
authorized by the Company and, assuming due execution by the parties
thereto other than the Company, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
obligations to indemnify or contribute to losses may be limited by
applicable law).
(xxxiv) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus under the
caption "Use of Proceeds" will not be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xxxv) Each of the Company and the Subsidiaries maintains
a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xxxvi) Each of the Company and the Subsidiaries has
reviewed its operations and that of any third parties with which the
Company or the Subsidiaries has a material relationship to evaluate
the extent to which the business or operations of the Company or the
Subsidiaries will be affected by the Year 2000 Problem. As a result
of such review, the disclosure in the Registration Statement under
Year 2000 is accurate and complies in all material respects with the
rules and regulations of the Act. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval,
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retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter
agrees to purchase from the Company at a price of $______ per Unit [90% of the
initial public offering price], that number of Firm Securities set forth in
Schedule A opposite the name of such Underwriter, subject to adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of an additional 75,000 Units at a
price of $______ per Unit [90% of the initial public offering price]. The option
granted hereby will expire 45 days after (i) the date the Registration Statement
becomes effective, if the Company has elected not to rely on Rule 430A under the
Rules and Regulations, or (ii) the date of this Agreement if the Company has
elected to rely upon Rule 430A under the Rules and Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which Representative
is then exercising the option and the time and date of payment and delivery for
any such Option Securities. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Representative, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Representative and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of Dirks &
Company, Inc. at 520 Madison Avenue, New York, New York, 10022, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________, 1999 or at such other time and date as shall be agreed upon by the
Representative and the Company, but not less than three (3) nor more than seven
(7) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called "Closing Date").
In addition, in the event that any or all of the Option Securities are purchased
by the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company.
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Delivery of the certificates for the Firm Securities and the Option Securities,
if any, shall be made to the Underwriters against payment by the Underwriters of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company for the Firm Securities and the Option Securities, if
any, by New York Clearing House funds. Certificates for the Firm Securities and
the Option Securities, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Representative may request in writing at least
two (2) business days prior to the Closing Date or the relevant Option Closing
Date, as the case may be. The certificates for the Firm Securities and the
Option Securities, if any, shall be made available to the Representative at such
office or such other place as the Representative may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior to
Closing Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell the
Representative's Warrants to the Representative at a purchase price of $.0001
per warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 100,000 shares of Common Stock and/or 50,000 Redeemable Warrants.
The Representative's Warrants shall be exercisable for a period of four (4)
years commencing one (1) year from the effective date of the Registration
Statement at a price equaling one hundred twenty percent (120%) of the initial
public offering price of the shares of Common Stock and Redeemable Warrants. The
Representative's Redeemable Warrants are identical to the Redeemable Warrants.
The Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 1.2 to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE UNITS. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Firm Securities and such Option
Securities as the Representative may determine (other than to residents of or in
any jurisdiction in which qualification of the Units is required and has not
become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Units has been completed to such
extent as the Representative, in its discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Units by
the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
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<PAGE>
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities regulatory authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifteenth business day after the effective date
of the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Representative in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or Orrick, Herrington & Sutcliffe LLP ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process in any
such jurisdiction. In each jurisdiction where such
16
<PAGE>
qualification shall be effected, the Company will, unless the Representative
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may reasonably be required by the laws of such jurisdiction to continue
such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative copies
of such amendment or supplement as soon as available and in such quantities as
the Representative may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve (12) consecutive months after the effective
date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the
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Company for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company, its subsidiaries (and any future subsidiary)
or its businesses which the Representative may request.
(vii) During such seven-year period, if the Company has an
active subsidiary, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiary(ies) are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is
not so consolidated.
(i) The Company will maintain a Transfer Agent and Warrant
Agent ("Transfer Agent") and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Representative or on
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with originally-executed
copies of duly executed, legally binding and enforceable Lock-Up Agreements
which are in form and substance satisfactory to the Underwriter. On or before
the Closing Date, the Company shall deliver instructions to its transfer agent
authorizing such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
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(l) The Company agrees that, for a period of twelve (12)
months commencing on the effective date of the Registration Statement, and
except as contemplated by this Agreement, it and its present and future
Subsidiaries will not, without the prior written consent of the Underwriter
issue, sell, contract or offer to sell, grant an option for the purchase or sale
of, assign, transfer, pledge, distribute or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any option, right or warrant with
respect to any shares of Common Stock or any type of capital stock having voting
or dividend rights on a parity with or superior to the Common Stock, except
pursuant to stock options or warrants issued on the date hereof, for cash at
less than the greater of the initial public offering price of shares of Common
Stock or the then market value of such shares.
(m) None of the Company, the Subsidiaries, nor any of its or
their officers, directors, stockholders, nor any of their respective affiliates
(within the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(n) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(o) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in its letter to be
furnished pursuant to Section 6(j) hereof.
(q) The Company shall cause the Units, the Common Stock and
the Redeemable Warrants to be quoted on the Nasdaq SmallCap Stock Market and for
a period of seven (7) years from the date hereof, use its best efforts to
maintain the Nasdaq SmallCap Stock Market listing of the Units, if the
securities underlying the Units are not separately tradable, the Common Stock
and the Redeemable Warrants to the extent outstanding.
(r) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Representative's request and
at the Company's sole expense, (i) daily consolidated transfer sheets relating
to the Units, the Common Stock and the Redeemable Warrants (ii) the list of
holders of all of the Company's securities and (iii) a Blue
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<PAGE>
Sky "Trading Survey" for secondary sales of the Company's securities prepared by
counsel to the Company.
(s) As soon as practicable, but in no event more than thirty
(30) days from the effective date of the Registration Statement, the Company
agrees to take all necessary and appropriate actions to be included in Standard
and Poor's Corporation Descriptions and Moody's OTC Manual and to continue such
inclusion for a period of not less than seven (7) years. (t) Until the
completion of the distribution of the Firm Securities and the Option Securities,
the Company shall not without the prior written consent of the Representative
and Underwriters' Counsel, issue, directly or indirectly, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering contemplated hereby, other than trade releases
issued in the ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
(u) Commencing one year from the date hereof, to pay the
Underwriter a warrant solicitation fee equal to five percent (5%) of the
exercise price of the Redeemable Warrants, payable on the date of the exercise
thereof on terms provided in the Public Warrant Agreement. The Company will not
solicit the exercise of the Redeemable Warrants through any solicitation agent
other than the Underwriter. The Underwriter will not be entitled to any warrant
solicitation fee unless the Underwriter provides bona fide services in
connection with any warrant solicitation and the investor designates, in
writing, that the Underwriter is entitled to such fee.
(v) For a period equal to the lesser of (i) three (3) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 or Form S-1 (or other appropriate
form) for the registration under the Act of the Representative's Securities.
(w) For a period of five (5) years after the effective date of
the Registration Statement, the Representative shall have the right to designate
for election one (1) individual to the Company's Board of Directors (the
"Board"). Such person shall be mutually acceptable to the Company and the
Representative. In the event the Representative elects not to exercise such
right, then it may designate one (1) individual to attend meetings of the
Company's Board. The Company shall notify the Representative of each meeting of
the Board and the Company shall send to such individual all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his attendance of meetings of the Board.
(x) For a period of twenty-four (24) months after the
effective date of the Registration Statement, the Company shall not restate,
amend or alter any term of any written employment, consulting or similar
agreement entered into between the Company and any officer, director or key
employee as of the effective date of the Registration Statement in a manner
which is more favorable to such officer, director or key employee, without the
prior written consent of the Representative.
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<PAGE>
(y) For a period of twenty-four (24) months after the
effective date of the Registration Statement, all holders of shares Common Stock
and Securities exercisable, convertible or exchangeable for shares of Common
Stock, shall agree to make any sale of the Securities of the Company owned by
them through the Representative.
(z) For a period of three (3) years after the effective date
of the Registration Statement, the Company, any subsidiaries and any affiliates
hereby grant a thirty-day (30) right of first refusal for any sale of securities
to be made by the Company, any affiliates and any subsidiaries.
(aa) The Company will use its best efforts to maintain the
effectiveness of the Registration Statement for a period of five years after the
date hereof.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, the Representative's Warrant Agreement and the
Warrant Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, (including mailing and
handling charges) filing, delivery and mailing (including the payment of
postage, overnight delivery or courier charges with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing (including the payment of postage with respect
thereto) and delivery of this Agreement, the Representative's Warrant agreement,
the Warrant Agreement, agreements with selected dealers, and related documents,
including the cost of all copies thereof and of the Preliminary Prospectuses and
of the Prospectus and any amendments thereof or supplements thereto supplied to
the Underwriters and such dealers as the Underwriters may request, in quantities
as hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the Securities including, but not limited to, (x) the purchase by the
Underwriters of the Firm Securities and the Option Securities and the purchase
by the Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Firm Securities
and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel or consultant retained, (vii) fees and expenses
of the transfer agent and registrar, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the
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<PAGE>
Commission and the NASD, and (x) the fees and expenses incurred in connection
with the quotation of the Securities on the Nasdaq SmallCap Stock Market and any
other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 11, (i) the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Securities, twenty-five thousand dollars ($25,000) of which has been paid
to date. In the event the Representative elects to exercise the overallotment
option described in Section 2(b) hereof, the Company agrees to pay to the
Representative on the Option Closing Date (by certified or bank cashier's check
or, at the Representative's election, by deduction from the proceeds of the
Option Securities) a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Option
Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
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<PAGE>
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the
favorable opinion of Gregory Bartko, Esq., counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiaries (A) has been
duly organized and is a validly existing corporation in good standing
under the laws of its jurisdiction of incorporation, (B) is duly
qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite power and
authority (corporate and other) and has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease
its properties and conduct its business as described in the
Prospectus; each of the Company and the Subsidiaries is and has been
doing business in compliance in with all such authorizations,
approvals, orders, licenses, certificates and permits obtained by it
from governmental or regulatory officials and agencies and all
federal, state, local and foreign laws, rules and regulations to
which it is subject; and, none of the Company nor the Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the
Company and the Subsidiaries taken as a whole. The disclosure in the
Registration Statement concerning the effects of federal, state,
local and foreign laws, rules and regulations on each of the
Company's and the Subsidiaries businesses as currently conducted and
as contemplated is correct in all respects and does
23
<PAGE>
not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(ii) the Company owns, directly or indirectly, eighty-four
percent (84%) of the outstanding capital stock of TVLCA and
one-hundred percent (100%) of the outstanding capital stock of TVN,
and all of such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive
rights, and except as set forth in the Prospectus, are owned free and
clear of any liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind
whatsoever;
(iii) except as described in the Prospectus, none of the
Company nor the Subsidiaries owns an interest in any other
corporation, partnership, joint venture, trust or other business
entity;
(iv) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities" and except as set forth in the
Prospectus, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform, or when
issued and paid for, will conform, in all respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason
of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company or any similar contractual right granted by the Company.
The Securities to be sold by the Company hereunder and under the
Representative's Warrant Agreement and the Warrant Agreement are not
and will not be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof and thereof, will
be validly issued, fully paid and non-assessable and conform to the
descriptions thereof contained in the Prospectus; the holders thereof
will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue
and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
The Redeemable Warrants and Representative's Warrants constitute
valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement of the Securities to be sold by
the Company hereunder and thereunder, the Underwriters will acquire
good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever. No transfer
tax is
24
<PAGE>
payable by or on behalf of the Underwriters in connection with (A)
the issuance by the Company of the Securities, (B) the purchase by
the Underwriters of the Securities from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, or (D) resales of the Securities in connection with the
distribution contemplated hereby;
(v) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or the Prospectus or any part of any thereof or suspending
the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules and other
financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
(vii) (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration
Statement (or required to be filed under the Exchange Act if upon
such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and the
exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or
amendment thereto of agreements, contracts and other documents to
which the Company or any Subsidiary is a party or by which it is
bound are accurate and fairly represent the information required to
be shown by Form SB-2; (C) there is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental
proceeding (including, without limitation, those pertaining to
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same)
or involving the properties or business of, any of the Company or the
Subsidiaries which (I) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), or (II) questions the
validity of the capital stock of the Company or of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; (D) no statute or regulation or
legal or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no action,
suit or proceeding pending or threatened against or affecting any of
the Company or the Subsidiaries before any court, arbitrator or
governmental body, agency or official (or any basis thereof known to
such counsel) in which there is a reasonable possibility of a
decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operation, properties, business or
results of
25
<PAGE>
operations of any of the Company or the Subsidiaries, which could
adversely affect the present or prospective ability of the Company to
perform its obligations under this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement;
(viii) the Company has full legal right, power and
authority to enter into each of this Agreement, the Representative's
Warrant Agreement and the Warrant Agreement and to consummate the
transactions provided for herein and therein; and each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of the Representative's Warrant Agreement and the
Warrant Agreement certain provisions of this Agreement assuming due
authorization, execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as obligations to indemnify or
contribute to losses may be limited by applicable law). None of the
Company's execution or delivery of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement, its
performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the
Prospectus and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company or the Subsidiaries pursuant to the terms of (A) the
certificate of incorporation or bylaws of the Company, (B) any
license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument
to which any of the Company or the Subsidiaries is a party or by
which it is or may be bound or to which its properties or assets
(tangible or intangible) are or may be subject, (C) any statute
applicable to any of the Company or Subsidiaries or (D) any judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over any of the Company or the
Subsidiaries or any of their activities or properties;
(ix) no consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign (other than such as may be required under "blue sky" laws and
the rules of the NASD, as to which no opinion need be rendered), is
required in connection with the issuance of the Securities pursuant
to the Prospectus, the Registration
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Statement, this Agreement, the Representative's Warrant Agreement and
the Warrant Agreement, or the performance of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement and the
transactions contemplated hereby and thereby;
(x) the properties and business of each of the Company and
the Subsidiaries conform to the description thereof contained in the
Registration Statement and the Prospectus; and each of the Company
and the Subsidiaries has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in
each case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, other than those referred to in the
Prospectus and liens for taxes not yet due and payable;
(xi) none of the Company nor the Subsidiaries is not in
breach of, or in default under, any term or provision of any license,
contract, indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit agreement or
any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which any of
the Company or the Subsidiaries is a party or by which it is or may
be bound or to which its property or assets (tangible or intangible)
are or may be subject; and none of the Company nor the Subsidiaries
is in violation of any term or provision of (A) its certificate of
incorporation or by-laws, (B) any authorization, approval, order,
license, certificate, franchise or permit of any governmental or
regulatory official or body, or (C) any judgement, decree, order,
statute, rule or regulation to which it is subject;
(xii) the Units, the Common Stock and the Redeemable
Warrants have been accepted for quotation on the Nasdaq SmallCap
Stock Market;
(xiii) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "Business," "Management," "Principal
Stockholders," "Certain Transactions," "Shares Eligible For Future
Sale," and "Description of Securities" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiv) the persons listed under the caption "Principal
Stockholders" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in Rule 13d-3 under the Exchange
Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
(xv) each of the Company and the Subsidiaries owns or
possesses, free and clear of all liens or encumbrances and right
thereto or therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights, service
names, tradenames, patents, patent applications and licenses
necessary to conduct its business (including without limitation any
such licenses or rights described in the Prospectus as being owned or
possessed by the any of the Company or the Subsidiaries)
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and there is no claim or action by any person pertaining to, or
proceeding, pending or threatened, which challenges the exclusive
rights of any of the Company or the Subsidiaries with respect to any
trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
Company's and the Subsidiaries' businesses (including, without
limitation, any such licenses or rights described in the Prospectus
as being owned or possessed by any of the Company or the
Subsidiaries);
(xvi) none of the Company, the Subsidiaries nor any of
their respective directors, officers, stockholders, employees, agents
or any other person acting on behalf of the Company or the
Subsidiaries has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or any
official or employee of any governmental agency or instrumentality of
any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is or may be in a position to help or hinder the business of the
Company or the Subsidiaries (or assist it in connection with any
actual or proposed transaction) which (A) might subject any of the
Company or the Subsidiaries or any such person to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (B) if not given in the past, might
have had material and adverse effect on the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the
Company taken as a whole, or (C) if not continued in the future,
might materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of each of
the Company and the Subsidiaries taken as a whole;
(xvii) there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or financial consulting arrangement
or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as
determined by the NASD;
(xviii) the minute books of each of the Company and the
Subsidiaries contain a complete summary of all meetings and actions
of the directors and stockholders of each of the Company and the
Subsidiaries since the time of its incorporation and reflect all
transactions referred to in such minutes accurately in all material
respects;
(xix) no person, corporation, trust, partnership,
association or other entity has the right to include and/or register
any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to
include any security in such registration statement;
(xx) assuming due authorization, execution and delivery by
the parties thereto, the Lock-Up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against such
parties and any subsequent holder of the securities subject thereto
in accordance with their terms;
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(xxi) except as described in the Prospectus, the none of
the Company nor the Subsidiaries (A) maintains, sponsors or
contributes to an ERISA Plans, (B) maintain or contribute, now or at
any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA, and (C) has never completely or partially withdrawn
from a "multiemployer plan"; and
(xxii) none of the Company or any of the Subsidiaries or
any of its or their affiliates shall be subject to the requirements
of or shall be deemed an "Investment Company," pursuant to and as
defined under, respectively, the Investment Company Act.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and the
Subsidiaries and representatives of the independent public accountants for the
Company at which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration Statement and
Prospectus, on the basis of the foregoing, no facts have come to the attention
of such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or
Prospectus), or any supplements or amendments thereto.
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of each of the
Company and the Subsidiaries, and certificates or other written statements of
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and the
Subsidiaries, provided that copies of any such statements or certificates shall
be delivered to Underwriters' Counsel if requested. The opinion shall also state
that the Underwriters' Counsel is entitled to rely thereon. The opinion of such
counsel for the Company and the Subsidiaries shall state that the opinion of any
such other counsel is in form satisfactory to such counsel and that the
Underwriters and they are justified in relying thereon.
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At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Gregory Bartko, Esq., counsel to the
Company and the Subsidiaries dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel,
confirming as of Option Closing Date the statements made by Gregory Bartko, Esq.
in his opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(f) Prior to the Closing Date and each Option Closing Date, if
any, (i) there shall have been no material adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
or the earnings, stockholders' equity, value, operations, properties, prospects,
business or results of operations of any of the Company and the Subsidiaries,
whether or not in the ordinary course of business, from the latest dates as of
which such matters are set forth in the Registration Statement and the
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by any of the Company or the Subsidiaries from
the latest date as of which the financial condition of the Company is set forth
in the Registration Statement and the Prospectus; (iii) none of the Company nor
the Subsidiaries shall be in default under any provision of any instrument
relating to any outstanding indebtedness; (iv) none of the Company nor the
Subsidiaries shall have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital
stock, debt (long or short term) or liabilities or obligations of any of the
Company or the Subsidiaries (contingent or otherwise) from the latest dates as
of which such matters are set forth in the Registration Statement and the
Prospectus; (v) no material amount of the assets of any of the Company or the
Subsidiaries shall have been pledged or mortgaged, except as set forth in the
Registration Statement and the Prospectus; (vi) no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against any of the Company or the
Subsidiaries or affecting any of its properties or business before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially and
adversely affect the condition, financial or otherwise, or the earnings,
stockholders' equity, value, operations, properties, business or results of
operations of the any of the Company or the Subsidiaries, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act with respect to the Registration Statement and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(g) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing
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Date or Option Closing Date, as the case may be, to the effect that each of such
persons has carefully examined the Registration Statement, the Prospectus and
this Agreement, and that:
(i) The representations and warranties of the Company and
the Subsidiaries in this Agreement are true and correct, as if made
on and as of the Closing Date or the Option Closing Date, as the case
may be, and the Company and the Subsidiaries have each complied with
all agreements and covenants and satisfied all conditions contained
in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and,
if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none
of the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither
the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) none of the Company nor the Subsidiaries has incurred
up to and including the Closing Date or the Option Closing Date, as
the case may be, other than in the ordinary course of its business,
any material liabilities or obligations, direct or contingent; (b)
none of the Company nor the Subsidiaries has paid or declared any
dividends or other distributions on its capital stock; (c) none of
the Company nor the Subsidiaries has entered into any transactions
not in the ordinary course of business; (d) there has not been any
change in the capital stock of any of the Company or the Subsidiaries
or any material change in the debt (long or short-term) of any of the
Company or the Subsidiaries; (e) none of the Company nor the
Subsidiaries has sustained any material loss or damage to its
property or assets, whether or not insured; (g) there is no
litigation which is pending or threatened (or circumstances giving
rise to same) against any of the Company or the Subsidiaries, or any
affiliated party of any of the foregoing which is required to be set
forth in an amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
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(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from Pannel Kerr Forster,
Certified Public Accountants, A Professional Corporation;
(i) confirming that they are independent certified public
accountants with respect to the Company and the Subsidiaries within
the meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company and the
Subsidiaries included in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements
of the Act and the Rules and Regulations thereunder and that the
Underwriters may rely upon the opinion of Pannel Kerr Forster,
Certified Public Accountants, A Professional Corporation, with
respect to such financial statements and supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the each of the Company and the Subsidiaries,
a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the boards of
directors each of the Company and the Subsidiaries, consultations
with officers and other employees each of the Company and the
Subsidiaries responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the pro forma and
as-adjusted financial information contained in the Registration
Statement and Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or is not fairly presented in conformity
with generally accepted accounting principles applied on a basis
consistent with that of the audited financial statements of the
Company and the Subsidiaries or the unaudited pro forma or
as-adjusted financial information included in the Registration
Statement, (B) the unaudited financial statements and supporting
schedules of the Company and the Subsidiaries included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company and the Subsidiaries included in the
Registration Statement, or (C) at a specified date not more than five
(5) days prior to the effective date of the Registration Statement,
there has been any change in the capital stock of any of the Company
or the Subsidiaries, any change in the long-term debt of any of the
Company
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or the Subsidiaries, or any decrease in the stockholders' equity of
any of the Company or the Subsidiaries or any decrease in the net
current assets or net assets of any of the Company or the
Subsidiaries as compared with amounts shown in the June 30, 1999
balance sheets included in the Registration Statement, other than as
set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such
change or decrease, and (D) during the period from June 30, 1999 to a
specified date not more than five (5) days prior to the effective
date of the Registration Statement, there was any decrease in net
revenues or net earnings of any of the Company or the Subsidiaries or
increase in net earnings per common share of any of the Company or
the Subsidiaries, in each case as compared with the corresponding
period beginning June 30, 1998 other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount
of liabilities of any of the Company or the Subsidiaries (including a
break-down of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
and the Subsidiaries set forth in the Prospectus in each case to the
extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including work sheets, of the Company and the Subsidiaries and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(j) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Pannel Kerr Forster, Certified Public
Accountants, A Professional Corporation, a letter, dated as of the Closing Date
or the Option Closing Date, as the case may be, to the effect that they reaffirm
the statements made in the letter furnished pursuant to SUBSECTION (j) of this
Section hereof except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of SUBSECTION (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(k) The Company shall have delivered to the Representative a
letter from Pannel Kerr Forster addressed to the Company stating that they have
not during the immediately preceding two year period brought to the attention of
the Company's management any
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"weakness" as defined in Statement of Auditing Standards No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit," in any of the
Company's internal controls.
(l) On each of the Closing Date and Option Closing Date, if
any, there shall be duly tendered to the Representative the appropriate number
of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit 1.2 to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(o) On or before the Closing Date, the Units, the Common Stock
and the Redeemable Warrants shall have been duly approved for quotation on the
Nasdaq SmallCap Stock Market, subject to official notice of issuance.
(p) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Representative's Counsel.
(q) On or before the effective date of the Registration
Statement, the Company and Continental Stock Transfer & Trust Company shall have
executed and delivered to the Underwriter the Warrant Agreement, substantially
in the form filed as Exhibit 1.3 to the Registration Agreement.
(r) At least two (2) full business days prior to the date
hereof, the Closing Date and each Option Closing Date, if any, the Company shall
have delivered to the Underwriter the unaudited interim financial statements
required to be so delivered pursuant to SECTION 4(p) of this Agreement.
If any condition to the Representative's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION.
(a) The Company, agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7, "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if
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any, who controls the Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses or liabilities, joint or several (and
actions, proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the Nasdaq SmallCap Stock Market or any other securities exchange, (B) the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), or (C) any breach of any representation, warranty, covenant or agreement
of the Company contained herein or in any certificate by or on behalf of the
Company or any of its officers delivered pursuant hereto unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to any Underwriter by or on behalf of such Underwriters expressly for use in any
Preliminary Prospectus, the Registration Statement or any Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriter but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriter expressly
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<PAGE>
for use therein and constitute the only information furnished in writing by or
on behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and
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(ii) doe snot include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall
37
<PAGE>
not relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii)
38
<PAGE>
if there shall have occurred any outbreak or escalation of hostilities or any
calamity or crisis or there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change
in the general market, political or economic conditions, in the United States
or elsewhere as in the Representative's judgment would make it inadvisable to
proceed with the offering, sale and/or delivery of the Securities; or (ix) if
John C. Homan shall no longer serve the Company in his present capacity.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Underwriter for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10 and 12 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 and Section 7
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement (under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
39
<PAGE>
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at their option, by notice from the Underwriters or the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at Dirks & Company, Inc., 520 Madison Avenue, 10th Floor, New York,
New York 10022, Attention: Jessy Dirks, with a copy to Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103, Attention: Lawrence
Fisher, Esq. Notices to the Company shall be directed to the Company at
TrueVision International, Inc., 1720 Louisiana Boulevard, Suite 100,
Albuquerque, New Mexico 87110, Attention: John C. Homan, Chief Executive
Officer, with a copy to Gregory Bartko, Esq., 3475 Lenox Road, Suite 400,
Atlanta, Georgia 30326, Attention: Gregory Bartko, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriters shall be deemed to
be a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
40
<PAGE>
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
TRUEVISION INTERNATIONAL, INC.
By: ________________________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
DIRKS & COMPANY, INC.
By:___________________________________
Name:
Title:
41
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Underwriter Number of Units
- ----------- ---------------
<S> <C>
Dirks & Company, Inc.
TOTAL 500,000
</TABLE>
42
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
TRUEVISION INTERNATIONAL, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall initially be located at
1720 Louisiana Boulevard, Suite 102, Albuquerque, New Mexico 87110. The
corporation may have such other offices, either within or outside the State of
Delaware, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Delaware
General Corporation Law to be maintained in the State of Delaware may be, but
need not be, identical with the principal office, if in the State of Delaware,
and the address of the registered office may be changed from time to time in
accordance with the Delaware General Corporation Law.
ARTICLE II
STOCKHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the stockholders for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting shall be held at such time and date as the board
of directors shall designate from time to time by resolution duly adopted. If
the day fixed for the annual meeting shall be a legal holiday in the State of
Delaware, such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein for any
annual meeting of the stockholders, or at any adjournment thereof, the board of
directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as is convenient.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose, unless otherwise prescribed by statute, may be called by the
president or by a majority of the board of directors, and shall be called by the
secretary at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
Section 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside of Delaware, as the place for any annual meeting
or for any special meeting called by the board of directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or outside of Delaware, as the place for such meeting. If
no designation is made, or if a special meeting shall be called otherwise than
by the board, the place of meeting shall be the registered office of the
corporation in Delaware.
<PAGE>
Section 4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting, and, in case of a special meeting, the
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, or the secretary, or the officer
or persons calling the meeting, to each stockholder of record entitled to vote
at such meeting, except that if the authorized capital stock is to be increased
at least thirty days notice shall be given. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the stockholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid. If requested by the person or persons
lawfully calling such meeting, the secretary shall give notice thereof, at
corporate expense.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for any stated period not
exceeding sixty days. If the stock transfer books shall be closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the board of directors may f ix in advance a date as the record date for any
such determination of stockholders, such date in any case to be not more than
sixty days and, in case of a meeting of stockholders, not less than ten days
prior to the date on which the particular action, requiring such determination
of stockholders, is to be taken. If the stock transfer books are not closed and
no record date is fixed for the determination of stockholders entitled to notice
of or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders shall be deemed to have been made as provided in this
section, such determination has been made through the closing of the stock
transfer books and the stated period of closing expired.
Section 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten days prior to such meeting, shall be kept on
file at the principal office of the corporation, whether within or outside
Delaware, and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at any meeting of stockholders.
2
<PAGE>
Section 7. QUORUM. At least one-third 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 less than one-third of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may 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 notified. 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.
If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, unless the vote of a greater number, or
voting by classes, is required by law, or the articles of incorporation.
Section 8. PROXIES. At all meetings of the stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, and each fractional share shall be
entitled to a corresponding fractional vote on each matter submitted to a vote
at a meeting of stockholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the articles of
incorporation as permitted by the Delaware General Corporation Law. In the
election of directors, each record holder of stock entitled to vote at such
election shall have the right to vote the number of shares owned by him for as
many persons as there are directors to be elected, and for whose election he has
the right to vote. Cumulative voting shall not be allowed.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Treasury shares shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares at any given time.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe, or, in
the absence of such provision, as the board of directors of such corporation may
determine.
Shares held by an administrator, executor, personal representative,
guardian or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person
3
<PAGE>
or by proxy, but no trustee shall be entitled to vote shares held by him without
a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
is contained in an appropriate order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. INFORMAL ACTION BY STOCKHOLDERS. Any action required to be
taken at a meeting of the stockholders ' or any other action which may be taken
at a meeting of the 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, is 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. The consent shall have the same force and effect as a vote of the
stockholders, and may be stated as such in any articles or document filed with
the Secretary of State of Delaware under the Delaware General Corporation Law.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors, except as otherwise provided in the
Delaware General Corporation Law or the articles of incorporation.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The board of directors
shall consist of at least three members as shall be designated by the board of
directors from time to time and, in the absence of such designation, the board
of directors shall consist of three members; provided, however, that in the
event the outstanding shares of the corporation are held of record by fewer than
three stockholders, there shall be only as many directors as there are
stockholders absent a designation by the board of directors to the contrary.
Directors shall be elected in three separate or staggered classes, with each
class having a different term than the other two classes. The first class of
directors shall have a term expiring at the annual meeting next ensuing after
their election; the second class of directors shall have a term expiring two
years after their election; and the third class shall have a term expiring three
years after their election.. Each director shall hold office until his successor
shall have been elected and qualified. Directors need not be residents of
Delaware or stockholders of the corporation. Directors may be removed in the
manner provided by the Delaware General Corporation Law. Directors shall be
natural persons of the age of 21 years or older.
4
<PAGE>
Section 3. REMOVALS AND RESIGNATIONS. Except as may otherwise be
provided by statute, the stockholders may, at any special meeting called for the
purpose, by a vote of the holders of the majority of the shares then entitled to
vote at an election of directors, remove any or all directors from office, with
or without cause.
A director may resign at any time by giving written notice to the board
of directors, the president or secretary of the corporation. The resignation
shall take effect immediately upon the receipt of the notice, or at any later
period of time specified therein. The acceptance of such resignation shall not
be necessary to make it effective, unless the resignation requires acceptance
for it to be effective.
Section 4. VACANCIES. Any vacancy occurring in the office of a
director, whether by reason of an increase in the number of directorships or
otherwise, may be filled by a majority of the directors then in office, though
less than a quorum. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, unless sooner displaced.
When one or more directors 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 the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective. Each director so chosen shall hold office as herein provided in the
filling of other vacancies.
Section 5. ANNUAL MEETINGS. The board of directors shall meet each year
immediately after the annual meeting of the stockholders for the purpose of
organization, election of officers, and consideration of any other business that
may be properly brought before the meeting. No notice of any kind to either old
or new members of the board of directors for such meeting shall be necessary.
Section 6. REGULAR MEETINGS. The board of directors from time to time
may provide by resolution for the holding of regular meetings and fix the time
and place of such meetings. Regular meetings may be held within or without the
State of Delaware. The board need not give notice of regular meetings provided
that the board promptly gives notice of any change in the time or place of such
meetings to each director not present at the meeting at which such change was
made.
Section 7. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or outside Delaware, as the place for holding
any special meeting of the board of director's called by them.
Section 8. NOTICE. Notice of any special meeting shall be given at
least five days prior thereto by written notice delivered personally or mailed
to each director at his business address, or by notice given at least two days
prior thereto by telegraph. If mailed, such notice shall be deemed to be
delivered
5
<PAGE>
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
board of directors need be specified in the notice or waiver of notice of such
meeting.
Section 9. QUORUM. A majority of the number of directors fixed by
Section 2 shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
Section 10. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 11. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings; and, a fixed sum of $1,000 per meeting for attendance at
each meeting.. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 12. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 13. EXECUTIVE COMMITTEE. By resolution adopted by a majority of
the board of directors, the board may designate one or more committees,
including an executive committee, a compensation committee and an audit
committee, each consisting of one or more directors. The board of directors may
designate one or more directors as alternate members of such committee, who may
replace any absent or disqualified member at any meeting of such committee. Any
such committee, to the extent provided in the resolution and except as may
otherwise be provided by statute, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require the same. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed upon it or him
by law. If there be more than two members on such committee, a majority of any
such committee may determine its action and may fix the time and place of its
meetings, unless provided otherwise by the board. If there be only two members,
unanimity of action shall be required. Committee action may be by way of a
written consent signed by all committee
6
<PAGE>
members. The board shall have the power at any time to fill vacancies on
committees, to discharge or abolish any such committee, and to change the size
of any such committee.
Except as otherwise prescribed by the board of directors, each
committee may adopt such rules and regulations governing its proceedings,
quorum, and manner of acting as it shall deem proper and desirable.
Each such committee shall keep a written record of its acts and
proceedings and shall submit such record to the board of directors. Failure to
submit such record, or failure of the board to approve any action indicated
therein will not, however, invalidate such action to the extent it has been
carried out by the corporation prior to the time the record of such action was,
or should have been, submitted to the board of directors as herein provided.
Section 14. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all of the directors entitled to vote with respect to the subject matter
thereof. The consent shall have the same force and effect as a unanimous vote of
the directors, and may be stated as such in any articles or document filed with
the Secretary of State of Delaware under the Delaware General Corporation Law.
ARTICLE IV
OFFICERS AND AGENTS
Section 1. GENERAL. The officers of the corporation shall be a president, one or
more vice presidents, if deemed appropriate and necessary by the board of
directors, a secretary and treasurer. The board of directors may appoint such
other officers, assistant officers, committees and agents, including a chairman
of the board, assistant secretaries and assistant treasurers, as they may
consider necessary, who shall be chosen in such manner and hold their offices
for such terms and have such authority and duties as from time to time may be
determined by the board of directors. The salaries of all the officers of the
corporation shall be fixed by the board of directors. One person may hold more
than one office, except no person may simultaneously hold the offices of
president and secretary. In all cases where the duties of any officer, agent or
employee are not prescribed by the bylaws or by the board of directors, such
officer, agent or employee shall follow the orders and instructions of the
president.
Section 2. ELECTION AND TERM OF OFFICE. The board of directors which
serves as such prior to the first annual meeting of the stockholders shall elect
the officers of the corporation. The officers of the corporation shall
thereafter be elected by the board of directors annually at each annual meeting
of the board of directors. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until the first of the following to occur: until
his successor shall have been duly elected and shall have qualified; or until
his death; or until he shall resign; or until he shall have been removed in the
manner hereinafter provided.
7
<PAGE>
Section 3. REMOVAL. Any officer or agent may be removed by the board of
directors or by the executive committee whenever in its judgment the best
interests of the corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not in itself create
contract rights.
Section 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors for the unexpired portion of the term.
Section 5. PRESIDENT. The president shall, subject to the direction and
supervision of the board of directors, be the chief executive officer of the
corporation and shall have general supervision of its officers, agents and
employees; he shall perform all the duties commonly incident to his office and
shall perform such other duties as the board of directors shall designate. He
shall, unless otherwise directed by the board of directors, attend in person or
by substitute appointed by him, or shall execute on behalf of the corporation
written instruments appointing a proxy or proxies to represent the corporation,
at all meetings of the stockholders of any other corporation in which the
corporation shall hold any stock. He may, on behalf of the corporation, in
person or by substitute or by proxy, execute written waivers of notice and
consents with respect to any such meetings. At all such meetings and otherwise,
the president, in person or by substitute or proxy as aforesaid, may vote the
stock so held by the corporation and may execute written consents and other
instruments with respect to such stock and may exercise any and all rights and
powers -Incident to the ownership of the stock, subject however to the
instructions, if any, of the board of directors. The president shall have
custody of the treasurer's bond, if any.
Section 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president designated by the board of directors or, (if there be no such
designation) designated in writing by the president shall have the powers and
perform the duties of the president. If no such designation shall be made all
vice presidents may exercise such powers and perform such duties.
Section 7. THE SECRETARY. The secretary shall: (a) keep the minutes of
the proceedings of the stockholders, executive committee and the board of
directors; (b) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation and affix the seal to all
documents when authorized by the board of directors; (d) keep at its registered
office or principal place of business within or outside Delaware a record
containing the names and addresses of all stockholders and the number and class
of shares held by each, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar; (e) sign with the president, or a
vice president, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (f)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent; and (g) in general perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned to him by the president or by the board of directors. Assistant
8
<PAGE>
secretaries, if any, shall have the same duties and powers, subject to
supervision by the secretary.
Section 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation and shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. He shall receive and give receipts and acquittances for
moneys paid in on account of the corporation, and shall pay out of the funds on
hand all bills, payrolls and other just debts of the corporation of whatever
nature upon maturity. He shall perform all other duties incident to the office
of the treasurer and, upon request of the board, shall make such reports to it
as may be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may be from time to time prescribed by the board of directors or the
president. Assistant treasurers, if any, shall have the same powers and duties,
subject to the supervision of the treasurer.
ARTICLE V
STOCK
Section 1. CERTIFICATES. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the corporation by its
president or a vice president and the secretary or an assistant secretary, and
shall be sealed with the seal of the corporation, or with a facsimile thereof.
The signatures of the company's officers on such certificate may also be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form consistent with law as shall be prescribed by the
board of directors. No certificate shall be issued until the shares represented
thereby are fully paid.
Section 2. CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof) as
shall be fixed from time to time by the board of directors. Treasury shares
shall be disposed of for such consideration expressed in dollars as may be fixed
from time to time by the board. The consideration may consist, in whole or in
part, of money, other property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute payment or part payment for shares.
Section 3. LOST CERTIFICATE. In case of the alleged loss, destruction
or mutilation of a certificate of stock the board of directors may direct the
issuance of a new certificate in lieu
9
<PAGE>
thereof upon such terms and conditions in conformity with law as it may
prescribe. The board of directors may in its discretion require a bond in such
form and amount and with such surety as it may determine, before issuing a new
certificate.
Section 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and such documentary stamps as may be required by law, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock shall be
entered on the stock book of the corporation which shall be kept at its
principal office, or by its registrar duly appointed.
The corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof, and, accordingly shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person whether or not it shall have express or other
notice thereof, except as may be required by the laws of Delaware.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. THIRD PARTY ACTIONS. Subject to the provisions of this
Article VI, the corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, stilt or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the tight of the corporation) by
reason of the fact that he 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 partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement (if such settlement is approved in advance by the
corporation, which approval shall not be unreasonably withheld) actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Subject to
the provisions of this Article VI, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of
10
<PAGE>
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
"short-swing" profits under Section 16(b) of the Securities Exchange Act of
1934, as amended.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
6.1 and 6.2, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. DETERMINATION OF CONDUCT. Any indemnification under Sections
6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that the indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Sections 6.1 and 6.2.
Such determination shall be made (i) by the Board of Directors or the Executive
Committee by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. Notwithstanding the foregoing, a director, officer, employee or
agent of the corporation shall be entitled to contest any determination that the
director, officer, employee or agent has not met the applicable standard of
conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent
jurisdiction.
Section 5. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in
defending a civil or criminal action, suit or proceeding by an individual who
may be entitled to indemnification pursuant to Section 6.1 or 6 2, shall be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of that director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article VI.
Section 6. INDEMNITY NOT EXCLUSIVE. The indemnification and advancement
of expenses provided by or granted pursuant to the other sections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of
11
<PAGE>
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
Section 7. INSURANCE INDEMNIFICATION. The corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article VI.
Section 8. THE CORPORATION. For purposes of this Article VI, references
to the "corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors and
officers so that any person who is or was a director, officer, employ or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership joint venture, trust or other enterprise, shall stand
in the same position under and subject to the provisions of this Article VI
(including, without limitation, the provisions of Section 6.4) with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 9. EMPLOYEE BENEFIT PLANS. For purposes of this Article VI,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to 'serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner 'not opposed to the best interests of the corporation" as referred to in
this Article VI.
Section 10. INDEMNITY FUND. Upon resolution pawed by the Board, the
corporation may establish a trust or other designated account, grant a security
interest or use other means (including without limitation, a letter of credit),
to ensure the payment of certain of its obligations arising under this Article
VI and/or agreements which may be entered into between the corporation and its
officers and directors from time to time.
Section 11 INDEMNIFICATION OF OTHER PERSONS. The provisions of this
Article VI shall not be deemed to preclude the indemnification of any person who
is not a director or officer of the corporation or is not serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, but whom
12
<PAGE>
the corporation has the power or obligation to indemnify under the provisions of
the General Corporation Law of the State of Delaware or otherwise. The
corporation may, in its sole discretion, indemnify an employee, trustee or other
agent as permitted by the General Corporation Law of the State of Delaware. The
corporation shall indemnify an employee, trustee or other agent where required
by law.
Section 12 SAVINGS CLAUSE. If this Article VI or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnity each person entitled to
indemnification hereunder against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
and whether internal or external, including a grand jury proceeding and an
action or suit brought by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated, or by any other applicable law.
Section 13. CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VT shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VII
MISCELLANEOUS
Section 1. TRANSACTIONS INVOLVING DIRECTORS OR OFFICERS. No contract or
other transaction between the corporation and any person, firm, partnership,
business or other corporation and no other act of the corporation shall in the
absence of fraud, in any way be affected or invalidated by the fact that any of
the directors or officers of the corporation are pecuniarily or are interested
in, or are directors or officers of, such other corporation, firm, person,
partnership, or business. Any officer or director of the corporation
individually or any firm or association of which any officer or director may be
a member, may be a party to, or may be pecuniarily or otherwise interested in,
any contract or transaction of the corporation, provided that the fact that he
individually or such firm or association is so interested shall be disclosed or
shall have been known to the board of directors at which action upon any such
contract or transaction shall be taken. Any director or officer of the
corporation who is also a director of officer of such other corporation or is so
interested may be counted in determining the existence of a quorum at any
meeting if the board of directors which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or transaction,
with like force and effect as if he were not such director or officer of such
other corporation or not so interested. Any director of the corporation may vote
upon any contract or other transaction between the corporation and any
subsidiary or affiliated corporation without regard to the fact that he is also
a director or officer of such subsidiary or affiliated corporation.
13
<PAGE>
Section 2. SEAL. The seal of this corporation shall consist of a
flat-faced circular die with such words and figures cut or engraved thereon as
the board of directors may from time to time determine.
Section 3. AMENDMENTS. The bylaws of the corporation regardless of
whether made by the stockholders or by the board of directors, may be amended,
added to, or repealed by vote of a majority of the then existing directors at a
regular or special directors' meeting or by vote of the holders of not less than
a majority of the issued and outstanding capital stock of this corporation, at
any meeting of the stockholders, provided notice of the proposed change is given
in the notice of meeting, or notice thereof is waived.
Section 4. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given by these bylaws, or the articles of incorporation of this
corporation, or any of the corporation laws of the State of Delaware, 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
thereto.
ARTICLE VIII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
The bylaws shall be so interpreted and construed as to conform to the
Articles of Incorporation and the statutes of the State of Delaware or of any
other state in which conformity may become necessary by reason of the
qualification of the corporation to do business in such foreign state, and where
conflict between these bylaws and the Articles of Incorporation or the statutes
of the State of Delaware has arisen or shall arise, these bylaws shall be
considered to be modified to the extent, but only to the extent,, conformity
shall require. If any provision hereof or the application thereof shall be
deemed to be invalid by reason of the foregoing sentence, such invalidity shall
not affect the validity of the remainder of the bylaws without the invalid
provisions or the application thereof, and the provisions of these bylaws are
declared to be severable.
Adopted this 26th day of November, 1999.
- ----------------------------------
Frank J. Seifert, Secretary
14
<PAGE>
Exhibit 4.3
NUMBER SHARES
TV [GRAPHIC]
TRUEVISION INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS
COMMON STOCK CUSIP 897874 1D 3
THIS CERTIFIES THAT:
IS OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH OF
======================== TRUEVISION INTERNATIONAL, INC. ========================
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of
Delaware, and to the Certificate of Incorporation and Bylaws of the
Corporation, as now or hereafter amended. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
COUNTERSIGNED:
DATED: CONTINENTAL STOCK TRANSFER & TRUST COMPANY
JERSEY CITY, NJ
TRANSFER AGENT
[SEAL] BY:
AUTHORIZED OFFICER
/s/ Frank I. Seifert /s/ John C. Homan
- --------------------------- ---------------------------
FRANK I. SEIFERT, SECRETARY JOHN C. HOMAN, PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________ Custodian ______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act __________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint _______________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________
__________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OF ANY CHANGE WHATSOEVER
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES
AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE
ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF
ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO
DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY
CLASS OR SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION
OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE.
- -------------------------------------------------------------------------------
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL
BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER
RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION
PROGRAM.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------- ---------------------
NUMBER VOID AFTER ______________ , 2005 WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
TW PURCHASE ONE SHARE OF COMMON STOCK
- --------------------- ---------------------
[LOGO]
TRUEVISION INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
- ----------------------------------------------------------------------------------------------------------------------------------
W A R R A N T CUSIP 897874 11 1
THIS CERTIFIES THAT:
, FOR VALUE RECEIVED
- ----------------------------------------------------------------------------------------------------------------------------------
or registered assigns (the "Registered Holder") is the owner Each Warrant represented hereby is exercisable at
of the number of Redeemable Warrants (the "Warrants") the option of the Registered Holder, but no fractional
specified above. Each Warrant initially entitles the interests will be issued. In the case of the exercise of
Registered Holder to purchase, subject to the terms and less than all the Warrants represented hereby, the
conditions set forth in this Certificate and the Warrant Company shall cancel this Warrant Certificate upon the
Agreement (as hereinafter defined), one fully surrender hereof and shall execute and deliver a
paid and nonassessable share of Common Stock of new Warrant Certificate or Warrant Certificates of like
TrueVision International, Inc., a Delaware corporation tenor, which the Warrant Agent shall countersign, for the
(the "Company"), at any time between ________________, balance of such Warrants.
2001 (the "Initial Warrant Exercise Date") and the The term "Expiration Date" shall mean 5:30 p.m. (New
Expiration Date (as hereinafter defined) upon the York time) on the date which is forty-eight (48) months
presentation and surrender of this Warrant Certificate after the Initial Warrant Exercise Date. If each such
with the Subscription Form on the reverse hereof duly date shall in the State of New York be a holiday or a day
executed, at the corporate office of Continental Stock on which the banks are authorized to close, then the
Transfer & Trust Company, as Warrant Agent, or its Expiration Date shall mean 5:30 p.m. (New York time) on
successor (the "Warrant Agent"), accompanied by payment the next following day which in the State of New York is
of $10.50 subject to adjustment (the "Purchase Price"), not a holiday or a day on which banks are authorized to
in lawful money of the United States of America in cash close.
or by check made payable to the Warrant Agent for the The Company shall not be obligated to deliver any
account of the Company. securities pursuant to the exercise of this Warrant
This Warrant Certificate and each Warrant unless a registration statement under the Securities Act
represented hereby are issued pursuant to and are subject of 1933, as amended (the "Act"), with respect to such
in all respects to the terms and conditions set forth in securities is effective or an exemption thereunder is
the Warrant Agreement (the "Warrant Agreement"), dated available. The Company has covenanted and agreed that
______________, 2000, between the Company and the Warrant it will file a registration statement under the Federal
Agent. securities laws use its best efforts to cause the same to
In the event of certain contingencies provided for become effective, use its best efforts to keep such
in the Warrant Agreement, the Purchase Price and the registration statement current, if required under the
number of shares of Common Stock subject to purchase upon Act, while any of the Warrants are outstanding, and
the exercise of each Warrant represented hereby are deliver a prospectus which complies with Section 10(a)(3)
subject to modification or adjustment. of the Act to the Registered Holder exercising this
Warrant. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would
be unlawful.
(CONTINUED ON REVERSE SIDE)
IN WITNESS WHEREOF, the Company has caused this Unit Certificate to be duly executed, manually or by facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon.
- --------------------------------------------- COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
DATED: JERSEY CITY, NJ
WARRANT AGENT
- --------------------------------------------- SEAL BY:
TRUEVISION INTERNATIONAL, INC.
AUTHORIZED OFFICER
/S/ FRANK J. SEIFERT /S/ JOHN C. HOMAN
--------------------------- ------------------------
FRANK J. SEIFERT, SECRETARY JOHN C. HOMAN, PRESIDENT
</TABLE>
<PAGE>
<TABLE>
TRUEVISION INTERNATIONAL, INC.
WARRANT
<S> <C>
(CONTINUED FROM FRONT)
This Warrant Certificate is exchangeable, upon the by Amex (or the closing bid price, if the Common Stock is
surrender hereof by the Registered Holder at the then traded on Nasdaq), shall have equaled or exceeded
corporate office of the Warrant Agent, for a new Warrant $18.00 per share for any twenty (20) trading days within
Certificate or Warrant Certificates of like tenor a period of thirty (30) consecutive trading days ending
representing an equal aggregate number of Warrants, each on the fifth trading day prior to the Notice of
of such new Warrant Certificates to represent such number Redemption, as defined below (subject to adjustment in
of Warrants as shall be designed by such Registered the event of any stock splits or other similar events).
Holder at the time of such surrender. Upon due Notice of redemption (the "Notice of Redemption") shall
presentment and payment of any tax or other charge be given not later than the thirtieth day before the date
imposed in connection therewith or incident thereto, the fixed for redemption, all as provided in the Warrant
registration of transfer of this Warrant Certificate Agreement. On and after the date fixed for redemption,
at such office, a new Warrant Certificate or Warrant the Registered Holder shall have no rights with respect
Certificates representing an equal aggregate number of to the Warrants except to receive the $.10 per Warrant
Warrants will be issued to the transferee in exchange upon surrender of this Warrant Certificate.
therefor, subject to the limitations provided in the Prior to due presentment for registration of
Warrant Agreement. transfer hereof, the Company and the Warrant Agent may
Prior to the exercise of any Warrant represented hereby, deem and treat the Registered Holder as the absolute
the Registered Holder shall not be entitled to any right owner hereof and of each Warrant represented hereby
of a stockholder of the Company, including, without (notwithstanding any notations of ownership or writing
limitation, the right to vote or to receive dividends or hereon made by anyone other than a duly authorized
other distributions and shall not be entitled to receive officer of the Company or the Warrant Agent) for all
any notice of any proceedings of the Company, except as purposes and shall not be effected by any notice to the
provided in the Warrant Agreement. contrary, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, This Warrant Certificate shall be governed by and
this Warrant may be redeemed at the option of the Company, construed in accordance with the laws of the State of New
at a redemption price of $0.10 per Warrant, at any time York without giving effect to conflicts of laws.
commencing after___________________, 2001, provided that This Warrant Certificate is not valid unless
the average closing sale price for the Common Stock as reported countersigned by the Warrant Agent.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ASSIGNMENT
(To Be Executed by the Registered Holder In Order to Assign Warrants)
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints
attorney
- -------------------------------------------------------------------------------------------------------------------------
to transfer this Warrant Certificate on the books of the Corporation, with full power of substitution in the premises.
Dated:
-----------------------------------, ------------. -----------------------------------------------------------
Signature(s)
-----------------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------------
Signature(s) Guaranteed (Social Security or Taxpayer Identification Number)
SUBSCRIPTION
(To Be Executed by the Registered Holder in Order to Exercise Warrants)
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably subscribes for _______________ shares of the common stock of the
Company named on the face of this certificate, pursuant and in accordance with the terms and conditions of this Warrant and
hereby makes payable of $______________ therefore, and requests that certificates for such securities shall be issued in the
name of: --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
and be delivered to
--------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
- ----------------------------------------------------------------------------------------------------------------------------------
and, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant
Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address
stated below:
- ----------------------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE ADDRESS)
Dated:
--------------------------------------------------- -----------------------------------------------------------
Signature(s)
-----------------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------------
Signature(s) Guaranteed (Social Security or Taxpayer Identification Number)
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR
TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE
GUARANTEE MEDALLION PROGRAM.
STOCK MARKET INFORMATION EXCHANGE
</TABLE>
<PAGE>
Exhibit 4.8
[SEAL] [LOGO] [SEAL]
TRUEVISION INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
UNITS CUSIP 897874 20 2
THIS CERTIFIES THAT,
FOR VALUE RECEIVED
(the "Registered Holder") is the owner of the number of Units specified
above, transferable only on the books of True Vision International, Inc. (the
"Corporation") by the Registered Holder thereof in person or by his or her
duly authorized attorney, or surrender of this Unit Certificate properly
endorsed.
Each Unit consists of two (2) shares of the Corporation's common stock,
par value $.001 per share (the "Common Stock), and one redeemable common
stock purchase warrant (the "Warrants") to purchase one (1) share of Common
stock for $10.80 per share (subject to adjustment) at any time on or after
January , 2001 and before 5:00 p.m. New York time on January , 2005 (the
"Expiration Date"). The terms of the Warrants are governed by a Warrant
Agreement dated as of January , 2000 (the "Warrant Agreements") between the
Company and Continental Stock Transfer & Trust Company, as Warrant Agent (the
"Warrant Agent"), and are subject to the terms and provisions contained
therein, all of which terms and provisions the Registered Holder of this Unit
Certificate consents to by acceptance hereof. Copies of the Warrant
Agreements are on file at the office of the Warrant Agent at 2 Broadway, New
York, NY 10004 and are available to any Registered Holder on written request
and without cost. The Warrant shall be void unless exercised before 5:00 p.m.,
New York time, on the Expiration Date.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar of the Corporation.
The Warrants and the shares of Common Stock of the Corporation
represented by this Unit Certificate shall be nonexercisable and not
separately transferable until , 2000 or such earlier date as shall
be determined by Dirks & Company, Inc. and True Vision International, Inc.
(the "Separation Date").
IN WITNESS WHEREOF, The Company has caused this Unit Certificate to be
duly executed, manually or by facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
[DATED:] COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
JERSEY CITY, NJ
[SEAL] TRANSFER AGENT
BY
AUTHORIZED OFFICER
/s/ Frank I. Seifert /s/ John C. Homan
FRANK I. SEIFERT, SECRETARY JOHN C. HOMAN, PRESIDENT
<PAGE>
TRUEVISION INTERNATIONAL, INC.
UNITS
The Corporation will furnish without change to each stockholder who so
requests, the designations, powers, preferences and relative, participating,
optional of other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Any such request may be made to the Corporation or to the Transfer
Agent.
WARRANT PROVISIONS
This certificate certifies that for value received the Registered Holder
hereby is entitled, at any time on or after , 2000 or such earlier
date as Dirks & Company, Inc. and TrueVision International, Inc. shall
determine that the Warrants and Common Stock which comprise the Units shall
be separately transferable (the "Separation Date") to exchange each Unit
represented by this Unit Certificates for two Common Stock certificates
representing two shares of Common Stock and one Warrant Certificate
representing one Warrant upon surrender of this Unit Certificate to the
Transfer Agent at the office of the Transfer Agent together with any
documentation required by such Transfer Agent. At any time on or after
January , 2001 and before 5:00 P.M. New York time on the Expiration Date,
upon surrender of the Warrant Certificate at the office of the Warrant Agent
for the Warrants, with the Subscription Form on the reverse side thereof
completed and duly executed and accompanied by payment, in cash or check
payable to the Warrant Agent for the account of the Corporation, the
Registered Holder of such Warrant Certificate shall be entitled to purchase
from the Corporation one share of Common Stock of the Corporation for each
Warrant represented by the Warrant Certificate, which shares shall be fully
paid and non-assessable, at the exercisable price of $10.80 per share. The
exercise price and the number of shares purchasable upon exercise of each
Warrant are subject to subject to adjustment and the Warrants are subject to
adjustment and the Warrants are redeemable by the Corporation, each upon the
occurrences of certain events set forth in the Warrant Agreement.
After 5:00 P.M. New York time, on January , 2005, the Warrant shall
become null and void and of no value.
REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE REVERSE
SIDE HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS THOUGHTFULLY SET FORTH ON THE FRONT OF THIS
CERTIFICATE.
The Warrant shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to conflicts of laws
provisions.
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE OF
THIS CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
<TABLE>
<S> <C>
TEN COM - AS TENANTS IN COMMON UNIF GIFT MIN ACT - ___________ CUSTODIAN ____________
TEN ENT - AS TENANTS BY THE ENTIRETIES (CUST) (MINOR)
JT TEN - AS JOINT TENANTS WITH RIGHT UNDER UNIFORM GIFTS TO MINORS
OF SURVIVORSHIP AND NOT AS
TENANTS IN COMMON ACT ________________
(STATE)
</TABLE>
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
FOR VALUE RECEIVED, ________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------
- ----------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________ (UNITS)
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE
AND APPOINT
______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID UNIT(S) ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
Dated _______________ ________________________________________________________
NOTICE: THE SIGNATURE TO THE AGREEMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
IMPORTANT: ALL SIGNATURES MUST BE GUARANTEED IN THE SPACE PROVIDED BELOW BY A
FIRM THAT IS A MEMBER OF THE NATIONAL SECURITIES EXCHANGE OR OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL
BANK OR TRUST COMPANY LOCATED IN THE UNITED STATES.
SIGNATURE GUARANTEE:
NAME: _________________________________________________________________________
(Please Print)
BY: ___________________________________________________________________________
TITLE: ________________________________________________________________________
<PAGE>
Law Office of Gregory Bartko
3475 Lenox Road
Suite 400
Atlanta, Georgia 30326
===============================================================================
Phone 404-238-0550
Fax 404-238-0551
Email [email protected]
December 22, 1999
TrueVision International, Inc.
1720 Louisiana Boulevard
Suite 100
Albuquerque, New Mexico 87110
Dear Ladies and Gentlemen,
I refer to the Registration Statement on Form SB-2 (Registration No. 333-86981),
as amended (the "Registration Statement") filed by TrueVision International,
Inc., a Delaware corporation (the "Company"), with the United States Securities
and Exchange Commission under the Securities Act of 1933, relating to the offer
by the Company of 500,000 units, each unit consisting of two shares of common
stock, $.001 par value per share and a redeemable common stock purchase warrant
to purchase one share of common stock (the "Units," "Common Stock," and
"Warrants," respectively), and up to 75,000 Units that may be sold by the
Company in the event the underwriters for the offering elect to exercise their
over-allotment option.
As counsel to the Company, I have examined such corporate records, documents and
questions of law as I have deemed necessary or appropriate for the purposes of
this opinion. In such examinations, I have assumed the genuiness of signatures
and the conformity to the originals of the documents supplied to me as copies.
As to various questions of fact material to this opinion, I have relied upon
statements and certificates of officers and representatives of the Company.
Upon the basis of such examination, I am of the opinion that:
(i) the 1,150,000 shares of Common Stock offered by the
Company as a part of the Units, when sold in accordance with the terms agreed
upon in the Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement, have been validly authorized, will be legally issued, fully paid, and
nonassessable;
(ii) the 500,000 redeemable common stock purchase warrants
offered by the Company as a part of the Units, when sold in accordance with the
terms agreed upon in the Underwriting Agreement filed as Exhibit 1.1 to the
Registration Statement, have been validly authorized, will be legally issued,
fully paid, and nonassessable; and
(iii) the 500,000 shares of Common Stock to be issued at the
time of exercise of the 500,000 redeemable common stock purchase warrants
offered by the Company as a part of the Units, when sold in accordance with the
terms agreed upon in the Underwriting Agreement filed as Exhibit 1.1 to the
Registration Statement, have been validly authorized, and when the exercise
price of the Warrants is fully paid, such shares will be legally issued, fully
paid, and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.0 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus contained therein. This consent is not to be
construed as an admission that I am a person whose consent is required to be
filed with the Registration Statement under the provisions of the Securities Act
of 1933.
TrueVision International, Inc.
<PAGE>
Page 2
Sincerely,
Gregory Bartko, Esq.
GAB/nmn
cc: John C. Homan, President
Michael Zeidel, Esq.
<PAGE>
Exhibit 10.4
AMENDED AND RESTATED CONSULTING AGREEMENT
AGREEMENT made as of this 23rd day of December 1999 by and between
TrueVision International, Inc. ("TrueVision") with an address at 1720 Louisiana
NE, Suite 110, Albuquerque, New Mexico 87110 and Frank J. Seifert (the
"Consultant"), with an address at 671 Loring St, San Diego, CA 92109
WITNESSETH
WHEREAS, Consultant possesses certain knowledge and expertise in
certain fields in which the Company is conducting research and development
and/or is otherwise engaged in business (the "Field"), and desires to continue
to provide services to the Company;
WHEREAS, the Consultant and the Company previously entered into a form
of consulting agreement dated August 23, 1999, the terms and conditions of which
have been mutually amended by the parties, which amendments are deemed to be
effective as of the date of this Agreement;
WHEREAS, the Company desires to continue to retain the Consultant to
provide required business advisory services and investment banking advice in the
Field;
WHEREAS, the Consultant desires to continue to be retained to render
such services upon the terms and conditions set forth in this Agreement; and
WHEREAS, the Company desires the Consultant not to compete with the
Company.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. Effective as of the date hereof, the terms and conditions of this
Agreement, as amended and restated, shall control the consulting relationship
between the Consultant and the Company.
2. Prior to the date hereof, Consultant shall have entered into and
executed an Unconditional Continuing Guaranty (the "Guaranty") in favor of DVI
Financial Services, Inc. ("DVI"). The Guaranty is provided pursuant to a certain
Subordination Agreement entered into on February 24,1999 by the Company and DVI
and is to replace a like Guaranty previously given by Pam Medley, M.D., the
previous Guarantor to a certain loan to TrueVision Laser Center of Albuquerque,
Inc., a subsidiary of the Company ("TrueVision"), and DVI Financial Services,
Inc., ("DVI"). TrueVision has obtained leases, loans, extensions of credit and
other financial services from DVI, and was required to provide the Guaranty in
order to consummate the refinancing of the excimer laser equipment utilized in
TrueVision's facility.
1
<PAGE>
2. (a) Subject all times to the supervision and direction of the
Company's chief executive officer, the Consultant shall, during the term hereof,
render business advisory, investment banking consulting and technical services
to the Company ("Services"). Such Services shall relate to further research and
development of the Company, as part of the business of the Company, as the same
shall now or hereafter exist, or as the Company's chief executive officer may
from time to time reasonably request. The Consultant shall perform his duties as
an independent contractor, and not as an employee, by use of his best efforts
and due diligence.
(b) Consultant may offer ideas or concepts to the Company at any
time that are not specifically requested by the Company, however, Consultant
shall first present a broad and general oral outline of the proposed Services to
the Company, for the purpose of minimizing Consultant's efforts in those
instances where the proposed idea or concept may not appear to be consistent
with the Company's research objectives; may appear to duplicate the Company's
activities planned or in progress; or may appear to have been previously
considered by the Company. It is understood that the Company shall have the sole
and exclusive right to accept or reject any Service offered, and the sole and
exclusive right to determine the extent, if any, to which the Services, an idea
or concept shall be further studied or developed.
(c) As long as the Guaranty is in effect, the Company shall use its
best efforts to nominate and retain the Consultant as a member of the Company's
board of directors. Consultant shall be entitled to receive reimbursement for
all reasonable costs incurred in board of director meetings including, but not
limited to food, lodging and transportation. In addition, Consultant shall be
entitled to the same compensation as the Company gives to other non-employee
directors for acting in such capacity.
3. This Agreement is for a term of thirty-six (36) months (the "Term"),
subject to earlier termination as provided in paragraph 6 below. The forgoing
notwithstanding, this Agreement may be extended or renewed by mutual consent of
the parties hereto.
4. In full satisfaction for: (i) the Services to be rendered hereunder;
and (ii) the delivery of the Consultant's Guaranty, the Consultant hereby
accepts and shall receive the following consideration:
(a) As compensation to the Consultant for providing the
Services, the Consultant will receive an annual consulting fee of
$60,000 paid monthly in advance at the rate, of $5,000 per month
("Monthly Fee") for services rendered. The Monthly Fee will commence
January 1. 2000. In addition to the Monthly Fee, the Company will
reimburse the Consultant on a monthly basis for all reasonable travel
and out-of-pocket expenses incurred by the Consultant in the
performance of his duties hereunder, and the Consultant shall account
for such expenses to the Company. Consultant shall also be entitled to
receive the same benefits
2
<PAGE>
that are available to employees of the Company on the same terms and
conditions as such employees, and shall participate in the grant or
award of stock options from the Company's 1998 Stock Option Plan (and
any successor or supplemental stock option plan) at a level which is
commensurate with other senior management of the Company.
(b) As consideration for the Consultant's agreement to provide
the Guaranty, and in addition to the consideration set forth in Section
2(a) above, the Company shall cause to be issued to the Consultant
non-statutory common stock options to purchase 83,333 shares ("Shares")
of the Company's Common Stock at an exercise price of $6.15 per share,
which options shall be granted pursuant to the form of non-statutory
stock option agreement annexed to this Agreement as EXHIBIT "A" and
incorporated herein by reference. Subject to the restrictions on
exercise of the options set forth in EXHIBIT "A", The shares underlying
these options shall be registered by the Company with the Securities
and Exchange Commission ("SEC") on the next available registration
statement, and if not so registered within six months from the date
hereof, shall be included on a Form S-8 registration statement or any
other available registration statement to be filed within seven months
from the date hereof.
(c) The Company hereby represents and warrants it will use its
best efforts to make all laser financing payments to DVI described in
Section 1 above, on a timely basis.
5. All obligations of the Consultant contained herein shall be subject
to the Consultant's reasonable availability for such performance, in view of the
nature of the requested service and the amount of notice received. The
Consultant shall devote such time and effort to the performance of his duties
hereunder as the Consultant shall determine is reasonably necessary for such
performance. The Consultant may look to such others for such factual
information, investment recommendations, economic advice and/or research upon
which to base his advise to the Company hereunder, as it shall deem appropriate.
The Company shall furnish to the Consultant all information relevant to the
performance by the Consultant of his obligations under this Agreement, or
particular projects as to which the Consultant is acting as advisor, which will
permit the Consultant to know all facts material to the advice to be rendered,
and all material or information reasonably requested by the Consultant. In the
event that the Company fails or refuses to furnish any such material or
information reasonably requested by the Consultant, and thus prevents or impedes
the Consultant's performance hereunder, any inability of the Consultant to
perform shall not be a breach of his obligations hereunder.
6. If, during the term of the agreement, the Consultant voluntarily
terminates his services as Consultant or is terminated by the Company for Cause,
as such term is defined below, then the term of this agreement shall end without
further action by either party hereto, and all rights and obligations of the
parties hereunder,
3
<PAGE>
except those set forth in paragraphs 8 and 9 hereof, shall
terminate as of such date. For the purpose of this Agreement, "Cause" shall mean
either the nonperformance of the Consultant's duties set forth herein, as
reasonably determined by the Company, or the conviction of the Consultant for a
felony committed against the Company.
7. Except with respect to business activities competitive to the
Company's Field, nothing contained in the Agreement shall limit or restrict the
right of the Consultant or of any partner employee, agent or representative of
the Consultant, to be a partner, director, officer, employee, agent or
representative of, or to engage in any other business, whether of a similar
nature or not, nor to limit or restrict the right of the Consultant to render
services of any kind to any other corporation, firm, individual or association.
8. The consultant will hold in confidence any confidential information,
which the Company provided to the Consultant pursuant to this Agreement unless
the Company gives the Consultant permission in writing to disclose such
confidential information to a specific third party. Notwithstanding the.
foregoing, the Consultant shall not be required to maintain confidentiality with
respect to information (i) which is or becomes part of the public domain; (ii)
independent knowledge prior to disclosure; (iii) which comes into the possession
of the Consultant in the normal and routine course of his own business from and
through independent non-confidential sources; or (iv) which is required to be
disclosed by the Consultant by governmental requirements. If the Consultant is
requested or required (by oral questions, interrogatories, requests for
information or document subpoenas, civil investigative demands, or similar
process) to disclose any confidential information supplied to him by the Company
or its representatives, the Consultant shall, unless prohibited by law, promptly
notify the Company of such request(s) so that the Company may seek an
appropriate protective order. This Paragraph shall survive the termination of
this Agreement.
9. The Company and the Consultant agree to indemnify and hold each
other harmless including their respective partners, employees, agents,
representatives and controlling persons (and the officers, directors, employees,
agents, representatives and controlling persons of each of them) from and
against any and all losses, claims, damages, liabilities, costs and expenses
(and all actions, suits, proceedings or claims in respect thereof and any legal
or other expenses in giving testimony or furnishing documents in response to a
subpoena or otherwise (including, without limitation, the cost of investigating,
preparing or defending any such action, suit, proceeding or claim, in which
either the Company or the Consultant is a party), as and when incurred, directly
or indirectly, caused by, relating to, based upon or arising out of this
Agreement. This Paragraph shall survive the termination of this Agreement.
10. This Agreement may not be transferred, assigned or delegated by any
of the parties hereto without the prior written consent of the other party
hereto.
4
<PAGE>
11. The failure or neglect of the parties hereto to insist, in any one
or more instances, upon the strict performance of any of the terms or conditions
of this Agreement, or their waiver of strict performance of any of the terms or
conditions of this Agreement shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.
12. Any notices hereunder shall be sent to the Company and to the
Consultant at their respective addresses set forth above. Any notice shall be
given by registered or certified mail, postage prepaid, and shall be deemed to
have been given when deposited in the United States mail. Either party may
designate any other address to which notice shall be given, by giving written
notice to the other of such change of address in the manner herein provided.
13. This Agreement has been made in the State of California and shall
be construed and governed in accordance with the laws thereof without giving
effect to principles governing conflicts of law.
14. This Agreement amends and supercedes any prior consulting agreement
entered into by these parties, contains the entire agreement between parties,
may not be altered or modified, except in writing and signed by the party to be
charged thereby, and supersedes any and all previous agreements between the
parties relating to the subject matter hereof.
15. This Agreement shall be binding upon the parties hereto, the
indemnified parties referred to in Section 9, and their respective heirs,
administrators, successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
Consultant:
- -------------------------------
Frank J. Seifert
TrueVision International, Inc.:
By:
----------------------------
John Homan, Chief Executive
Officer
5
<PAGE>
Exhibit 10.6
EXHIBIT "A"
TRUEVISION INTERNATIONAL, INC.
AMENDED NON-STATUTORY STOCK OPTION AGREEMENT
TrueVision International, Inc., a Delaware corporation ("Company"),
hereby grants to Frank J. Seifert ("Optionee"), an option ("Option") to purchase
a total of 83,333 shares of the common stock of the Company ("Shares"), at the
price set forth herein, and in all respects subject to the terms, definitions
and provisions of this Option Agreement and the Company's 1998 Stock Option Plan
("Plan"), which is incorporated herein by reference.
1. NATURE OF THE OPTION. The Option is intended to be a non-statutory
stock option and NOT an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended ("Code").
2. OPTION PRICE. The Option Price is $6.15 for each Share.
3. VESTING AND EXERCISE OF OPTION. The Option shall vest and become
exercisable during its term in accordance with the following provisions and in
accordance with the Plan:
(a) VESTING AND RIGHT TO EXERCISE.
(i) The Option shall vest thirty-six (36) months from the
date of this Option Agreement and become fully exercisable at that time with
respect to all 83,333 of the Shares subject to the Option. Subject to the
provisions of subparagraphs (ii) and (iii) below, the Optionee can exercise any
portion of the Option that has vested until the expiration of the Option term.
(ii) In the event of the Optionee's death or disability,
the exercisability of the Option shall be governed by the relevant provisions of
the Plan.
(iii) The Option may not be exercised for fractional shares
or for less than one thousand (1,000) Shares.
(b) METHOD OF EXERCISE. In order to exercise any portion of
this Option, the Optionee shall notify the Company in writing of the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised and if applicable, the Consent of Spouse forms which are
attached hereto. The notice of election to exercise all or any portion of this
Option must be accompanied by payment in full of the aggregate purchase price of
the Shares to be purchased. The certificate or certificates for Shares as to
which the Option has been exercised shall be registered in the name of the
Optionee.
1
<PAGE>
(c) RESTRICTIONS ON EXERCISE. This Option may not be exercised
if the issuance of the Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities law or any other law or regulation. Furthermore, the
method and manner of payment of the Option Price will be subject to the rules
under Part 207 of Title 12 of the code of Federal Regulations ("Regulation G")
as promulgated by the Federal Reserve Board if such rules apply to the Company
at the date of exercise. As a condition to the exercise of this Option, the
Company may require the Optionee to make any representation or warranty to the
Company at the time of exercise of the Option as in the opinion of legal counsel
for the Company may be required by any applicable law or regulation, including
the execution and delivery of an appropriate representation statement.
Accordingly, the stock certificates for the Shares issued upon exercise of this
Option may bear appropriate legends restricting transfer.
4. NON-TRANSFERABILITY OF OPTION. This Option may be exercised during
the lifetime of the Optionee only by the Optionee and, may not be transferred in
any manner other than by will or by the laws of descent and distribution. The
terms of this Option shall be binding upon the executors, administrators, heirs
and successors of the Optionee.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) certified or bank cashier's check; or
(c) in the event there exists a public market for the Company's
common stock on the date of exercise, by surrender of Shares of the Company's
common stock, provided that if such Shares were acquired upon exercise of an
incentive stock option, the Optionee must have first satisfied the holding
period requirements under Section 422(a)(1) of the Code. In this case payment
shall be made as follows:
(i) In addition to the execution and delivery of any other
documents that may be required for the exercise of this Option, Optionee shall
deliver to the secretary of the Company a written notice which shall set forth
the portion of the purchase price by the average of the last reported bid and
asked prices per Share of common stock of the Company, as reported in THE WALL
STREET JOURNAL (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) System or, in the
event the common stock is listed on a national securities exchange, or on the
NASDAQ National Market System (or any successor national market system), the
closing price of common stock of the Company on such exchange as reported in THE
WALL STREET JOURNAL, for the day on which
2
<PAGE>
the notice of exercise is sent or delivered;
(ii) Fractional shares shall be disregarded and the Optionee
shall pay in cash an amount equal to such fraction multiplied by the price
determined under subparagraph (i) above;
(iii) The written notice shall be accompanied by a duly
endorsed blank stock power with respect to the number of Shares set forth in the
notice, and the certificate(s) representing said Shares shall be delivered to
the Company at its principal offices within five (5) working days from the date
of the notice of exercise;
(iv) The Optionee hereby authorizes and directs the
secretary or stock transfer agent of the Company to transfer so many of the
Shares represented by such certificate(s) as are necessary to pay the purchase
price in accordance with the provisions herein;
(v) If any such transfer of Shares requires the consent of
the California Commissioner of Corporations or of some other agency under the
securities laws of any other state, or an opinion of counsel for the Company or
Optionee that such transfer may be effected under applicable federal and state
securities laws, the time periods specified herein shall be extended for such
periods as the necessary request for consent to transfer is pending before said
Commissioner or other agency, or until counsel renders such an opinion, as the
case may be. All parties agree to cooperate in making such request for transfer,
or in obtaining such opinion of counsel, and no transfer shall be effected
without such consent or opinion if required by law; and
(vi) Notwithstanding any other provision herein, the
Optionee shall only be permitted to pay the purchase price with Shares of the
Company's common stock owned by him as of the exercise date in the manner and
within the time periods allowed under 17 CFR Section 240.16b-3 promulgated under
the Securities Exchange Act of 1934 as such regulation is presently constituted,
as it is amended from time to time, and as it is interpreted now or hereafter by
the United States Securities and Exchange Commission.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
Shares covered by this Option shall be adjusted in accordance with the
provisions of the Plan in the event of changes in the capitalization or
organization of the Company, or if the Company is a party to a merger or other
corporate reorganization.
7. TERM OF OPTION. This Option may not be exercised more than ten (10)
years and one (1) day from the date of grant of this Option, as set forth below,
and may be exercised during such term only in accordance with the Plan and the
terms of this Option.
8. VOTING RIGHTS. The Optionee hereby agrees that any Shares acquired
upon the exercise of this Option shall be subject to a restriction that
prohibits the Optionee from voting such Shares for a
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<PAGE>
period of two (2) years from the date of exercise of the Option. This provision
restricting the Optionee's voting rights with respect to the Shares shall be
void and of no effect at such time as the Optionee may sell or transfer the
Shares during the term of the voting restriction.
9. INCOME TAX WITHHOLDING. The Optionee authorizes the Company to
withhold in accordance with applicable law from any compensation payable to him
or her any taxes required to be withheld by federal, state or local laws as a
result of the exercise of this Option. Furthermore, in the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of this Option, the
Optionee agrees to pay the Company the amount of any such deficiency in cash
within five (5) days after receiving a written demand from the Company to do so,
whether or not Optionee is an employee of the Company at that time.
DATE OF AMENDED GRANT: December 23, 1999
By:
-----------------------------
John C. Homan, Chief Executive Officer
The Optionee acknowledges receipt of a copy of the Plan and the
exhibits referred to therein and represents that he or she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the committee
upon any questions arising under the Plan.
Dated: December 23, 1999
OPTIONEE:
--------------------------------
Frank J. Seifert
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CONSENT OF SPOUSE
I, ____________________________________________, spouse of the
Optionee who executed the foregoing Agreement, hereby agree that my spouse's
interest in the Shares of common stock subject to said Agreement shall be
irrevocably bound by the Agreement's terms. I further agree that my community
property interest in such Shares, if any, shall similarly be bound by said
Agreement and that such consent is binding upon my executors, administrators,
heirs and assigns. I agree to execute and deliver such documents as may be
necessary to carry out the intent of said Agreement and this consent.
Dated: December ___, 1999
- -----------------------------------
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OPHTHALMOLOGIST MEMBERSHIP AGREEMENT
TRUEVISION LASER CENTER OF ALBUQUERQUE, INC.
THIS AGREEMENT entered into this 16 day of August, 1999, by and between
TRUEVISION LASER CENTER OF ALBUQUERQUE, INC. (hereinafter "TrueVision") and
Dr. Stuart Cooper (hereinafter referred to as "Doctor").
WHEREAS, TrueVision is in the business of operating an ophthalmic laser
center which will perform laser refractive procedures using an excimer laser
(hereinafter the "Laser Center"), and,
WHEREAS, in support of the operations of the Laser Center, TrueVision is
establishing a network of members to provide professional services to
patients undergoing certain accepted laser refractive procedures (hereinafter
"LR Procedures") at the Laser Center, such professional services to consist
of patient screening, preoperative and post operative care along with the
actual performance of the LR Procedures; and,
WHEREAS, Doctor holds a valid and unrestricted license to practice
medicine in the State of New Mexico and is qualified as a specialist in
ophthalmology; and,
WHEREAS, Doctor desires to associate with TrueVision to provide
professional services to Doctor's patients undergoing the LR Procedures at
the Laser Center and seeks to become a member with the obligations and
benefits related thereto; and
WHEREAS, TrueVision desires to accept Doctor as a member of the
TrueVision network.
NOW, THEREFORE, the parties hereto agree as follows:
1. ACCEPTANCE AS MEMBER. TrueVision hereby conditionally accepts Doctor
as a member of TrueVision Laser Center of Albuquerque, Inc. and, subject to
the provisions herein with regard to training, credentialing, licensing and
insurance, agrees that Doctor has the right to provide professional services
to patients undergoing the LR Procedures and to use the excimer laser and
other equipment, services and facilities at the
3969 Fourth Ave Suite 202 San Diego CA 92103
Phone 619-543-1700 Fax 619-543-1707 E-mail [email protected]
<PAGE>
Laser Center, it being expressly understood that this right shall be
exercised in accordance with the guidelines, protocols, procedures, and rules
established by the Board of Directors and the Medical Advisory Committee.
2. CREDENTIALING AND TRAINING
a. CREDENTIALING.
Immediately upon the complete execution of this Agreement,
Doctor shall deliver to TrueVision:
(1) A completed Physician Credentialing Application (in the
form set forth in Exhibit A which is attached hereto);
(2) Evidence of current unrestricted license to practice
medicine in the State of New Mexico;
(3) Evidence of current board certifications, if any; and
(4) Evidence of the insurance required in paragraph 4b, below.
TrueVision will promptly review Doctor's Application and act upon it in
accordance with its usual credentialing policies and procedures, which are
attached as EXHIBIT `B' and as may be modified from time to time. Doctor will
not have any rights of a member until credentialing has been approved.
b. TRAINING. Upon positive conclusion of the credentialing
process Doctor will be required to participate in the TrueVision Physician
Training Program which will include mandatory FDA training and the TrueVision
orientation program as outlined in Exhibit `C'. This Program will be provided
to Doctor by TrueVision in Albuquerque, NM for such fee that the Board of
Directors of TrueVision may determine from time to time is necessary to cover
the costs of such training. Doctors may complete the mandatory FDA training
at any manufacturer approved location conducted by a certified trainer,
provided that he/she submits evidence of the successful completion of said
training acceptable to the Medical Advisory Committee. Upon successful
completion of the Training Program and receipt of laser certification, Doctor
will be accepted as a full member of the TrueVision network with all the
rights and obligations contained herein.
3. OPERATION OF LASER CENTER.
a. FACILITY. TrueVision hereby agrees to establish
and maintain the operations of the Laser Center at its expense. In addition
to leasing appropriate space for the Laser Center, TrueVision shall acquire,
maintain, repair and/or replace all equipment
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and supplies necessary to perform the LR Procedure including, but not limited
to, the excirnet laser and related ancillary equipment.
b. SUPPORT STAFF. TrueVision further agrees to provide the reasonably
trained and qualified support staff (professional, technical, managerial,
and/or clerical) necessary to provide Doctor a state of the art, fully
supported location to perform the accepted LR Procedures.
c. MANAGEMENT. The business operations of the Laser Center will be
controlled by the officers and Board of Directors of TrueVision. Decisions
regarding local medical and professional issues, will be made by an elected
Medical Advisory Committee.
d. MEDICAL ADVISORY COMMITTEE each member will be entitled to
participate in the election of the Medical Advisory Committee and receive one
vote per person regardless of the number of membership units owed. This
Committee will be elected six (6) months after the commencement of LR
Procedures at the Center. Until said Committee is elected the Board of
Directors will serve in that capacity. Further, the members, as a group, will
be entitled to elect one member to the Board of Directors of True Vision of
Albuquerque, Inc.
e. REFERRAL PROGRAM. The member network established by TrueVision will
include both ophthalmologists and optometrists. These professionals will be
trained and encouraged to work with each other in conjunction with the
Marketing Program discussed below to establish cross referrals among members.
In addition, those individual patients who contact TrueVision directly and
are not existing patients of a member, will be referred to a member or
members for professional services. The TrueVision referrals to Doctor will be
done in accordance with policies and procedures to be established from time
to time by the Medical Advisory Committee.
f. MARKETING PROGRAM. TrueVision will undertake a multifaceted
marketing effort to both increase general patient awareness of and demand for
the LR Procedure. Said multifaceted marketing effort will be undertaken
without contribution from Doctor and will in no way promote the practice of
one doctor over another, nor will it specifically support any one member over
any other member. Further TruVision will assist individual members in their
marketing efforts with specific programs, including but not limited to:
patient referral programs, in-office training, support and materials,
consumer advertising programs; which may include television, radio and
newspaper. TrueVision will also provide all members with access to
cooperative advertising programs allowing for the sharing of the costs of
certain approved advertising and marketing programs to the Doctor.
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These programs will be available from time to time and may be expanded or
reduced without the prior consent of the members.
g. ADMINISTRATIVE SERVICES.
(1) BILLING. TrueVision will be responsible for collections from all
patients who undergo any procedure at the Laser Center. The component
portions of the fees for Doctor's professional services, the professional
services of any other member, as well as TrueVision portion for facility
usage, royalties, licenses, taxes and supplies will be included in one bill
to the patient. For purposes of administrative case after the subtraction of
any and all royalties, licenses and fees, that may be imposed by any
governmental agencies or the manufacturers of the LR equipment, various
patient holders of LR technology; including but not limited to "Pillar Point"
fees, the allocation of the billing will be 50% to the Doctor and/or
comanaging members and 50% to TrueVision. The Medical Advisory Committee and
the Board of Directors shall review this allocation from time to time to
ensure that it is fair and reasonable and supports the financial viability of
the Center. If more than one TrueVision member is providing care for a
patent, the co-management care and fees shall be paid as agreed upon by
those members. Written direction shall be given to TrueVision, in advance of
the procedure, by those members. The Medical Advisory Committee establishes
the non-binding guidelines for the distribution of fees between medical
professionals based upon medically acceptable allocation of pre and post
procedure care as well as the actual performance of the procedure. These
guidelines will be reviewed from time to time by the Medical Advisory
Committee and/or the TrueVision Laser Centers, Inc. Medical Director and
modified to reflect contemporary standards of practice and for
consistent clinical outcomes for the patient.
(2) FINANCING AND COLLECTIONS. TrueVision will facilitate a financing
program to allow patients to defer the cost of the LR procedure. TrueVision
will collect all payments from patients undergoing procedures at the Laser
Center.
(3) PAYMENT TO DOCTOR. Payment to Doctor as provided for in
paragraph g(1) for professional services rendered by Doctor will be made as
fees are received from the patient. All payments to Doctor will be made as
determined by TrueVision but in no case less than monthly. The payment to the
Doctor will include all collected professional fees of Doctor within the time
period included in that payment. Payments are subject to adjustment for NSP
checks, disputed billing and/or charge backs from credit providers.
h. TRAINING PROGRAMS. TrueVision will maintain ongoing Continuing
Professional Education programs at a nominal cost for the benefit of Doctor
and the staff
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of Doctor's office. These programs may be conducted at the Laser Center or
other location as determined by the Medical Advisory Committee.
4. DUTIES OF DOCTOR. In order to retain the full use of the Laser
Center and to otherwise take advantage of the other benefits of membership
described herein. Doctor agrees to the following:
a. MAINTENANCE OF PROFESSIONAL STANDING. Doctors shall take all
reasonable steps necessary to maintain all licenses, privileges, and
certifications necessary to continue to practice as an Ophthalmologist.
Further, Doctor shall meet all requirements set from time to time by the
Medical Advisory Committee for continued credentialing by the Laser Center as
well as certifications that may be necessary to perform the Laser Procedures.
b. INSURANCE. Doctor shall maintain at Doctor's expense, general
and professional liability insurance covering Doctor's acts and the acts of
all those in Doctor's employ or control. Such liability insurance shall be in
an amount not less than $1,000,000/$3,000,000 and shall name TrueVision and
any parent company of TrueVision as additional insureds. Doctor shall,
annually, during the term of this Agreement provide a certificate of
insurance to TrueVision evidencing such insurance coverage.
c. MARKETING SUPPORT. Doctor shall actively participate in and
support those marketing activities which TrueVision shall establish from time
to time. These services may include complimentary screening, patient
education seminars, media interviews, etc.) as reviewed and agreed to by the
Medical Advisory Committee but shall not require any other financial
contribution by the Doctor. This does not include cooperative marketing
programs that may be offered from time to time which will specifically allow
for TrueVision to contribute funding in support of a member's marketing
program.
d. REFERRAL PATIENTS. Doctor agrees that if in Doctor's
professional judgment, the LR Procedure is appropriate for any patient
referred to Doctor by TrueVision, the LR Procedure will be performed at the
Laser Center. If the patient elects laser vision correction in any form at
any time within three (3) years after the referral by TrueVision, Doctor
agrees to use Doctor's best efforts to encourage the patient to have the
procedure performed at the Laser Center so long as if in Doctor's
professional judgment such treatment would be appropriate.
e. PATIENT INFORMATION. Doctor shall provide preoperative and
postoperative ophthalmic data to TrueVision on all patients who are treated
at the Laser Center.
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5. RELATIONSHIP OF PARTIES. In the performance of the work, duties and
obligations undertaken by Doctor under the terms of this Agreement, it is
mutually understood and agreed that Doctor is at all times acting as an
independent contractor practicing as an Ophthalmologist for the benefit of
Doctor's patients. Doctor is not an employee of TrueVision. TrueVision shall
neither have nor exercise any control over Doctor's professional work. The
standards of practice, professional duties, and guidelines of Doctor in the
performance of procedures at the Laser Center, shall be determined by the
Medical Advisory Committee.
6. INDEMNIFICATION. TrueVision and Doctor each hereby indemnify and hold
harmless the other from any liability, claim, cost, or expense (including but
not limited to attorney's fees and court costs) which may arise out of any
act or omission of the other, their employees or agents. In addition to the
foregoing, and not in limitation thereof, Doctor indemnifies TrueVision
and holds it harmless from any liability, claim, cost or expense (including
but not limited to attorney's fees and court costs) which may arise from any
professional services which were performed or which should have been
performed by Doctor and Doctor's employees, agents and any other individual
or entity in Doctor's control or for whom Doctor might otherwise have legal
responsibility. This duty to indemnify shall survive the term of this
agreement and inure to the benefit of any and all successor and assigns of
either party.
7. CHANGES OF LAWS/REGULATORY COMPLIANCE. The parties recognize that
this Agreement at all times is to be subject to applicable state, local and
federal law and all regulations and policies arising therefrom. The parties
further recognize that his Agreement shall be subject to amendments in such
laws and regulations or changes in interpretation thereof. Any provisions of
Lawyer regulations which would invalidate or otherwise be inconsistent with,
the terms of this Agreement or that would cause one or both of the parties to
be in violation of law, shall be deemed to have superseded the terms of this
Agreement, provided, however, that the parties shall exercise their best
efforts to accommodate the terms and intent of this Agreement to the greatest
extent possible consistent with the then requirements of law and regulations.
In the event that a change in law or regulation or the interpretation
thereof impacts upon the ability of a party hereto to receive the economic
benefits intend by this Agreement,
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<PAGE>
the affected party shall have the right to request the renegotiation of this
Agreement. In the event that such renegotiation does not result in a
satisfactory Agreement in the light of the changed laws and/or regulations,
the affected party may terminate this Agreement.
8. ASSIGNMENT. This Agreement is personal to Doctor and therefore may
not be assigned to any other individual or entity without prior written
consent TrueVision, which consent may be withheld at its absolute discretion.
TrueVision's rights and obligations hereunder may be assigned to any other
entity controlled by TrueVision for by any entity which controls TrueVision.
9. TERM/TERMINATION. This Agreement shall be for an initial term of
three (3) years from the date set forth above. It shall be renewable at the
option of either party for an additional three year term upon terms agreeable
to the parties, after the initial term. Either party may nominate this
Agreement at any time, without cause, upon ninety (90) days written notice to
the other.
This Agreement may be terminated by TrueVision, immediately, in the
event that the Medical Advisory Committee determines in good faith that
Doctor is not providing adequate patient care or that the safety of patients
is jeopardized by continuing Doctor's privilege under this Agreement.
TrueVision may terminate this agreement at its option upon the vote of the
Medical Advisory Committee for cause, including but no limited to fraud,
abuse of privilege, and/or failure to promote the interest of this center.
This Agreement shall automatically be terminated upon Doctor's loss of
license of Doctor's death or permanent disability.
10. NONDISCLOSURE
a. Doctor acknowledges that during the term of this Agreement,
Doctor will acquire knowledge of certain confidential information regarding
the Laser Center. Doctor agrees to keep all such information confidential.
Doctor shall not at any time disclose any confidential information to any
individual or entity, subject only to Doctor's disclosure obligations to
Doctor's patient or any subposes or Court order requiring disclosure of such
information, and then only after notice and approval by TrueVision of the
nature and extent of any disclosure that will be made. Such approval shall be
specifically in writing and shall not be unreasonably withheld.
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<PAGE>
b. During the term of this Agreement, Doctor agrees to use the
Laser Center to perform all ophthalmic laser correction procedures which may
be necessary for any patient of Doctor so long as such use is, in Doctor's
professional judgment, appropriate.
11. MISCELLANEOUS.
a. JURISDICTION AND VENUE. This Agreement is entered into in
Albuquerque, New Mexico and the parties hereby agree that for all disputes,
controversies, and / obligation which may arise under this Agreement, New
Mexico Law shall govern. Exclusive venue shall lie with the Courts of
Bernalillo County, New Mexico and Doctor and TrueVision agree to submit to
the personal jurisdiction of such Courts.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement of the parties hereto regarding membership in the TrueVision Doctor
network and all prior written or oral negotiations, representations,
arrangements, and / or agreements regarding the subject matter of this
Agreement are merged into and superseded by this Agreement.
c. SEVERABILITY. All provisions of this agreement are severable
and this Agreement shall not be affected by the invalidity of any provision
hereof so long as the basic intent of the parties and the economic benefit to
each is not materially adversely affected by the invalidity of such provision.
d. INUREMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, successors and
permitted assigns.
e. AMENDMENT. This Agreement may not be amended except in
writing signed by the parties hereto.
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IN WITNESS THEREOF, the parties hereto have hereunto set their hands on the
date above written.
WITNESSED BY: "DOCTOR"
/s/ Lamare Platt /s/ Stuart M. Cooper, M.D.
- ----------------------------- -----------------------------
- -----------------------------
"TRUEVISION"
TRUEVISION LASER CENTER
OF ALBUQUERQUE, Inc.
/s/ [Illegible] By: /s/ John C. Homan
- ----------------------------- --------------------------
Its: President
- ----------------------------- ---------------------------
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TRUEVISION INTERNATIONAL, INC.
April 23, 1999
New Mexico Eye Clinics
Dr. Donald Rodgers
1100 Lead Road, S.E.
Albuquerque, New Mexico 87106
Dear Don,
This agreement will memorialize our understanding relative to the
acquisition of a Hansatome micro-keratome for the exclusive use of the
TrueVision Laser Center of Albuquerque, Inc. (TrueVision) and the New Mexico
Eye Clinics (NMEC) will:
Purchase a certain Hansatome micro-keratome on behalf of True Vision for
use at the TrueVision Laser Center of Albuquerque.
Provide for technical training in Albuquerque for up to three technicians
for TrueVision
Provide a fully certified technical person for all Lasik procedures for
physicians employed by NMEC at no cost to TrueVision.
Agree to lease said micro-keratome to TrueVision for five years at the
rate of $1,250 per month commencing on May 1, 1999, afterwhich TrueVision
will deliver the Micro-keratome to NMEC in good condition except for
normal wear and tear.
TrueVision agrees to:
Pay to NMEC a total of $75,000 in payments of $1,250 per month for sixty
months for a certain Hansatome micro-keratome
Have full use of said micro-keratome for all qualified member users and
employees. The system is to permanently reside at TrueVision Albuquerque.
<PAGE>
TRUEVISION INTERNATIONAL, INC.
Have at least one technician fully trained on the use of said
micro-keratome and to assure only such fully trained technician(s) are
authorized to assist qualified surgeons in the performance of laser
vision correction.
Pay for any required maintenance to the Hansatome during the term of this
agreement.
The parties hereby agree to be bound by this agreement entered into this
twenty-fourth day of April 1999, by and between
For New Mexico Eye Clinics For TrueVision International, Inc.
/s/ Donald Rodgers, M.D. /s/ John C. Homan, President
- --------------------------------- ---------------------------------
Donald Rodgers, M.D. John C. Homan, President
<PAGE>
EXHIBIT 23.1
CONSENT OF
INDEPENDENT PUBLIC ACCOUNTANT
We consent to the use in Amendment No. 3 to Form SB-2 of TrueVision
International, Inc. and Subsidiaries of our report dated November 17, 1999
(except for notes 11, 12 and 15 as to which the date is December 13, 1999),
relating to the consolidated financial statements of TrueVision International,
Inc. and Subsidiaries, and to the reference to us under the heading "Experts" in
such registration statement.
<TABLE>
<S> <C>
San Diego, California /s/ PANNELL KERR FORSTER
December 23, 1999 ----------------------------
PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation
</TABLE>
