<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 333-03219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
SIGHT RESOURCE CORPORATION
(FORMERLY NEWVISION TECHNOLOGY, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8099 04-3181524
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
67 SOUTH BEDFORD STREET, BURLINGTON, MA 01803 (617) 229-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM G. MCLENDON, PRESIDENT
67 SOUTH BEDFORD STREET, BURLINGTON, MA 01803 (617) 229-1100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
LEWIS J. GEFFEN, ESQ. GARY J. SIMON, ESQ.
MINTZ, LEVIN, COHN, FERRIS, PARKER CHAPIN FLATTAU &
GLOVSKY AND POPEO, P.C. KLIMPL, LLP
ONE FINANCIAL CENTER 1211 AVENUE OF THE AMERICAS
BOSTON, MA 02111 NEW YORK, NY 10036
(617) 542-6000 (212) 704-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included in this Registration Statement is a combined prospectus relating also
to Registration Statement No. 33-77030 previously filed by the Registrant on
Form S-1 and declared effective on August 25, 1994. This Registration Statement,
which is a new Registration Statement, also constitutes post-effective amendment
no. 1 to Registration Statement No. 33-77030, and such post-effective amendment
no. 1 shall hereafter become effective concurrently with the effectiveness of
this registration statement and in accordance with Section 8(c) of the
Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SIGHT RESOURCE CORPORATION
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
----------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Cover Page of the Registration Statement;
Cross Reference Sheet; Explanatory Note;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus;
Concurrent Sales; Underwriting; Plan of
Distribution
9. Description of Securities to be
Registered.............................. Description of Securities
10. Interest of Named Experts and Counsel..... Legal Matters
11. Information With Respect to the
Registrant.............................. Cover Page of the Registration Statement;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dilution;
Capitalization; Price Range of Common
Equity and Dividend Policy; Selected
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Management;
Principal Stockholders; Certain
Relationships and Related Transactions;
Description of Securities; Concurrent
Sales; Shares Eligible for Future Sale;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
EXPLANATORY NOTE
This Registration Statement contains three forms of prospectus: (i) one to
be used in connection with a public offering of Common Stock offered by the
Registrant (the "Offering") and related over-allotment granted to the
Representative, (ii) one to be used in connection with the Registrant's offering
of up to 85,000 shares of Common Stock issuable upon exercise of outstanding
Common Stock purchase warrants (the "Class A Warrants") and (iii) one to be used
in connection with the Registrant's offering of up to 2,472,100 shares of Common
Stock issuable upon exercise of outstanding redeemable common stock purchase
warrants (the "Warrants"). The Class A Warrants were issued in connection with
the Registrant's issuance and sale in a private placement in March 1994 of
$1,100,000 of notes, which notes were repaid in August 1994. The Warrants were
issued in connection with the Registrant's firm commitment public offering in
August 1994 (the "1994 Public Offering") of 2,472,500 units (the "Units"), each
Unit consisting of one share of Common Stock and one Warrant. The three
prospectuses will be identical in all material respects except for the front and
back cover pages, the Prospectus Summary and pages 6, 16, 56, 57 and 58 of the
Offering prospectus, pages W-6, W-16, W-56, W-57, and W-58 of the Warrant
prospectus and pages AW-6, AW-16, AW-56, AW-57 and AW-58 of the Class A Warrant
prospectus.
<PAGE> 4
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.
SUBJECT TO COMPLETION, DATED MAY 29, 1996
PROSPECTUS
LOGO 1,600,000 SHARES
SIGHT RESOURCE CORPORATION
COMMON STOCK
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being sold by Sight Resource Corporation (the
"Company"). The Common Stock is quoted on the Nasdaq National Market under the
symbol "VISN". On May 28, 1996, the last reported sales price of the Common
Stock was $7.00 per share.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
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UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
Per Share................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3).................... $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be
approximately $616,000 ($678,400 if the Underwriter's over-allotment option
is exercised in full), including the Underwriter's nonaccountable expense
allowance. See "Underwriting."
(3) The Company has granted the Underwriters a 45-day option to purchase up to
240,000 additional shares of Common Stock on the same terms and conditions
as the Common Stock offered hereby solely to cover over-allotments, if any.
If such over-allotment option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively.
------------------------
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein (the "Offering"). It is expected that delivery of
certificates representing the shares of Common Stock offered hereby will be made
at the offices of Commonwealth Associates at 733 Third Avenue, New York 10017,
on or about , 1996.
------------------------
COMMONWEALTH ASSOCIATES
The date of this Prospectus is , 1996
<PAGE> 5
Graphics for the inside front cover will include (i) a photograph of the
Massachusetts Eye and Ear Infirmary, (ii) a photograph of a Cambridge Eye
Doctors storefront, (iii) an industry photograph of an excimer laser system and
patient treatment, (iv) a photograph of an eyeglass fitting and (v) a photograph
of a surgeon.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information assumes that the
Underwriters' over-allotment option is not exercised. Unless otherwise indicated
or the context otherwise requires, references in this Prospectus to the term
"Company" refer to Sight Resource Corporation and its subsidiaries on a
consolidated basis. An investment in the securities offered hereby involves a
high degree of risk. See "Risk Factors."
THE COMPANY
Sight Resource Corporation (the "Company") provides a complete range of eye
care products and services through integrated networks of opticians,
optometrists and ophthalmologists. The Company's services are provided primarily
to persons with common vision disorders, as well as to persons with
sight-threatening conditions. The Company's operations currently consist of 29
eye care centers, a centralized optical laboratory and distribution center, two
management service organizations ("MSOs") and six laser vision correction
("LVC") centers. Each of the Company's eye care centers includes one or more
opticians and a Company-managed optometric office, and provides access to a
Company-affiliated ophthalmologist. The Company's LVC centers are established in
association with hospitals, ambulatory surgery centers and private practice
facilities, and include the Massachusetts Eye and Ear Infirmary, an affiliate of
the Harvard Medical School, and the Medical College of Pennsylvania/Hahnemann
University.
The Company's objective is to become the leading integrated provider of eye
care products and services in select, regional markets. The principal elements
of the Company's business strategy are to (i) acquire and integrate the assets
of regional multi-site eye care centers and the practices of eye care
professionals (optometrists and ophthalmologists), (ii) employ or enter into
management services contracts with these professionals, (iii) establish LVC
centers, (iv) expand strategic affiliations with select hospitals, ambulatory
surgery centers and eye care professionals and (v) continue to market
comprehensive and competitively priced eye care programs to leading HMOs,
insurance companies and other third party payors in the Company's regional
markets:
Acquire and Integrate Assets of Eye Care Centers and Professional
Practices. Acquiring and integrating the assets of eye care centers and
professional practices provide the Company with significant and direct
access to persons with vision disorders and sight-threatening conditions,
thereby establishing a broad patient base for the Company's integrated eye
care strategy. The Company estimates that opticians, optometrists, retail
optical chains and multi-site eye care centers are the primary vision care
providers to approximately 82% of the population with common vision
disorders. The Company's eye care centers sell products and services to
approximately 125,000 customers annually and, through its eye care centers,
the Company maintains an updated customer database of approximately 350,000
individuals who have utilized the services of the Company and its
affiliated eye care professionals over the last few years.
Enter into Management Services Contracts with Eye Care
Professionals. By entering into management services contracts with eye
care professionals, the assets of whose practices the Company has acquired,
the Company earns revenues from the management, administrative, marketing
and other services it provides to such affiliated professionals. These
professionals, in turn, benefit from the services and resources provided by
the Company's MSOs.
Establish LVC Centers. By establishing LVC centers in association
with hospitals, ambulatory surgery centers, ophthalmologic practice groups
and ophthalmologists, the Company is able to provide LVC services to its
eye care center customers and the patients of its affiliated eye care
professionals. In addition, under the Company's Open Access Plan(TM), the
Company's laser systems are made available for use by all ophthalmologists
in the local market; thus the Company earns fees from such non-affiliated
professionals' use of the Company's laser systems to perform LVC.
3
<PAGE> 7
Expand Strategic Affiliations. The Company intends to both expand its
existing LVC center strategic affiliations and enter into new strategic
affiliations with health care providers, including hospitals, ambulatory
surgery centers, ophthalmologic practice groups and ophthalmologists. The
Company's goals in expanding its strategic affiliations are to broaden its
service capabilities and afford the Company, for itself and on behalf of
its affiliated eye care professionals, significant opportunities for cross-
referrals and volume contracting with third party payors and their
intermediaries.
Market Eye Care Programs to Third Party Payors. The Company intends
to build on its existing managed care contracts and integrated eye care
strategy to market comprehensive and competitively priced eye care service
programs to leading HMOs, insurance companies and other third party payors
in the Company's regional markets. Approximately 40 million Americans
currently receive eye care benefits via third party payor programs. Through
its integrated approach to eye care, the Company believes that it offers a
complete range of eye care products and services at competitive cost;
consequently, payors benefit from contracting with the Company's networks
of integrated and efficient providers.
LVC STRATEGY. The Company has established a model for the delivery of LVC
services. The Company's LVC strategy is based upon (i) generating and
controlling patient flow, (ii) delivering LVC through eye care centers and (iii)
promoting cooperation with local ophthalmologists and optometrists through the
Company's Open Access Plan. In October 1995, the U.S. Food and Drug
Administration (the "FDA") approved the use of ophthalmic excimer lasers to
correct nearsightedness. In FDA-required clinical trials involving the treatment
and subsequent follow up, studies found that one year after treatment 98.8% of
treated eyes were corrected to 20/40 or better without eyeglasses or contact
lenses, and 80.5% were 20/20 or better without eyeglasses or contact lenses.
Industry studies indicate that 60 to 70 million Americans are nearsighted and
that more than 90% of these people have a refractive disorder that falls within
the LVC treatment parameters approved by the FDA. Industry sources
conservatively estimate that an aggregate of approximately four million LVC
procedures for nearsighted patients will be performed in the U.S. by the year
2000, resulting in a potential annual market in excess of $1 billion in the year
2000. In addition, LVC for farsightedness and astigmatism is currently
undergoing FDA-required clinical testing. Consistent with the Company's strategy
to provide a complete range of eye care services, as new technologies or
procedures are approved for refractive correction, the Company intends to
incorporate these technologies and procedures into the services provided by the
Company.
ACQUISITION STRATEGY. The Company also intends to continue its acquisition
program to expand the number of eye care centers which it owns and operates and
the number of eye care professionals whose business the Company owns or manages
or with whom the Company has a strategic affiliation. Eye care products and
services in the U.S. are delivered through a fragmented system of local
providers, including approximately 65,000 opticians, 31,000 optometrists and
16,500 ophthalmologists. The Company believes that approximately $20 billion is
annually spent on eye care products and services, including eyeglasses, contact
lenses and professional eye care services. Within this large and fragmented
market, the Company believes that significant opportunities exist (i) to
participate in the consolidation of multi-site eye care centers, (ii) to enter
into management services and other agreements with eye care professionals and
(iii) to provide technologically advanced services, such as LVC. Acquisitions in
existing markets (a) permit the Company to effect economies of scale and realize
other operating efficiencies, (b) provide the Company with the opportunity to
expand its patient base and revenues without a proportionate increase in
administrative costs and (c) permit the Company to strategically complement
existing operations. For example, the Company's centralized optical laboratory
and distribution center has the capacity to service additional multi-site eye
care centers. The Company believes that it will be an attractive acquiror to
owners of independent multi-site eye care centers and ophthalmic and optometric
practices because of the Company's (i) fee structure, which allows owners and
professionals to participate in the cost efficiencies and revenue growth
realized by the affiliated centers and practices and (ii) transaction structure,
which permits owners and professionals to become stockholders of the Company,
thus permitting ownership liquidity and alignment of the interests of the owners
and professionals with the Company's business strategy.
The Company believes that its integrated approach to eye care provides
significant advantages, benefits and opportunities to patients, providers and
payors. Patients benefit from the convenience of eye care products
4
<PAGE> 8
and services delivered or accessed efficiently at a single location. Eye care
professionals benefit from the supplemental management and administrative
services and resources provided by the Company, permitting them to continue to
dedicate their time and effort to their patients and professional practices.
Payors benefit from the Company's ability to provide a complete range of eye
care products and services in select regional markets at lower cost.
The Company's executive offices are located at 67 South Bedford Street,
Burlington, Massachusetts 01803 and its telephone number is (617) 229-1100.
5
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.......... 1,600,000 shares
Common Stock Outstanding before the
Offering................................... 6,346,715 shares(1)
Common Stock to be Outstanding after the
Offering................................... 7,946,715 shares(1)(2)
Use of Proceeds.............................. Working capital and general corporate
purposes, including acquisitions.
Nasdaq National Market Symbols............... Common Stock -- VISN
Warrants -- VISNZ
Risk Factors................................. The Common Stock offered hereby involves a
high degree of risk. Prospective investors
should carefully consider the factors
discussed under the heading "Risk Factors."
<FN>
- ---------------
(1) Excludes (i) 2,472,100 shares of Common Stock issuable upon the exercise of
2,472,100 Warrants (defined below) outstanding as of the date of this
Prospectus, (ii) 215,000 shares of Common Stock included in, and 215,000
shares of Common Stock issuable upon the exercise of warrants included in,
Units (defined below) issuable in connection with the exercise of Unit
Purchase Options (defined below), (iii) 85,000 shares of Common Stock
issuable upon exercise of, and 85,000 shares of Common Stock issuable upon
the exercise of warrants issuable upon exercise of, the IPO Representative's
Warrants (defined below), (iv) 85,000 shares of Common Stock issuable upon
the exercise of the Class A Warrants (defined below) and (v) 875,333 shares
of Common Stock issuable upon the exercise of stock options outstanding as
of the date of this Prospectus (the "Outstanding Stock Options"). See
"Description of Securities."
(2) Excludes 160,000 shares of Common Stock included in the Representative's
Warrants. See "Description of Securities" and "Underwriting."
</TABLE>
6
<PAGE> 10
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -----------------
1992(1) 1993 1994 1995(2) 1995 1996
------- ------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ -- $ 155 $ 529 $18,240 $ 4,200 $5,660
Cost of revenue....................... -- 292 928 8,147 1,872 2,262
Selling, general and administrative... 34 1,434 2,492 15,265 3,518 4,082
------ ------- ------- ------- ------- ------
Loss from operations........ (34) (1,571) (2,891) (5,172) (1,190) (684)
------ ------- ------- ------- ------- ------
Other income (expense):
Interest income..................... -- 43 183 387 119 94
Interest expense.................... (14) (7) (48) (253) (57) (58)
Other............................... -- 5 (189) 150 -- --
------ ------- ------- ------- ------- ------
Total other income
(expense)................. (14) 41 (54) 284 62 36
------ ------- ------- ------- ------- ------
Net loss.............................. $ (48) $(1,530) $(2,945) $(4,888) $(1,128) $ (648)
====== ======= ======= ======= ======= ======
Net loss per common share............. $ (0.04) $ (0.74) $ (0.94) $ (0.89) $ (0.22) $(0.10)
====== ======= ======= ======= ======= ======
Weighted average number of common
shares outstanding.................. 1,307 2,057 3,122 5,488 5,194 6,347
====== ======= ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................ $ 22,418 $ 32,218
Working capital..................................................... 5,135 14,935
Long term obligations, less current portion......................... 1,613 1,613
Stockholders' equity................................................ 15,798 25,598
</TABLE>
- ---------------
(1) Represents activity for the period from inception to December 31, 1992.
(2) Effective January 1, 1995 and July 1, 1995, the Company purchased
substantially all of the assets of Cambridge Eye Associates, Inc.
("Cambridge Eye") and Douglas Vision World, Inc. ("Vision World"),
respectively. Combined, the Company has a practice of 29 eye care centers
providing comprehensive eye care products and services.
(3) Adjusted to reflect the sale by the Company of the 1,600,000 shares offered
hereby at an assumed public offering price of $7.00 per share and the
application of the net proceeds therefrom. See "Use of Proceeds",
"Capitalization" and "Underwriting."
Unless otherwise indicated, all information contained in this Prospectus
assumes no exercise of (i) the outstanding Warrants, (ii) the Unit Purchase
Options, (iii) the IPO Representative's Warrants, (iv) the Class A Warrants, (v)
the Representative's Warrants or (vi) the Outstanding Stock Options.
7
<PAGE> 11
RISK FACTORS
An investment in the securities offered hereby is speculative in nature and
involves a high degree of risk. Accordingly, in addition to the other
information in this Prospectus, prospective purchasers are urged to consider
carefully the following risk factors in determining whether to purchase the
securities offered hereby.
This Prospectus contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Reference is made in particular to the description of the Company's plans
and objectives for future operations, assumptions underlying such plans and
objectives and other forward-looking statements included in "Prospectus
Summary," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" in this Prospectus. Such
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in the forward-looking statements. Factors which
could cause such results to differ materially from those described in the
forward-looking statements include those set forth in the risk factors below.
LOSSES FROM RECENT OPERATIONS; ABSENCE OF PROFITABILITY; LIMITED OPERATING
HISTORY
The Company has experienced losses in each year of operation since
inception in November 1992 and may continue to incur significant operating
losses for the foreseeable future. For the fiscal quarter ended March 31, 1996,
the Company incurred a net loss of $648,000, bringing its accumulated deficit to
$10.1 million at March 31, 1996. Although the Company's LVC business began in
the United Kingdom in 1993, the FDA only recently approved the use of excimer
lasers to perform LVC in October 1995. In addition, the Company has a limited
history of operating multi-site eye care centers, which operations commenced in
1995 with the acquisitions of Cambridge Eye and Vision World. In view of the
Company's limited experience operating multi-site eye care centers, managing the
practices of eye care professionals and marketing LVC services in the United
States, there can be no assurance that the Company will ever achieve
profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations", "Business" and "Financial Statements."
GOVERNMENT REGULATION AND SUPERVISION
The health care industry is highly regulated and there can be no assurance
that the regulatory environment in which the Company operates will not change
significantly in the future. The Company expects to modify its agreements and
operations from time to time as the business and regulatory environment changes.
While the Company believes that its operations comply with applicable law, there
can be no assurance that it will be able to successfully address changes in the
regulatory environment.
Each state imposes licensing requirements on individual opticians,
optometrists and ophthalmologists and on facilities and services operated by
these professionals. In addition, federal and state laws regulate health
maintenance organizations ("HMOs") and other managed care organizations with
which the Company's affiliated practices may have contracts. Many states require
regulatory approval, including certificates of need, before establishing or
expanding certain types of health care facilities (including ambulatory surgery
centers such as those that may be managed by the Company), offering certain
services or making expenditures in excess of statutory thresholds for health
care equipment, facilities or programs. In connection with the expansion of
existing operations and the entry into new markets, the Company and its
affiliated practices may become subject to additional regulation.
In addition to extensive existing government health care regulation, there
have been numerous initiatives on the federal and state levels for comprehensive
reforms affecting the payment for and availability of health care services. The
Company believes that such initiatives will continue during the foreseeable
future. Aspects of certain of these reforms as proposed in the past, such as
further reductions in Medicare and Medicaid payments and additional prohibitions
on physician ownership, directly or indirectly, of facilities to which they
refer patients, if adopted, could adversely affect the Company. Concern about
the potential effects of such reform measures has contributed to the volatility
of stock prices of many companies in health care and related industries and may
similarly affect the price of the Common Stock following this Offering.
8
<PAGE> 12
The laws of many states prohibit the unlawful rebate or unlawful division
of professional fees and prohibit non-physician entities from practicing
medicine. These laws vary from state to state and are enforced by the courts and
by regulatory authorities with broad discretion. The Company's business
operations have not been the subject of judicial or regulatory interpretation in
this context and there can be no assurance that review of the Company's business
by courts or regulatory authorities will not result in determinations that could
adversely affect the operations of the Company. In addition, the regulatory
framework of certain jurisdictions may limit the Company's expansion into such
jurisdictions if the Company is unable to modify its operational structure to
conform with such regulatory framework.
Federal law prohibits the offer, payment, solicitation or receipt of any
form of remuneration in return for, or in order to induce, the referral of a
person or the furnishing or arranging for the furnishing of items or services
reimbursable under Medicare or Medicaid. Pursuant to this anti-kickback law, the
federal government has recently announced a policy of increased scrutiny of
joint ventures and other transactions among health care providers in an effort
to reduce potential fraud and abuse relating to Medicare costs. The
applicability of these provisions to many business transactions in the health
care industry has not yet been subject to judicial and regulatory
interpretation. Noncompliance with the federal anti-kickback legislation can
result in exclusion from Medicare and Medicaid programs and civil and criminal
penalties.
The Company believes that, although it receives fees under management
services contracts for management services, it is not in a position to make or
influence referrals of patients or services reimbursed under Medicare or
Medicaid programs to its affiliated practices or to receive such referrals. Such
service fees are intended by the Company to be consistent with fair market value
in arm's length transactions for the nature and amount of management services
rendered and therefore would not constitute unlawful remuneration under
anti-kickback laws and regulations. If the Company is deemed to be in a position
to make, influence or receive referrals from or to physicians, or the Company is
deemed to be a provider under the Medicare or Medicaid programs, the operations
of the Company could be subject to scrutiny under federal and state
anti-kickback and anti-referral laws.
Significant prohibitions against physician referrals have been enacted by
Congress. These prohibitions, commonly known as "Stark II," amended prior
physician self-referral legislation known as "Stark I" by dramatically enlarging
the field of physician-owned or physician-interested entities to which the
referral prohibitions apply. Effective December 31, 1994, Stark II prohibits a
physician from referring Medicare or Medicaid patients to an entity providing
"designated health services" in which the physician has an ownership or
investment interest, or with which the physician has entered into a compensation
arrangement. The designated health services include prosthetic devices, which
under applicable regulations and interpretations include one pair of eyeglasses
or contact lenses furnished after cataract surgery and intraocular lenses
provided at ambulatory surgery centers. The penalties for violating Stark II
include a prohibition on payment by these government programs and civil
penalties of as much as $15,000 for each violative referral and $100,000 for
participation in a "circumvention scheme." The Company believes that although it
will receive fees under the management service contracts for management
services, it is not in a position to make or influence referrals of patients. To
the extent that the Company or any affiliated practice is deemed to be subject
to the prohibitions contained in Stark II for services, the Company believes its
activities fall within the permissible activities defined in Stark II,
including, but not limited to, the provision of in-office ancillary services.
COMPETITION
The Company experiences competition regarding the acquisition of the assets
of, and the provisions of management services to, eye care centers and
practices. Several companies, both publicly and privately held, that have
established operating histories and greater resources than the Company are
pursuing the acquisition of the assets of general and specialty practices and
the management of such practices. There can be no assurance that the Company
will be able to compete effectively in this regard with such competitors, that
additional competitors will not enter the market, or that such competition will
not make it more difficult to acquire the assets of, and provide management
services to, eye care practices on terms favorable to the Company.
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<PAGE> 13
Eye care practices affiliated with the Company will compete with other
local eye care practices as well as managed care organizations. The Company
believes that changes in governmental and private reimbursement policies and
other factors have resulted in increased competition for consumers of eye care
services. The Company believes that cost, accessibility and quality of services
are the principal factors that affect competition. There can be no assurance
that the affiliated practices will be able to compete effectively in the markets
that they serve, which inability to compete would adversely affect the Company.
The optical industry is highly competitive and includes chains of retail
optical stores, multi-site eye care centers, and a large number of individual
opticians, optometrists, and ophthalmologists who provide professional services
and/or dispense prescription eyewear. Since retailers of prescription eyewear
generally service local markets, competition varies substantially from one
location or geographic area to another. The Company believes that the principal
competitive factors affecting retailers of prescription eyewear are location and
convenience, quality and consistency of product and service, price, product
warranties, and a broad selection of merchandise, and that it competes favorably
in each of these respects. In its current regional markets, the Company faces
competition from national and regional retail optical chains which, in some
cases, have greater financial resources than those of the Company.
LVC competes with or supplements other surgical and non-surgical treatments
for refractive disorders, including eyeglasses, contact lenses, other types of
refractive surgery (such as radial keratotomy), corneal transplants and other
technologies currently under development. Other competitive factors which may
affect revenues include performance, pricing, convenience, ease of use, success
relative to alternative treatments and patient and general market acceptance.
The Company's laser suppliers are likely to compete with the Company in the
provision of LVC, either directly or indirectly, through marketing subsidiaries
or strategic partnerships with third parties. In addition, competition will
continue from entities similar to the Company and from hospitals,
hospital-affiliated group entities, physician group practices and private
ophthalmologists that, in order to offer LVC to existing patients, purchase
refractive lasers. Suppliers of conventional vision correction alternatives
(eyeglasses and contact lenses), such as optometric chains, may also compete
with the Company by purchasing laser systems and offering LVC to their
customers. The Company's current and prospective competitors include many large
domestic and foreign companies that have substantially greater financial,
operating, marketing and support resources than the Company. Competition to
provide LVC may lead to lower prices for LVC, as has happened in some countries
where the treatment has been available for several years.
The Company and its affiliated practices compete with other providers for
managed care contracts. The Company believes that trends toward managed care
have resulted in increased competition for such contracts. Other practices and
management service organizations may have more experience than the Company in
obtaining such contracts. There can be no assurance that the Company and its
affiliated practices will be able to successfully acquire sufficient managed
care contracts to compete effectively in the markets they serve, which inability
to compete would adversely affect the Company.
DEPENDENCE ON HEALTH CARE PROVIDERS
Certain states prohibit the Company from practicing medicine, employing
physicians to practice medicine on the Company's behalf or employing
optometrists to render optometric services on the Company's behalf. Since the
Company does not intend to practice medicine or optometry, its activities will
be limited to establishing LVC centers and other affiliations with health care
providers at which professionals may render eye care services, including LVC.
Accordingly, the success of the Company's operations as a full-service eye care
provider depends upon its ability to enter into agreements with health care
providers, including institutions, independent physicians and optometrists, to
render surgical and other professional services at facilities owned or managed
by the Company. To date, the Company has entered into agreements with six health
care providers to establish LVC centers. There can be no assurance that the
Company will be able to enter into agreements with other health care providers
on satisfactory terms or that such agreements will be profitable to the Company.
See "-- Government Regulation and Supervision" and "-- Competition."
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<PAGE> 14
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS
As an increasing percentage of optometric and ophthalmologic patients are
coming under the control of managed care entities, the Company believes that its
success will, in part, be dependent upon the Company's ability to negotiate, on
behalf of existing and prospective affiliated practices, contracts with HMOs,
employer groups and other private third party payors pursuant to which services
will be provided on a risk-sharing or capitated basis by some or all affiliated
practices. Under some of such agreements, the eye care provider accepts a
predetermined amount per month per patient in exchange for providing all
necessary covered services to the patients covered under the agreement. Such
contracts pass much of the risk of providing care from the payor to the
provider. The proliferation of such contracts in markets served by the Company
could result in greater predictability of revenues, but greater unpredictability
of expenses. There can, however, be no assurance that the Company will be able
to negotiate, on behalf of the affiliated practices, satisfactory arrangements
on a risk-sharing or capitated basis. In addition, to the extent that patients
or enrollees covered by such contracts require more frequent or extensive care
than anticipated, operating margins may be reduced or, in the worst case, the
revenues derived from such contracts may be insufficient to cover the costs of
the services provided. As a result, affiliated practices may incur additional
costs, which would reduce or eliminate anticipated earnings under such
contracts. Any such reduction or elimination of earnings would have a material
adverse affect on the Company's results of operations.
PLANS FOR ACQUISITIONS
Since the Company's formation, it has acquired the assets of two multi-site
eye care centers and their related optometric practices, Cambridge Eye and
Vision World. The Company's plans for growth and expansion include further
acquisitions of the assets of multi-site eye care centers and the practices of
eye care professionals (optometrists and ophthalmologists). The success of the
Company's growth strategy is dependent, in part, on its ability to integrate and
manage acquired operations and to acquire, integrate and manage additional
operations. Although the Company believes that there are opportunities to
acquire the assets of small to mid-sized regional multi-site eye care centers
and professional eye care practices, there can be no assurance that any such
opportunities do or will continue to exist, that the Company will be able to
identify suitable acquisition candidates or be able to finance any such
acquisitions or that any such acquisitions will be consummated on terms
favorable to the Company. The failure to consummate acquisitions on favorable
terms could have a material adverse effect on the Company. If the Company is
able to acquire additional operations, there can be no assurance that the
Company will be able to integrate and manage such additional operations
successfully. In addition, the Company's acquisition strategy will depend upon,
among other factors, the Company's ability to effect economies of scale and
realize other efficiencies, as to which there can be no assurance.
FUTURE CAPITAL NEEDS
The Company has incurred and anticipates that it will incur substantial
acquisition, capital and operating expenses and that it will be required to make
substantial cash disbursements, including expenses and disbursements related to
acquisitions, marketing, additional personnel and business development. The
Company expects these expenses to result in significant operating losses until
such time, if ever, that the Company is able to attain adequate revenue levels,
of which there can be no assurance. Even if the Company generates a positive
cash flow from its operations, as to which there can be no assurance, it may
require substantial capital in addition to the proceeds of the Offering and the
proceeds, if any, from the exercise of outstanding warrants or options, to
establish additional eye care centers or LVC centers or to otherwise fund the
Company's operations. Such additional capital may not be available when needed
or on terms acceptable to the Company. Although the Company intends to seek a
new line of credit from one or more commercial banks, there can be no assurance
that the Company will be able to do so. The Company may need to seek additional
capital through public or private sales of its securities, including equity
securities. Insufficient funds may require the Company to delay, scale back or
eliminate certain or all of its operations and development activities. Although
there can be no assurance, management believes that the net proceeds from the
Offering,
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<PAGE> 15
together with the revenues from operations and interest income from cash
investments, will be adequate to fund the Company's currently proposed
activities for at least the next 18 months.
NO ASSURANCE OF MARKET ACCEPTANCE OF LVC
The Company's profitability depends, in part, upon broad market acceptance
of LVC by the professional eye care community and the general population in the
United States. As the FDA only recently approved the use of excimer lasers to
perform LVC in October 1995, LVC is commercially untested in the United States.
The operating expenses, revenues or working capital requirements of the
Company's LVC centers cannot be ascertained based upon historical operating
performance and should therefore be considered in light of the numerous risks,
expenses, problems and difficulties frequently encountered in connection with
the establishment of a new business and the competitive environment in which the
Company's LVC centers will operate. Factors that may adversely affect market
acceptance of LVC in the U.S. include: nonacceptance of LVC as an alternative to
existing methods of treating refractive vision disorders; the relatively high
cost of LVC procedures (currently ranging from $1,500 to $2,000 per eye) and
general unavailability of third party reimbursement for the procedure; general
resistance to surgery; the effectiveness of alternative, less intrusive or less
expensive methods of correcting refractive vision disorders; concerns about the
safety and efficacy of LVC, including the lack of long term follow-up data; and
the possibility of known or unknown side effects. Any future reported adverse
events or other unfavorable publicity involving patient outcomes from LVC could
also adversely affect acceptance of the procedure. In addition, LVC surgery is
currently approved only for the correction of certain degrees of myopia.
Moreover, LVC has had limited market acceptance in certain foreign countries.
The failure of LVC to achieve broad market acceptance by the professional eye
care community and the general population would have a material adverse effect
on the Company's business, financial condition and results of operations.
LACK OF THIRD PARTY REIMBURSEMENT FOR LVC
Third party reimbursement generally is unavailable for LVC. There can be no
assurance that the absence of such reimbursement will not adversely affect the
prospects for market acceptance of the Company's LVC services.
SAFETY AND EFFICACY OF LVC
While LVC has been tested clinically and the FDA has approved two excimer
laser systems, there is not a large population of patients who have experience
with LVC and its post-procedure effects. Concerns with respect to the safety and
efficacy of the performance of LVC procedures with excimer lasers include
predictability and stability of results. Potential complications or side effects
include: post-operative pain or discomfort; double vision; corneal haze during
healing (an increase in light scattering properties of the cornea); glare/halos
(undesirable visual sensations produced by bright lights); decrease in contrast
sensitivity (diminished vision in low light); temporary increases in intraocular
pressure in reaction to post-procedure medication; modest fluctuations in
refractive capabilities during healing; modest decreases in best corrected
vision (i.e. with corrective eyewear); unintended over- or under-corrections;
instability, reversion or regression of effect; corneal scars (blemishing marks
left on the cornea); corneal ulcers (inflammatory or infectious lesions
resulting in loss of corneal tissue); induced astigmatism; and disorders of
corneal healing (compromised or weakened immune system or connective tissue
disease which causes poor healing). Published reports regarding PRK have
questioned the efficacy of the procedure based on mixed anecdotal evidence in
other countries where the procedure has been in use for some period. There can
be no assurance that additional complications will not hereafter be identified
and have a material adverse effect on the safety, efficacy or market acceptance
of such procedures and/or lead to product liability or other claims against the
Company.
RELIANCE ON SUPPLIERS OF LASER EQUIPMENT
The Company is not involved in the research, development or manufacture of
ophthalmic laser systems, and is dependent on unrelated manufacturers for its
supply of ophthalmic lasers. There are two companies whose excimer laser systems
have been approved for use by the FDA, Summit Technology, Inc. ("Summit")
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<PAGE> 16
and VISX, Inc. ("VISX"). The Company's laser suppliers may compete with the
Company in the provision of LVC, either directly or indirectly, and, as a
result, the Company may be unable to obtain and maintain agreements with
suppliers for suitable ophthalmic laser equipment on pricing, delivery and other
terms acceptable to the Company and could incur substantial delays in or be
prevented from placing lasers into operation.
The Company's ability to purchase ophthalmic laser systems from suppliers
of laser equipment depends in part on the ability of the Company's suppliers to
obtain patents, defend against patent infringement claims, maintain trade secret
protection and operate without violating the proprietary rights of third
parties. Patent filings relating to refractive laser surgery are numerous and
disputed, and patent law relating to the scope of claims in this area is still
evolving. There can be no assurance that patent infringement claims in the U.S.
or in other countries will not be asserted against any of the Company's laser
suppliers or that, if asserted, such supplier will be successful in defending
against such claims. In the event one of the products of one or more of the
Company's suppliers is adjudged to infringe patents of others with the likely
consequence of a damage claim, the supplier and its customers (including the
Company) may be enjoined from using such product or be required to obtain a
royalty-bearing license, if available on acceptable terms. The inability of any
of the Company's laser suppliers to resolve favorably the patent status of its
ophthalmic laser systems may interfere with potential sales of its ophthalmic
laser systems to the Company. Summit and VISX have entered into agreements which
require the payment of a $250 royalty fee each time one of such manufacturer's
excimer laser systems is used to perform LVC in the U.S. Such royalty fee could
provide a competitive advantage to Summit, VISX and their marketing subsidiaries
or strategic partnerships with third parties. In addition, such royalty fee is
likely to affect the pricing of LVC procedures and, therefore, may potentially
impact consumer acceptance of LVC.
RAPID TECHNOLOGICAL CHANGES
The medical device and ophthalmic laser industries are characterized by
rapid technological changes, including advances in laser and other technologies
and the potential new development of alternative surgical techniques or new
pharmaceutical products. LVC for treatment of refractive vision disorders will
compete with or supplement other surgical and non-surgical treatments for
refractive vision disorders, including existing treatments (such as eyeglasses,
contact lenses and radial keratotomy), as well as with other technologies and
surgical techniques currently under development, such as corneal implants and
refractive surgery using different types of lasers. It is conceivable that newer
technologies, techniques or products could be developed with better performance
than the excimer lasers purchased by the Company, although such new technologies
would be subject to the FDA approval process. Medical companies, academic and
research institutions and others could develop new therapies, including new
medical devices or surgical procedures, for the treatment of refractive vision
disorders that could be more medically effective and less expensive than LVC and
could potentially render LVC obsolete. The availability of new and better
ophthalmic laser technologies and surgical procedures could have a materially
adverse impact on the business of the Company's LVC centers. The Company may not
be able to utilize such new technologies or procedures or, if the Company is
able to utilize such new technologies in its business, the Company may not have
sufficient funds to make the substantial capital expenditures required to
acquire such technology. There can be no assurance that used excimer lasers can
be recovered by the Company and sold for a commercially reasonable price by the
Company.
CORPORATE LIABILITY AND INSURANCE
The provision of professional eye care services entails an inherent risk of
professional malpractice and other similar claims. The Company does not
influence or control the practice of medicine or optometry by professionals or
have responsibility for compliance with certain regulatory and other
requirements directly applicable to individual professionals and professional
groups. As a result of the relationship between the Company and its affiliated
practices, the Company may become subject to some professional malpractice
actions under various theories. There can be no assurance that claims, suits or
complaints relating to professional services provided by affiliated practices
will not be asserted against the Company in the future. The Company believes
that the providers with which the Company enters into LVC center agreements or
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<PAGE> 17
other strategic affiliation agreements are covered by such providers' medical
malpractice or liability insurance. The Company may not be able to purchase
medical malpractice insurance, and may not be able to purchase other insurance
at reasonable rates, which would protect it against claims arising from the
medical practice conducted by providers, including ophthalmologists, at its LVC
centers. Similarly, the use of laser systems in the Company's LVC centers may
give rise to claims against the Company by persons alleging injury as a result
of the use of such laser systems. The Company believes that claims alleging
defects in the laser systems it purchases from its suppliers are covered by such
suppliers' product liability insurance and that the Company could take advantage
of such insurance by adding such suppliers to lawsuits against the Company.
There can be no assurance that the Company's laser suppliers will continue to
carry product liability insurance or that any such insurance will be adequate to
protect the Company.
There can be no assurance that the Company will be able to retain adequate
liability insurance at reasonable rates, or that the insurance will be adequate
to cover claims asserted against the Company, in which event the Company's
business may be materially adversely affected.
DEPENDENCE UPON MANAGEMENT/NEED FOR ADDITIONAL PERSONNEL
The future success of the Company is dependent in part on its ability to
retain certain key personnel, particularly its President, William G. McLendon
and its Executive Vice President and Chief Operating Officer, Stephen M. Blinn.
See "Management." The loss of Mr. McLendon's or Mr. Blinn's services could have
a materially adverse impact upon the business of the Company. The success of the
Company's future operations depends in large part on the Company's ability to
recruit and retain qualified personnel over time, and there can be no assurance
that the Company will be able to retain its existing personnel or attract
additional qualified employees in the future. See "Business -- Employees."
DILUTION
Purchasers of the shares of the Common Stock offered hereby will experience
immediate and substantial dilution of approximately $4.636 per share in net
tangible book value of the Company. See "Dilution."
LACK OF DIVIDENDS
The Company has never declared or paid any cash dividend and does not
anticipate paying dividends on its Common Stock for the foreseeable future. See
"Price Range of Common Equity and Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of outstanding shares of Common Stock and shares of
Common Stock issuable upon exercise of the Class A Warrants, the Warrants, the
Unit Purchase Options, the IPO Representative's Warrant and the Representative's
Warrants, and upon exercise of the Outstanding Stock Options, are or will become
available for future sale in the public market at prescribed times. Sales of a
significant number of shares of Common Stock in the market could have an adverse
effect on the market price of the Company's securities. See "Shares Eligible for
Future Sale."
Assuming the exercise of all of the Warrants and Class A Warrants, the
Company will have outstanding 8,903,815 shares of Common Stock (excluding (i)
the shares of Common Stock included in, and issuable upon exercise of the
Warrants included in, the UPO Units, (ii) the shares of Common Stock included
in, and issuable upon exercise of the warrants included in, the IPO
Representative's Warrants, (iii) the shares of Common Stock issuable upon
exercise of the Representative's Warrants and (iv) the shares of Common Stock
issuable upon exercise of the Outstanding Stock Options). Of the 8,903,815
shares, 8,281,890 shares will be freely tradeable without restriction or further
registration under the Securities Act, except for shares held by "affiliates" of
the Company, as that term is defined under the Securities Act of 1933 and the
regulations promulgated thereunder, which will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act of 1933 ("Rule
144"). The remaining 621,925 shares that are outstanding have been issued and
sold by the Company in reliance on one or more exemptions from the registration
requirements of the Securities Act of 1933 and are "restricted securities"
within the meaning of Rule 144 ("Restricted
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<PAGE> 18
Shares") and, therefore, may be publicly sold only (i) if subsequently
registered under the Securities Act of 1933, (ii) pursuant to Rule 144 or Rule
701 promulgated under the Securities Act of 1933 ("Rule 701") or (iii) in other
private transactions exempt from registration under the Securities Act of 1933.
None of such shares have been held for the minimum two-year period required by
Rule 144 and therefore will not become eligible for public sale pursuant to Rule
144 until expiration of their respective two-year holding periods. The earliest
date at which any such two-year holding period will expire is in February 1997.
In addition, 60,000 Restricted Shares are eligible for sale in the public market
in accordance with Rule 701. Notwithstanding the foregoing, all of the
Restricted Shares are subject to lock-up agreements. See "Shares Eligible For
Future Sale -- Lock-up Agreements."
As of the date of this Prospectus, there are options to purchase an
aggregate of 875,333 shares of Common Stock of which options to purchase 331,750
shares are immediately exercisable. Upon exercise of these options, 60,000
shares will be eligible for sale in the public market in accordance with Rule
701. Of such 875,333 shares, 500,000 shares are subject to lock-up agreements.
See "Shares Eligible For Future Sale -- Lock-up Agreements."
POTENTIAL ISSUANCE OF PREFERRED STOCK
Under the Company's Restated Certificate of Incorporation, the Company may
issue up to 5,000,000 shares of Preferred Stock, $.01 par value (the "Preferred
Stock"), in the future without stockholder approval and upon such terms as the
Board of Directors may determine. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of delaying or preventing a
change in control of the Company without further action by the stockholders. The
Company has no present plans to issue any shares of Preferred Stock. See
"Description of Securities."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation and By-Laws contain
certain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company, including (i) the classification of the Board
of Directors into three classes, each class being elected for three-year terms,
(ii) the potential issuance of up to 5,000,000 shares of Preferred Stock without
stockholder approval and upon such terms as the Board of Directors may determine
and (iii) the requirement that, for nominations for the Board of Directors or
for other business to be properly brought by a stockholder before an annual
meeting of stockholders, notice thereof generally must be delivered by a
stockholder not less than 60 nor more than 90 days prior to the annual meeting.
Such provisions could limit the price that certain investors might be willing to
pay in the future for the Company's securities. Certain of such provisions allow
the Board of Directors to impose various procedural and other requirements that
could make it more difficult for stockholders to effect certain corporate
actions. See "Description of Securities -- Delaware Law and Certain Charter and
By-Law Provisions."
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THE COMPANY
Sight Resource Corporation was incorporated in Delaware on November 2, 1992
and commenced operations on November 30, 1992. The Company's operations are a
continuation of the business begun in April 1992 by PRK Limited Partnership, a
Massachusetts limited partnership (the "Predecessor Partnership"). On October
31, 1995 the Company changed its name to Sight Resource Corporation from
NewVision Technology, Inc. to better reflect its expanded corporate mission. The
Company has two wholly-owned consolidated British subsidiaries, NewVision
Technology Limited and NewVision Leasing Limited, which were registered under
the laws of the United Kingdom on September 7, 1993 and two wholly-owned
consolidated U.S. subsidiaries, Cambridge Eye Associates, Inc. ("Cambridge Eye")
and Douglas Vision World, Inc. ("Vision World"). As used in this Prospectus,
unless the context otherwise requires, "Sight Resource Corporation" or the
"Company" refers to Sight Resource Corporation and its consolidated subsidiaries
and, with respect to periods prior to its incorporation, to the business of the
Predecessor Partnership. See "Business."
In connection with its initial public offering in March 1993, the Company
sold to the lead underwriter (the "IPO Representative") warrants (the "IPO
Representative's Warrants") to purchase 85,000 units at an exercise price equal
to $7.98 per unit through March 1998, each unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.75 per share, subject to
adjustment. In March 1994, the Company issued 110,000 warrants (the "Class A
Warrants") to purchase 110,000 shares of Common Stock at an exercise price of
$6.00 per share, in connection with the Company's private placement of
$1,100,000 of bridge notes. In August 1994, the Company completed a public
offering of 2,472,500 units (the "Units"), each Unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.00 per share, subject to
adjustment (a "Warrant"). In connection with the public offering of the Units,
the Company issued to the lead underwriter and finder (the "Representatives")
options (the "Unit Purchase Options") to purchase an aggregate of 215,000 units
(the "UPO Units") at an exercise price per unit equal to $9.90, exercisable
through August 25, 1999. See "Description of Securities" below.
The Company's executive offices are located at 67 South Bedford Street,
Burlington, Massachusetts 01803 and its telephone number is (617) 229-1100.
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USE OF PROCEEDS
The net proceeds of the Offering, assuming a public offering price of $7.00
per share, and after deducting the estimated underwriting discounts and
commissions and expenses payable by the Company, are estimated to be
approximately $9,800,000 ($11,300,000 if the Underwriter's over-allotment option
is exercised in full).
Based upon the Company's current business plans, the Company anticipates
using the net proceeds of the Offering for working capital and other general
corporate purposes, including acquisitions. From time to time, the Company
intends to use a portion of the net proceeds to acquire the assets of individual
or multi-site eye care centers and the practices of eye care professionals
although it currently has no binding understandings, commitments or agreements
with respect to any such transaction. Pending such uses, the Company intends to
invest the net proceeds in interest-bearing deposit accounts, certificates of
deposit or similar short-term, investment grade financial instruments (financial
instruments, such as commercial paper, bankers' acceptances and repurchase
agreements, rated "investment grade" or better by one or more of the nationally
recognized securities rating agencies and maturing in 90 days or less).
Based on its currently planned programs, the Company anticipates that the
net proceeds of the Offering and the interest earned thereon, together with
funds generated from operations, should be adequate to satisfy its capital
requirements for at least the next 18 months, although there can be no
assurance. The Company anticipates that additional financing will be required
after the net proceeds of the Offering have been utilized. There can be no
assurance that such additional financing will be available when needed or on
terms acceptable to the Company. See "Risk Factors -- Future Capital Needs."
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DILUTION
The net tangible book value of the Company as of March 31, 1996 was
approximately $8,988,000 or approximately $1.416 per share of Common Stock. Net
tangible book value per share represents the total tangible assets of the
Company, reduced by the amount of its total liabilities, and divided by the
total number of shares of Common Stock outstanding as of March 31, 1996.
After giving effect to the sale of the 1,600,000 shares of Common Stock
offered hereby and the application of the estimated $9,800,000 net proceeds
therefrom (assuming an offering price of $7.00 per share), the pro forma net
tangible book value of the Company at March 31, 1996 would have been
approximately $18,788,000 or $2.364 per share. This represents an immediate
increase in net tangible book value of $0.948 per share (or 66.9%) to existing
stockholders and an immediate dilution of $4.636 per share (or 66.2%) to
investors purchasing shares of Common Stock offered hereby at the public
offering price. If the public offering price is higher or lower, the dilution to
the new investors will be, respectively, greater or less. The following table
illustrates the pro forma per share dilution in net tangible book value to
investors in the shares of Common Stock offered hereby:
<TABLE>
<S> <C> <C>
Offering price per share........................................... $ 7.00
------
Net tangible book value per share before Offering................ $1.416
Increase in net tangible book value per share attributable to new
investors..................................................... $0.948
------
Pro forma net tangible book value per share after Offering......... $2.364
------
Dilution of net tangible book value per share to new investors... $4.636
======
</TABLE>
The following table summarizes, as of March 31, 1996, the shares of Common
Stock purchased, the total consideration paid and the average price per share of
Common Stock paid by the existing stockholders and new investors in the
Offering:
<TABLE>
<CAPTION>
SECURITIES PURCHASED TOTAL CONSIDERATION
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 6,346,715 79.87% $25,858,000 72.52% $ 4.07
New investors................ 1,600,000 20.13% 9,800,000 27.48% $ 6.125
--------- ------ ---------- ------
Total:............. 7,946,715 100.00% $35,658,000 100.00%
========= ====== ========== ======
</TABLE>
18
<PAGE> 22
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996 (i) on an actual basis, and (ii) as adjusted to reflect the receipt of
the net proceeds from the sale of the 1,600,000 shares of Common Stock offered
hereby, assuming a public offering price of $7.00 per share. The data set forth
below should be read in conjunction with the Company's consolidated financial
statements and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------
ACTUAL AS ADJUSTED
------------ --------------------
(UNAUDITED)
<S> <C> <C>
Long term obligations, less current maturities............... $ 1,613,000 $ 1,613,000
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; no shares issued or outstanding............. -- --
Common Stock, $.01 par value; 20,000,000 shares authorized;
6,346,715 and 7,946,715 shares issued and outstanding,
actual and as adjusted, respectively.................... 63,000 79,000
Additional paid-in capital................................. 25,795,000 35,579,000
Accumulated deficit........................................ (10,060,000) (10,060,000)
------------ ------------
Total stockholders' equity................................... $ 15,798,000 $ 25,598,000
============ ============
</TABLE>
19
<PAGE> 23
PRICE RANGE OF COMMON EQUITY AND DIVIDEND POLICY
The Company's Common Stock began trading on the Nasdaq SmallCap Market on
March 31, 1993 under the symbol "VISN". The Warrants began trading on the Nasdaq
National Market on August 25, 1994 under the symbol "VISNZ". The following table
sets forth for the periods indicated, the high and low sales prices for the
Common Stock and the Warrants as reported by Nasdaq:
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL 1994:
First Quarter.................................. 9 3/8 7 7/8 -- --
Second Quarter................................. 8 1/2 5 7/8 -- --
Third Quarter.................................. 7 1/4 4 1/4 2 3/4
Fourth Quarter................................. 6 3 3/4 1 7/8 7/8
FISCAL 1995:
First Quarter.................................. 6 5/8 4 1/8 2 1
Second Quarter................................. 7 3/4 5 7/8 2 3/4 1 5/8
Third Quarter.................................. 9 7/8 7 1/4 4 3/4 2 1/2
Fourth Quarter................................. 11 1/4 6 5 5/8 3 1/4
FISCAL 1996:
First Quarter.................................. 11 7 7/8 5 1/4 2 15/16
</TABLE>
The Common Stock and the Warrants have been quoted on the Nasdaq National
Market since August 25, 1994. Prior to that time, the Common Stock was quoted on
the Nasdaq SmallCap Market.
The Company has not paid dividends to its stockholders since its inception
and does not plan to pay cash dividends in the foreseeable future. The Company
currently intends to retain earnings, if any, to finance the operations of the
Company. As of April 25, 1996, there were 344 and 17 holders of record of the
Common Stock and Warrants, respectively. The Company believes that there are
approximately 6,000 and 1,200 beneficial owners of Common Stock and Warrants,
respectively. On May 28, 1996, the last reported sales price of the Common Stock
on the Nasdaq National Market was $7.00 per share.
20
<PAGE> 24
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data presented below under the captions "Statement
of Operations Data" and "Balance Sheet Data" as of and for the period from April
29, 1992 (the date of inception of the Predecessor Partnership) through December
31, 1995 and as of and for each of the three fiscal years ended December 31,
1995, are derived from the consolidated financial statements of the Company,
which financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The foregoing consolidated financial
statements and the report thereon are included elsewhere in this Prospectus. The
selected financial data as of and for the three months ended March 31, 1995 and
1996 were derived from unaudited financial statements of the Company, that, in
the opinion of management, contain all adjustments necessary to present fairly
the results of operations for such periods and the financial position of the
Company as of March 31, 1996. The results of operations for the three months
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the entire 1996 fiscal year or any other interim period. The
information below should be read in conjunction with the consolidated financial
statements (and notes thereto) and "Management's Discussion and Analysis of
Financial Condition and Results of Operations", included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------------
1992(1) 1993 1994 1995(2) 1995 1996
------ ------- ------- ------- --------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................... $ -- $ 155 $ 529 $18,240 $ 4,200 $ 5,660
Cost of revenue........................ -- 292 928 8,147 1,872 2,262
Selling, general and administrative.... 34 1,434 2,492 15,265 3,518 4,082
------ ------- ------- ------- ------- -------
Loss from operations............... (34) (1,571) (2,891) (5,172) (1,190) (684)
------ ------- ------- ------- ------- -------
Other income (expense):
Interest income...................... -- 43 183 387 119 94
Interest expense..................... (14) (7) (48) (253) (57) (58)
Other................................ -- 5 (189) 150 -- --
------ ------- ------- ------- ------- -------
Total other income (expense)....... (14) 41 (54) 284 62 36
------ ------- ------- ------- ------- -------
Net loss............................... $ (48) $(1,530) $(2,945) $(4,888) $(1,128) $ (648)
====== ======= ======= ======= ======= =======
Net loss per common share.............. $(0.04) $ (0.74) $ (0.94) $ (0.89) $ (0.22) $ (0.10)
====== ======= ======= ======= ======= =======
Weighted average number of common
shares outstanding................... 1,307 2,057 3,122 5,488 5,194 6,347
====== ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------ MARCH 31,
1992 1993 1994 1995 1996
------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Total assets............................ $ 863 $ 5,210 $13,911 $23,554 $ 22,418
Working capital (deficiency)............ (478) (690) 9,787 5,327 5,135
Long term obligations, less current
portion............................... -- -- -- 1,703 1,613
Stockholders' equity.................... 169 3,419 13,364 16,445 15,798
<FN>
- ---------------
(1) Represents activity for the period from inception to December 31, 1992.
(2) Effective January 1, 1995 and July 1, 1995, the Company purchased
substantially all of the assets of Cambridge Eye and Vision World,
respectively. Combined, the Company has 29 eye care centers providing
comprehensive eye care products and services.
</TABLE>
21
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides a complete range of eye care products and services
through integrated networks of opticians, optometrists and ophthalmologists. The
Company was formed in November 1992 with an initial mission of providing LVC as
an alternative to conventional vision correction. Together with a private health
care provider in the United Kingdom, the Company established a network of LVC
centers in England and Wales which, utilizing the Company's excimer laser
systems, offered LVC to persons with nearsightedness. While the Company's
initial efforts focused on building a LVC delivery model in the United Kingdom,
the Company is now fully concentrating its efforts and resources in the United
States, where an estimated 60 to 70 million people are nearsighted and more than
90% of these people require corrections that fall within the LVC treatment
parameters approved by the FDA.
In October 1995, the FDA first approved the use of one manufacturer's
excimer laser for the treatment in the United States of nearsightedness using
LVC. In March 1996, the FDA approved a second manufacturer's excimer laser for
the same treatment. The Company had commenced consolidation of its United
Kingdom operations during the third quarter of fiscal 1995 and, following the
FDA's initial approval, had fully discontinued these operations by the fourth
quarter of fiscal 1995.
The Company's discontinuation of its United Kingdom operations permitted
the Company to concentrate its efforts and resources on growth opportunities now
available in the United States. For this purpose, excimer laser systems
previously used in the United Kingdom have been or are being retrofitted and
relocated to the United States. As of May 20, 1996, six laser systems were in
place in the United States. The costs associated with the discontinuation of the
United Kingdom operations were immaterial and included in operating expenses in
fiscal 1995.
During fiscal 1995, the Company acquired two New England-based eye care
centers. The first, Cambridge Eye, operates 21 eye care centers while the
second, Vision World, operates eight centers. While the Company's eye care
centers continue to provide traditional eyewear and eye care services, they now
also offer patients convenient access to LVC information and pre- and
post-operative LVC services and access to affiliated ophthalmologists.
Cambridge Eye was acquired effective January 1, 1995. The transaction
consisted of the purchase of substantially all of the assets of Cambridge Eye,
including accounts receivable, inventory and property and equipment, for a
purchase price of $1,690,000 in cash, 424,000 shares of Common Stock and the
assumption of net liabilities of approximately $1.6 million. Vision World was
acquired effective July 1, 1995. The transaction consisted of the purchase of
substantially all of the assets of Vision World, including accounts receivable,
inventory and property and equipment, for a purchase price of approximately
$970,000 in cash, 131,525 shares of Common Stock, $660,000 in cash payable over
a three-year period and $250,000 in cash payable over 18 months. Both
acquisitions were accounted for using the purchase method of accounting.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Revenue. The Company generated net revenue of approximately $5.7
million during the three months ended March 31, 1996 from the operation of its
29 eye care centers and six LVC centers in the United States as compared to net
revenue of approximately $4.2 million from its 21 eye care centers and its
network of LVC centers in the United Kingdom for the same period in 1995. Of the
$1.5 million, or 35%, increase in net revenue over the periods, approximately
$1.3 million of that increase relates to the additional eight eye care centers
acquired during the second half of fiscal 1995.
Cost of Revenue. Cost of revenue for the three months ended March 31, 1996
increased by approximately $390,000 or 21% over the same period in 1995. The
increase primarily resulted from the inclusion of costs associated with the sale
of optical products by the additional eye care centers operated by the
22
<PAGE> 26
Company in the first quarter of fiscal 1996. As a percentage of net revenue,
cost of revenue decreased from 44.6% to 40.0% over the periods. Cost of revenue
for the three months ended March 31, 1996 and 1995 principally consisted of (i)
the cost of manufacturing, purchasing and distributing optical products to its
customers and (ii) the cost of delivering LVC, including depreciation and
maintenance on excimer lasers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were approximately $4.1 million and $3.5 million for the
three months ended March 31, 1996 and 1995, respectively. The increase of
approximately $564,000 primarily relates to payroll and facility costs incurred
in operating additional eye care centers in the first quarter in fiscal 1996 as
compared to the first quarter in fiscal 1995. Selling, general and
administrative expenses, as a percentage of net revenue, declined from 84% to
72% over the periods. This decrease is a result of operating efficiencies which
the Company began to realize from the acquisition and expansion of multi-site
eye care centers.
Other Income and Expense. Interest income decreased by approximately
$25,000 to approximately $94,000 from $119,000 for the three months ended March
31, 1996 and 1995, respectively. This decrease resulted from the investment of a
lower cash balance during the first quarter in fiscal 1996 as compared to the
same period in fiscal 1995. Interest expense remained comparable at
approximately $58,000 and $57,000 for the three months ended March 31, 1996 and
1995 respectively.
Net Loss. The Company reduced its net loss by approximately 43% in the
first quarter of fiscal 1996 compared to the first quarter of fiscal 1995. For
the three months ended March 31, 1996, the Company recorded a net loss of
approximately $648,000 or $0.10 per share as compared to a net loss of
approximately $1.1 million or $0.22 per share for the same period in 1995.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Revenue. Net revenue for fiscal 1995 amounted to $18.2 million
compared to approximately $529,000 for fiscal 1994. The significant increase
resulted from revenue generated by the Company's newly-acquired eye care
centers.
The Company generated revenue in December 1995 from the treatment of its
first LVC patients in the United States. Although the amount included in revenue
in fiscal 1995 is immaterial, the event represented the beginning of the
Company's LVC business in the United States.
Cost of Revenue. Cost of revenue for fiscal 1995 was approximately $8.1
million as compared to approximately $928,000 for fiscal 1994. The increase
resulted from the inclusion of costs associated with the sale of optical
products by the Company's newly acquired eye care centers. Cost of revenue in
fiscal 1995 principally consisted of (i) the cost of manufacturing, purchasing
and distributing optical products to its customers in the United States as well
as (ii) the cost of delivering LVC in the United Kingdom, including depreciation
and maintenance on the Company's excimer lasers in the aggregate amount of more
than $1.2 million. Cost of revenue in fiscal 1994, which did not include
multi-site eye care center expenses, consisted exclusively of depreciation and
maintenance on the Company's excimer lasers in the United Kingdom.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were approximately $15.3 million and $2.5 million for
fiscal 1995 and 1994, respectively. Substantially all of the increase is
attributable to the costs of operating the multi-site eye care centers during
fiscal 1995. In addition, the Company continued to incur costs to develop and
execute the Company's U.S. business plan. Included in selling, general and
administrative expenses in fiscal 1995, were costs of occupancy and personnel at
the multi-site eye care centers, advertising and marketing programs, payroll and
office expenses in the United States and United Kingdom, severance and other
costs associated with closing United Kingdom operations, legal and accounting,
and other general and administrative expenses. In fiscal 1994, selling, general
and administrative expenses primarily consisted of costs incurred in its United
Kingdom operations and did not include expenses for the operation of multi-site
eye care centers. At December 31, 1995 and 1994, the Company had approximately
250 and 10 full time employees, respectively.
Other Income and Expense. Interest income increased to approximately
$387,000 for fiscal 1995 from approximately $183,000 for fiscal 1994. This
increase is a result of interest earned on the invested proceeds
23
<PAGE> 27
received from the Company's second public offering in September 1994 and the
exercise of certain warrants in October 1995. Interest expense for fiscal 1995
of approximately $253,000 represents interest on the revolving credit agreement
and the long-term debt which was assumed as part of the acquisition of Cambridge
Eye. The Company also recorded a $150,000 foreign currency translation gain on
the liquidation of the United Kingdom business at the close of fiscal 1995. In
fiscal 1994, the Company incurred $180,000 of financing costs in conjunction
with the issuance of bridge notes and the Class A Warrants.
Net Loss. For fiscal 1995, the Company recorded a net loss of
approximately $4.9 million or $0.89 per share as compared to a net loss of
approximately $2.9 million or $0.94 per share for fiscal 1994. The Company has
not yet been profitable, has experienced operating losses since its inception in
November 1992 and may incur operating losses in the future as it continues to
develop and implement its United States business plan.
FISCAL 1994 COMPARED TO FISCAL 1993
Net Revenue. In fiscal 1994 and 1993, the Company's net revenue was
generated exclusively from its United Kingdom operations. Net revenue for fiscal
1994 increased significantly to approximately $529,000 from approximately
$155,000 for fiscal 1993. This increase was a result of the performance of LVC
procedures in fiscal 1994 at refractive surgery centers established in
collaboration with British United Provident Association ("BUPA") during the
latter half of fiscal 1993 and the first quarter of fiscal 1994. Under the joint
venture agreement signed with BUPA (the "BUPA Agreement") the Company recorded
its share of the revenue for each LVC procedure performed.
Although fiscal 1993 represents the first full year of operations for the
Company, no revenue was recorded until the Company signed the BUPA Agreement in
June 1993 to establish BUPA/Sight Resource Centers in selected BUPA health care
facilities. BUPA is the largest provider of private health care in the United
Kingdom and is a recognized deliverer of quality care. At December 31, 1993,
eight excimer lasers systems were operational compared to 12 laser systems at
the end of fiscal 1994. The Company experienced an introductory period of
approximately six months from the time the centers became operational before any
regularity in patient flow was developed. In each of the quarters of fiscal
1994, the Company experienced an increase in the number of procedures performed
and the amount of revenue recorded.
Cost of Revenue. Cost of revenue consists exclusively of depreciation
expense on the excimer lasers of approximately $928,000 and $292,000 for fiscal
1994 and 1993, respectively. The increase in fiscal 1994 was a result of
depreciation on 12 laser systems for the majority of fiscal 1994 compared to
eight laser systems for the latter half of fiscal 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $1.1 million from $1.4
million in fiscal 1993 to $2.5 million in fiscal 1994. Approximately $430,000 of
the increase is attributable to increased advertising and marketing programs for
the BUPA/Sight Resource Centers throughout fiscal 1994, the hiring of additional
personnel, the development and sponsoring of optometric training programs, and
the establishment in the fourth quarter of a telemarketing division in the
United Kingdom.
The remainder of the increase of approximately $628,000 is a result of
increased general and administrative expenses in fiscal 1994 to implement the
BUPA Agreement and develop the infrastructure needed to manage the centers. The
increase also reflects costs incurred in fiscal 1994 associated with developing
and executing the United States business plan. During fiscal 1994, the Company
signed an agreement with Massachusetts Eye and Ear Infirmary, an affiliate of
the Harvard Medical School and one of the world's leading eye care providers, to
operate refractive surgery centers in New England. Included in general and
administrative expenses are personnel, legal, accounting and other costs
incurred in completing this agreement as well as advancing other relationships.
Other Income and Expense. Interest income represents interest on the
invested proceeds received from the Company's initial public offering and second
public offering. The amount earned during fiscal 1994 of approximately $183,000
as compared to fiscal 1993 of approximately $43,000, reflects the interest
earned in
24
<PAGE> 28
the final four months of fiscal 1994 from the net proceeds of approximately
$12.5 million generated from the Company's second public offering.
Interest expense other expenses for fiscal 1994 represents interest and
debt financing costs on $1.1 million of bridge notes and Class A Warrants which
were issued on March 28, 1994 at an interest rate of 10%. Principal and interest
on the bridge notes were repaid upon the completion of the second public
offering in September 1994. The Company incurred $180,500 of financing costs in
conjunction with the issuance of the bridge notes and Class A Warrants.
Net Loss. For fiscal 1994, the Company recorded a net loss of
approximately $2.9 million or $0.94 per share as compared to a net loss of
approximately $1.5 million or $0.74 per share for fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had approximately $6.6 million in cash and
cash equivalents and working capital of approximately $5.1 million. At December
31, 1995, the Company had approximately $8.0 million in cash and cash
equivalents and working capital of approximately $5.3 in comparison to
approximately $10.2 million in cash and cash equivalents and working capital of
approximately $9.8 million as of December 31, 1994. The decrease in cash and
working capital is primarily a result of the acquisition of eye care centers in
fiscal 1995, the purchase of additional excimer laser systems, and the Company
not yet obtaining profitability.
The combined purchase price of Cambridge Eye and Vision World consisted of
a payment of $2.7 million in cash, the issuance of 555,525 shares of Common
Stock, the assumption of approximately $2.3 million of debt and other cash
payments totaling $910,000 due over a three year period, of which $83,000 was
paid in fiscal 1995. Cambridge Eye is party to a credit agreement with a bank
providing a $500,000 revolving credit facility used for general working capital
purposes and a $1.8 million term loan. The revolving credit facility is based on
eligible accounts receivable and inventory balances and bears interest at the
bank's base rate plus 1.5%. The term loan bears interest at LIBOR plus 3.5% and
is payable in quarterly principal installments of $100,000 through March 1998
followed by four consecutive principal installments of $125,000. The credit
agreement is secured by all the assets of Cambridge Eye.
Using its supply of excimer lasers previously in service in the United
Kingdom and those purchased in fiscal 1995, the Company has the advantage of
utilizing the capital expenditures already incurred as it enters into the LVC
business in the United States. With regulatory approval granted by the FDA in
October 1995 for the commercial use of an excimer laser system for treating
nearsightedness, the Company had the laser systems it needed to begin treating
its first United States patients in December 1995. By early fiscal 1996, six of
the Company's center's were treating patients in Boston, New York City, Chicago,
Philadelphia, Providence and Warwick, Rhode Island.
Acquiring small-to-medium-sized multi-site eye care centers is a key
component of the Company's business strategy. By acquiring optometric chains,
the Company gains critical mass of locations ensuring that potential patients
will have convenient access to LVC information and pre- and post-operative
services. It also allows the Company to deliver these services at considerable
savings by using existing corporate and operational infrastructure, which
includes store operations, MIS, manufacturing purchasing, distribution and
training. The Company is currently evaluating potential acquisition candidates.
The Company has securities outstanding which provide it with potential
sources of financing. As part of the Company's secondary public offering of
stock in September 1994, the Company issued 2,472,500 Warrants. Each Warrant
allows the holder to purchase one share of the Company's Common Stock for $6.00.
The exercise of outstanding Warrants would provide net proceeds of approximately
$14.8 million. The exercise of all Unit Purchase Options (including the exercise
of the warrants included therein) would provide net proceeds of approximately
$3.7 million. The exercise of the IPO Representative Units (including the
exercise of warrants included in the IPO Representatives Units) would provide
net proceeds of approximately $1.3 million. In addition, the exercise of the
outstanding Class A Warrants would provide net proceeds of
25
<PAGE> 29
$510,000. There can be no assurance that the Company will obtain any such
proceeds from the exercise of the Warrants, the Unit Purchase Options, IPO
Representative's Warrants and the Class A Warrants.
The Company anticipates that its working capital, cash flow from
operations, revenues from operations and interest income from cash investments,
together with the net proceeds from this Offering, will be adequate to fund the
Company's currently proposed activities for at least the next 18 months. Without
the exercise of a significant number of the outstanding securities, additional
financing may be needed after this 18 month period. The Company anticipates
using financing vehicles such as bank debt, leasing, and other sources of
funding, such as additional equity offerings, to fund its operation. There can
be no assurance that the Company will be successful in obtaining funds from any
such sources. If additional funds are raised by issuing equity securities,
further dilution to the Company's stockholders may result. If additional funds
are not available, the Company may be required to delay execution of its
business plan.
The net operating loss carryforwards for federal and state tax purposes at
December 31, 1995 are approximately $9,595,000 and $9,546,000, respectively and
expire through 2010 and 2000, respectively.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
The effect of adopting SFAS 121, "Accounting for Long Lived Assets," in
fiscal 1996 will not have a material effect (if any) on the Company's financial
results.
26
<PAGE> 30
BUSINESS
OVERVIEW
Sight Resource Corporation (the "Company") provides a complete range of eye
care products and services through integrated networks of opticians,
optometrists and ophthalmologists. The Company's services are provided primarily
to persons with common vision disorders, as well as to persons with
sight-threatening conditions. The Company's operations currently consist of 29
eye care centers, a centralized optical laboratory and distribution center, two
management service organizations ("MSOs") and six laser vision correction
("LVC") centers which the Company has established in association with leading
hospitals, ambulatory surgery centers and ophthalmologists. The Company intends
to acquire additional eye care centers, expand the number of eye care
professionals (optometrists and ophthalmologists) whose businesses the Company
manages or with whom the Company has strategic affiliations, and to establish
additional LVC centers.
The Company's objective is to become the leading integrated provider of eye
care products and services in select, regional markets. To develop significant
regional integrated networks, the Company's business strategy focuses on (i)
acquiring and integrating the assets of regional multi-site eye care centers and
the practices of eye care professionals, (ii) employing or entering into
management services contracts with these professionals, (iii) establishing
additional LVC centers, (iv) expanding strategic affiliations with select
hospitals, ambulatory surgery centers and eye care professionals and (v)
continuing to market comprehensive and competitively priced eye care programs to
leading HMOs, insurance companies and other third party payors in the Company's
regional markets.
The Company believes that its integrated approach to eye care provides
significant advantages, benefits and opportunities to patients, providers and
payors. Patients benefit from the convenience of eye care products and services
delivered or accessed efficiently at a single location. Eye care professionals
benefit from the supplemental management and administrative services and
resources provided by the Company, permitting them to continue to dedicate their
time and effort to their patients and professional practices. Payors benefit
from the Company's ability to provide a complete range of eye care products and
services in select regional markets.
THE EYE CARE INDUSTRY
Eye Care Population. Eye care professionals and organizations recommend
periodic eye examinations for all Americans. More than 150 million Americans, or
approximately 60% of the nation's population, use eyeglasses or contact lenses
to correct common refractive vision disorders and, in 1995, more than 90 million
of these persons purchased corrective eyewear. The population for corrective
eyewear has grown consistently over the last five years and the demographic
trends of an aging population are expected to generate increased demand for
corrective eyewear and optical services. In addition to refractive vision
disorders, each year many Americans also require medical or surgical eye care
services, such as treatment for cataracts, glaucoma and retinal disorders.
According to industry sources, ophthalmic surgeons perform more than 3 million
surgical procedures in the United States per year.
Eye Care Market. Industry sources estimate that approximately $20 billion
is annually spent on eye care products and services, including eyeglasses,
contact lenses and professional eye care services. Of this $20 billion market, a
total of approximately $13 billion is annually spent on sales of eyeglasses
(approximately $11 billion) and contact lenses (approximately $2 billion) and
approximately $4 billion annually is spent on eye exams and related services
performed by opticians, optometrists and ophthalmologists, while the remaining
$3 billion represents the costs of related surgical procedures performed by
ophthalmologists.
Eye Care Providers. Eye care services in the United States are delivered
through a fragmented system of local providers, including individual or small
groups of opticians, optometrists and ophthalmologists. The Company estimates
that opticians, optometrists, retail optical chains and multi-site eye care
centers are the primary vision care providers to approximately 82% of the
population with common vision disorders. According to industry sources,
approximately 65,000 opticians, 31,000 optometrists and 16,500 ophthalmologists
are actively involved in patient care in the United States today.
27
<PAGE> 31
Eye Care Trends. Concerns over the accelerating costs of health care in
general, including eye care, have resulted in the increasing prominence of
managed care in the eye care industry and a decline in the traditional fee-based
eye care product and service market. Managed care, which typically involves a
third party (frequently the payor) assuming responsibility for ensuring that eye
care is provided in a high quality, cost-effective manner, has reduced the
competitive position of many eye care professional groups and individual
practices, particularly those that lack the capital to expand, develop
information systems and purchase new technologies, have higher operating costs
and do not have formal ties with other providers nor the ability to offer a
variety of eye care services. In order to remain competitive in the changing
health care environment, eye care professionals increasingly are affiliating
with larger organizations which offer skilled and innovative management, access
to payors and their enrollees, sophisticated information systems, greater
capital resources and more efficient cost structures. Approximately 40 million
Americans currently receive eye care benefits via third party payor programs.
The Company believes that third party payors increasingly will prefer to
contract with a single provider for complete eye care services within selected
geographic areas.
Recent Eye Care Developments. The eye care industry is characterized by
rapid technological changes, including advances in medical device and ophthalmic
laser technologies and developments of alternative surgical techniques or new
pharmaceutical products. In October 1995, the United States Food and Drug
Administration (the "FDA") approved the use of ophthalmic excimer lasers to
correct nearsightedness. Lasers for the correction of farsightedness and
astigmatism are currently undergoing FDA-required clinical testing. Industry
sources estimate that, in 1995, approximately 350,000 radial keratotomy
procedures were performed in the United States. Radial keratotomy is a surgical
procedure in which the ophthalmologist uses a diamond-edged scalpel to cut a
varying number of radial incisions in order to reshape the cornea to correct the
patient's vision.
BUSINESS STRATEGY
The Company's objective is to become the leading integrated provider of eye
care products and services in select, regional markets. The principal elements
of the Company's business strategy are to (i) acquire and integrate the assets
of regional multi-site eye care centers and the practices of eye care
professionals, (ii) employ or enter into management services contracts with
these professionals, (iii) establish LVC centers, (iv) expand strategic
affiliations with select hospitals, ambulatory surgery centers and eye care
professionals and (v) continue to market comprehensive and competitively priced
eye care programs to leading HMOs, insurance companies and other third party
payors in the Company's regional markets:
Acquire and Integrate Assets of Eye Care Centers and
Practices. Acquiring and integrating the assets of eye care centers and
professional practices provide the Company with significant and direct
access to persons with vision disorders and sight-threatening conditions,
thereby establishing a broad patient base for the Company's integrated eye
care strategy. The Company estimates that opticians, optometrists, retail
optical chains and multi-site eye care centers are the primary vision care
providers to approximately 82% of the population with common vision
disorders. The Company's eye care centers sell products or services to
approximately 125,000 customers annually and, through its eye care centers,
the Company maintains an updated customer database comprised of
approximately 350,000 individuals who have utilized the services of the
Company and its affiliated eye care professionals over the last several
years. The Company's centralized optical laboratory and distribution center
have the capacity to service additional multi-site eye care centers.
Enter into Management Services Contracts with Eye Care
Professionals. By entering into management services contracts with eye
care professionals the assets of whose practices the Company has acquired,
the Company earns revenues from the management, administrative, marketing
and other services it provides to such affiliated professionals. These
professionals, in turn, benefit from the services and resources provided by
the Company's MSOs.
Establish LVC Centers. By establishing LVC centers in association
with hospitals, ambulatory surgery centers, ophthalmologic practice groups
and ophthalmologists, the Company is able to provide LVC services to its
eye care center customers and the patients of its affiliated eye care
professionals. In
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addition, under the Company's Open Access Plan, the Company's laser
systems are made available for use by all ophthalmologists in the local
market; thus the Company earns fees from such non-affiliated professionals'
use of the Company's laser systems to perform LVC.
Expand Strategic Affiliations. The Company intends to both expand its
existing LVC center strategic affiliations and enter into new strategic
affiliations with health care providers, including hospitals, ambulatory
surgery centers, ophthalmologic practice groups and ophthalmologists. The
Company's goals in expanding its strategic affiliations are to broaden its
service capabilities and afford the Company, for itself and on behalf of
its affiliated eye care professionals, significant opportunities for cross-
referrals and volume contracting with third party payors and their
intermediaries.
Market Eye Care Programs to Third Party Payors. The Company intends
to build on its existing managed care contracts and integrated eye care
strategy to market comprehensive and competitively priced eye care service
programs to leading HMOs, insurance companies and other third party payors
in the Company's regional markets. Approximately 40 million Americans
currently receive eye care benefits via third party payor programs. Through
its integrated approach to eye care, the Company believes that it offers a
complete range of eye care products and services at competitive cost;
consequently, payors benefit from contracting with the Company's networks
of integrated and efficient providers.
ACQUISITION STRATEGY
The Company has an acquisition strategy to acquire and integrate the assets
of multi-site eye care centers and the practices of eye care professionals and
to employ or enter into management services contracts with these professionals.
This strategy includes both expanding existing regional markets and entering new
regional markets:
Expand Existing Regional Markets. The Company plans to expand its
business in the markets where it currently operates, particularly to
broaden the delivery of services offered in such markets. Acquisitions in
existing markets (i) permit the Company to effect economies of scale and
realize other operating efficiencies, (ii) provide the Company with the
opportunity to expand its patient base and revenues without a proportionate
increase in administrative costs and (iii) permit the Company to
strategically complement existing operations.
Enter New Regional Markets. The Company intends to enter into
additional regional markets by acquiring the assets of multi-site eye care
centers and eye care practices that may be well positioned to become
leaders in their regional markets. The Company will target acquisitions in
strategic markets that will serve as platforms from which the Company can
consolidate a given service area by making and integrating additional
"in-market" acquisitions.
The Company believes that a substantial number of multi-site eye care
centers and optometric and ophthalmic practices would meet its acquisition
criteria. Acquisition candidates will be expected to demonstrate potential for
revenue growth or continued profitability. The Company will also evaluate
qualitative issues such as the medical professionals' reputations in the local
and national marketplace, medical professionals' training, licensure and
experience, Medicare and Medicaid compliance, billing practices and operating
history. Prior to entering any market, the Company will consider such factors as
the local level of eye care competition, networking and consolidation activity,
the regulatory environment, patient-provider ratios and the economic condition
of the local market. The Company also will consider the acquisition of
ambulatory surgical centers, specialty eye hospitals and other complementary
practices and services that are consistent with its objective of being a leading
integrated provider of eye care products and services in select, regional
markets.
The Company believes that it will be an attractive acquiror to owners of
independent multi-site eye care centers and ophthalmic and optometric practices
because of the Company's (i) fee structure, which allows owners and
professionals to participate in the cost efficiencies and revenue growth
realized by the affiliated centers and practices and (ii) transaction structure,
which permits owners and professionals to become
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stockholders of the Company, thus permitting ownership liquidity and alignment
of the interests of the owners and professionals with the Company's strategy.
OPERATIONS
EYE CARE CENTERS
Effective January 1, 1995, the Company acquired the assets of Cambridge
Eye, an optometric practice operating 21 eye care centers, principally in
Massachusetts. The Company also entered into a management services contract with
Optometric Providers, Inc. ("Optometric Providers"), a corporation established
to employ the optometrists previously employed by Cambridge Eye.
Effective July 1, 1995, the Company acquired the assets of Douglas Vision
World, Inc., ("Vision World") a company operating eight eye care centers in
Rhode Island. The Company has also entered into a management services contract
with Optometric Care, Inc. ("Optometric Care"), a professional corporation
established to employ the optometrists previously affiliated with Vision World.
The Company's 29 eye care centers are major providers of prescription and
non-prescription eye care products and services in New England, principally
Massachusetts and Rhode Island, with sales of eye care products and services to
approximately 125,000 customers each year. Each eye care center carries an
extensive array of eyeglass frames ranging in price from value models to
designer collections. Lens and frame selections include a variety of materials
and styles. In addition to prescription eyewear, each center also carries
fashion sunglasses and eyewear accessories. Point-of-sale equipment ensures that
retail prices of products are accurate and provides control over inventory and
merchandising. The point-of-sale equipment also establishes and maintains an
updated customer database comprised of approximately 350,000 individuals who
have utilized the services of the Company and its affiliated eye care
professionals over the last few years.
Each eye care center is staffed by one or more licensed optometrists, a
manager and a number of trained vision care technicians and/or licensed
opticians. Currently, 17 of the Company's 29 eye care centers maintain on-site
facilities for cutting and edging ophthalmic lenses to fit into eyeglass frames,
which enable those centers to offer same-day or next-day service for a majority
of customers ordering prescription eyeglasses.
The Company's 29 eye care centers are located in major shopping malls,
strip shopping centers, urban locations and free-standing buildings and
generally are clustered within market areas so as to maximize the benefit of
advertising strategies and to minimize the cost of supervising operations.
CENTRALIZED OPTICAL LABORATORY AND DISTRIBUTION CENTER
To meet the volume needs of the eye care centers for certain prescription
eyeglass lenses and the rapid delivery needs of each center's customers, the
Company operates a centralized optical laboratory and distribution center in
Holliston, Massachusetts. The centralized optical laboratory provides complete
laboratory services to all of the Company's eye care centers, including
polishing, cutting and edging, tempering, tinting and coating of ophthalmic
lenses. The distribution center provides and maintains a central inventory of
all accessories and supplies necessary to operate the retail eye care centers,
as well as "ready made" eye care products, including contact lenses and related
supplies. The inventory of eyeglass lenses, frames, contact lenses, accessories
and supplies is acquired through a number of sources, domestic and foreign. The
Company is not dependent on any one supplier. The centralized optical laboratory
and distribution center has the capacity to accommodate additional multi-site
eye care centers.
MANAGEMENT SERVICES CONTRACTS
In connection with its acquisition of Cambridge Eye and Vision World, the
Company entered into management services contracts with Optometric Providers and
Optometric Care, pursuant to which Cambridge Eye and Vision World operate as
MSOs. Pursuant to these management services contracts, the MSOs provide
management, administrative, marketing and related services to Optometric
Providers and Optometric Care. As a result, the Company is involved in the daily
on-site financial and administrative management of these optometric practices
and provides various other services to the practices from time to time,
including
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legal, financial reporting, treasury, human resources and insurance assistance.
The Company's goals in providing such services are to (i) improve the
performance of these optometric practices in these non-professional activities,
(ii) allow the optometrists employed by or associated with these practices to
more fully dedicate their time and efforts toward their professional practice
activities, (iii) enhance the financial return to the Company and (iv) afford
the Company expanded service capabilities, and, for itself and on behalf of the
optometric practices, significant opportunities for contracting with payors and
their intermediaries.
Pursuant to the service contracts, the MSOs, among other things, (i) act as
the exclusive business manager and administrator of all business and
administrative functions and services associated with the provision of the
professional services, (ii) order and purchase all professional and office
inventory and supplies and arrange for the availability of the same, (iii)
maintain files and records, (iv) provide or arrange for the provision of
technical and ancillary service and support personnel, (v) establish, operate
and maintain bookkeeping, accounting, billing and collection systems, (vi)
render advice concerning the marketing of services, (vii) develop and administer
benefit plans for the professionals and (viii) render such other business and
financial management, consultation and advice as may reasonably be needed from
time to time by the practice in connection with its provision of professional
services.
The service fees payable to the Company by the affiliated practices under
the management services contracts vary based on the cost, nature and amount of
services provided, and may be adjustable or subject to renegotiation from time
to time. Service fees payable under existing and future contracts are subject to
the requirements of applicable laws, rules and regulations and negotiations with
individual professional practices.
Under the management services contracts, the affiliated practices retain
the responsibility for, among other things, (i) hiring and compensating
professionals, (ii) ensuring that professionals have the required licenses,
credentials, approvals and other certifications needed to perform their duties
and (iii) complying with applicable federal and state laws, rules and
regulations. In addition, the affiliated practices exclusively control all
aspects of professional practice and the delivery of professional services.
LASER VISION CORRECTION CENTERS
Business History. Following the Company's inception in 1992, its initial
business efforts involved the delivery of LVC in the United Kingdom. In 1993,
the Company established a national network of laser vision centers in the United
Kingdom in conjunction with British United Provident Association, the largest
provider of private health care in the United Kingdom. During 1995, in
anticipation of FDA approval of LVC in the United States, the Company
de-emphasized its United Kingdom operations in order to concentrate its
attention and resources on LVC opportunities in the United States. These
operations were discontinued by the end of 1995 and laser systems which had been
in use in the United Kingdom have been or are in the process of being
retrofitted and relocated to the United States. The Company's efforts in the
United Kingdom played a key role in the development of its business strategy for
the United States market and provided it with operating experience in the
delivery of LVC services.
Potential United States Market for LVC. On October 20, 1995, the FDA
granted the first United States approval of a laser system for the treatment of
nearsightedness using LVC. LVC is now used to treat nearsightedness in
approximately 50 countries. Industry studies indicate that 60 to 70 million
Americans are nearsighted and that more than 90% of these people have a
refractive disorder that falls within the LVC treatment parameters approved by
the FDA. Industry sources conservatively estimate that an aggregate of
approximately four million LVC procedures for nearsighted patients will be
performed in the U.S. by the year 2000, resulting in a potential annual market
in excess of $1 billion in the year 2000. In addition, LVC for farsightedness
and astigmatism is currently undergoing FDA-required clinical testing. As new
technologies or procedures are approved for refractive correction, the Company
intends to incorporate these technologies and procedures into the services
provided by the Company.
Establishment of LVC Centers. The Company establishes LVC centers in
association with selected hospitals, ambulatory surgery centers and private
practice facilities ("providers"). These providers generally
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have a high level of name recognition and reputation within the ophthalmic
community and among prospective patients for LVC which, in turn, supports the
Company's efforts to market its LVC centers. By affiliating with the Company,
these providers benefit by having a convenient way of participating in LVC
without incurring the substantial capital expenditures or the risk of
technological obsolescence. The providers also benefit from the Company's
ability to acquire, counsel and refer patients for LVC services.
Following FDA approval in October 1995, the Company has to date established
six LVC centers in affiliation with the following providers:
- Massachusetts Eye and Ear Infirmary, an affiliate of the Harvard Medical
School (Boston, MA)
- St. George Eye Center (Chicago, IL)
- The New York Center for Laser Vision Correction (New York, NY)
- Medical College of Pennsylvania/Hahnemann University (Philadelphia, PA)
- The Rhode Island Eye Institute (Providence, RI)
- Koch Eye Associates (Warwick, RI)
The Company plans on placing additional lasers in areas where it has
acquired or may acquire multi-site eye care centers or enter into strategic
affiliations. By utilizing its supply of laser systems previously in service in
the United Kingdom and those purchased in 1995, the Company can take advantage
of capital expenditures already incurred. The Company analyzes demographic,
competitive and other available data in determining potential LVC center sites.
LVC Center Agreements. LVC centers are established in compliance with
applicable law and, generally, pursuant to a written LVC center agreement
between the Company and the provider. Each LVC center agreement specifies the
region in which the LVC center will operate. For example, the Company's LVC
center agreement with the Massachusetts Eye and Ear Infirmary covers the
provision of LVC services in substantially all of New England; the Company's
other LVC center agreements cover the provision of LVC services in the local
market in which the provider is located.
The LVC center agreements also set forth the terms and conditions pursuant
to which the Company and the providers will operate the respective LVC centers,
including (i) a description of the types of LVC and related eye care services to
be provided, (ii) specification of the duties and responsibilities of the
Company and the providers concerning such matters as procurement and use of
equipment, delivery of services, quality standards, personnel, billing and
collections, insurance and marketing, (iii) compliance with applicable laws,
rules and regulations and (iv) provisions addressing noncompetition and
confidentiality.
The Company's obligations pursuant to such agreements typically include:
furnishing the laser system to be used for the delivery of LVC, therapeutic and
related eye care services at the LVC center; maintenance, repairs and upgrades
to the laser system; and certain training and oversight of medical, technical
and administrative personnel involved in the delivery of services at the center.
The providers' responsibilities pursuant to such agreements typically include:
providing ophthalmologists to perform the LVC, therapeutic and related eye care
services to patients at the LVC center, including performing LVC on qualified
patients originated through the Company's marketing efforts; furnishing suitable
space and certain ancillary equipment, furniture and supplies for the LVC
center's operations; and providing administrative, nursing and technical support
for the LVC center.
The LVC center agreements also generally provide for the Company to pay the
providers for certain services associated with each LVC procedure performed by
the provider on a patient generated through the Company's marketing efforts. In
addition, the provider pays the Company an access fee for use of the laser
system to perform LVC or therapeutic procedures on patients generated by such
provider. Generally, the LVC center agreements also provide that community-based
opthalmologists may access the LVC center under the Company's Open Access Plan.
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Numerous state laws and regulations, which vary significantly from state to
state, presently affect the manner in which the Company may establish and
operate LVC centers. In some instances these laws and regulations are ambiguous,
and sometimes state regulators fail to provide adequate guidelines. The Company
believes that its LVC centers are in substantial compliance with all applicable
regulatory requirements. However, federal and state regulatory attention may
continue to be directed to the practice of medicine, and any changes in state or
federal law or regulations, or in governmental agency and judicial
interpretations of such laws and regulations, could cause one of the Company's
strategies that is now in compliance with applicable laws to cease so to comply.
There can be no assurance that federal regulations will not in the future place
impediments upon the Company's LVC centers.
LVC Procedure. Myopia (nearsightedness), hyperopia (farsightedness) and
astigmatism are three of the most common refractive disorders. These refractive
disorders have traditionally been corrected with conventional methods such as
eyeglasses and contact lenses. Myopia can also be corrected with radial
keratotomy, a surgical procedure in which the ophthalmologist uses a
diamond-edged scalpel to cut a varying number of radial incisions to reshape the
cornea to correct the patient's vision. LVC, by contrast, is a surgical
procedure which, utilizing an ophthalmic excimer laser system, involves the
removal of a microscopic layer of the cornea. This procedure changes the
curvature of the cornea and allows the eye to focus light properly, resulting in
improved vision. For the majority of nearsighted patients this procedure can
eliminate the need to wear eyeglasses or contact lenses to correct their
nearsightedness.
LVC is performed by a specially trained ophthalmologist on an outpatient
basis. The procedure commences with a routine eye examination to determine the
exact correction required. The information from the examination is programmed
into the laser's computer, which calculates the data needed to make a precise
corneal correction. Following the application of anesthetic drops, the
ophthalmologist then removes the thin layer of cells covering the outer surface
of the cornea (the epithelium) and positions the patient for the laser
procedure. The pre-programmed laser's energy is then applied in discrete pulses,
each of which lasts several billionths of a second, to ablate microscopic layers
of tissue from the surface of the cornea in a predetermined pattern to
permanently reshape the anterior surface of the cornea. This procedure changes
the curvature of the cornea and, when healed, allows the eye to focus light
properly, resulting in improved vision. The entire LVC procedure, including
patient preparation and post-operative dressing, generally lasts no more than
thirty minutes.
Individuals who undergo the procedure generally experience discomfort for
24 to 48 hours and blurred vision for approximately 48 to 72 hours after the
procedure. Following LVC, the ophthalmologist may prescribe a topical
pharmaceutical to promote corneal healing and alleviate discomfort. Although
most patients experience improvement in clarity of vision within a few days
following the procedure, it generally takes from one to three months for the
correction to stabilize and for the full benefit of the procedure to be
realized. In the six months following treatment, a series of patient follow-up
visits are scheduled with an optometrist who monitors the corneal healing
process to verify that the treatment is proceeding as expected. A patient
typically has one eye treated in a session, with the second eye treated three to
six months thereafter.
The safety and efficacy of the laser system currently used by the Company
were demonstrated in FDA-required clinical trials involving the treatment and
subsequent three-year follow up of more than 1,600 eyes. Studies using the 6mm
beam laser found that six months after treatment 95.0% of treated eyes were
corrected to 20/40 or better without eyeglasses or contact lenses, and 65.4%
were 20/20 or better without eyeglasses or contact lenses. One year after
treatment, those results had improved to 98.8% at 20/40 or better and 80.5% at
20/20 or better.
LVC STRATEGY
The Company has established a model for the delivery of LVC services. The
Company's LVC strategy is based upon (i) generating and controlling patient
flow, (ii) delivering LVC through eye care centers and (iii) promoting
cooperation with local ophthalmologists and optometrists through the Company's
Open Access Plan:
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Generating and Controlling Patient Flow. Management believes that
generating and controlling patient flow is the key to building a successful
LVC services business. The Company estimates that opticians, optometrists,
retail eye care chains and multi-site eye care centers are the primary
vision care providers to approximately 82% of the population with common
vision disorders. The Company's LVC strategy is based upon the
complementary approach of delivering LVC services through its eye care
centers and developing its Open Access Plan, under which its laser systems
are made available to all qualified opthalmologists and under which
community-based optometrists and opthalmologists can refer their patients
to the LVC center, giving the Company access to the other 18% of the
population with common vision disorders.
Delivering LVC through Eye Care Centers. The Company's 29 eye care
centers provide products and services to approximately 125,000 customers
each year, and have compiled a marketing database of approximately 350,000
customers with common refractive vision disorders. Delivering LVC services
through its eye care centers (i) provides the Company significant and
direct access to a large percentage of the population eligible for LVC,
(ii) provides prospective patients with local access to information
concerning LVC services and to pre-operative assessments, (iii) offers
patient convenience to pre- and post-operative examinations that are part
of the LVC procedure and (iv) adds only an incremental expense to existing
optical and optometric marketing costs. The Company believes that contact
lens wearers (approximately 29 million Americans) and those who would like
to wear contact lenses (including the two million individuals per year who
become contact lens-intolerant) will be particularly receptive to LVC since
they have already chosen to seek an alternative to eyeglasses to correct
their vision.
Open Access Plan. The Company's LVC strategy is designed to promote
cooperation between the Company and local ophthalmologists and
optometrists. Through its Open Access Plan, the Company's laser systems are
made available for use by all ophthalmologists in the local market. Local
optometrists can also refer their patients to the Company's LVC centers for
LVC services. The Company believes that its Open Access Plan will encourage
ophthalmologists to use its LVC centers to treat their own patients. The
Open Access Plan allows ophthalmologists who have met the applicable
training requirements to use the Company's LVC centers for a per procedure
fee. The Company believes that through the efficiencies created by
integrating its LVC centers with its eye care centers and network of
affiliated optometrists, it can provide its Open Access Plan to local
ophthalmologists at very competitive rates, thus providing local
ophthalmologists an incentive to use the Company's LVC centers by treating
their LVC patients at the Company's LVC centers.
MARKETING
As an integrated provider of eye care products and services in regional
markets, the Company makes use of various media to market its products and
services, including LVC:
Advertising. The Company uses newspaper, magazine, television, radio,
direct mail and other advertising to reach prospective, as well as
existing, customers. Advertisements emphasize the Company's benefits to the
eyewear public, such as value pricing, product promotions, convenience of
location, customer service and knowledgeable salespersons. In-house
optometric examinations by licensed optometrists are also emphasized in
advertising, subject to regulatory requirements.
In-center Marketing. The Company's eye care centers and LVC centers
are designed to be attractive and customer oriented. In its eye care
centers, the Company prepares and revises point-of-purchase displays, which
convey promotional messages to customers upon arriving at the center.
Visual merchandising techniques are employed to draw attention to products
displayed in the eye care centers. In addition, to market the Company's LVC
services in its eye care centers, the Company shows customers educational
videotapes, provides take-home brochures and uses LVC-specific point-of-
purchase displays.
Personalized Consultations. Each eye care center is staffed by one or
more licensed optometrists, a manager and a number of trained vision care
technicians and/or licensed opticians, each of whom is
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trained to provide personalized consultation to customers regarding the
Company's eye care products and services, including LVC.
Quarterly Newsletters. The Company mails a quarterly newsletter to
the approximately 350,000 individuals in its Company's marketing database,
consisting of individuals who have utilized the services of the Company and
its affiliated professionals over the last several years. The newsletter
includes educational, promotional and marketing information about the
Company's products and services, including LVC.
Eye Care Professionals. To support its Open Access Plan, the Company
markets its LVC centers to eye care professionals in the local community.
The Company provides LVC-related marketing materials to these eye care
professionals.
Financing Arrangements. The Company has arranged for the availability
of third-party financing vehicles for customers to purchase the Company's
products and services, including LVC.
Managed Care. The Company markets its comprehensive and competitively
priced vision care programs to leading HMOs, insurance companies and other
third party payors in the Company's regional markets. The Company's
marketing strategy towards these organizations stresses its regional
coverage, its complete range of eye care products and services and its
commitment to quality and service.
COMPETITION
The Company experiences competition regarding the acquisition of the assets
of, and the provision of management services to, eye care centers and practices.
Several companies, both publicly and privately held, that have established
operating histories and greater resources than the Company are pursuing the
acquisition of the assets of general and specialty practices and the management
of such practices. There can be no assurance that the Company will be able to
compete effectively in this regard, that additional competitors will not enter
the market, or that such competition will not make it more difficult to acquire
the assets of, and provide management services to, eye care practices on terms
favorable to the Company.
Eye care practices affiliated with the Company will compete with other
local eye care practices as well as managed care organizations. The Company
believes that changes in governmental and private reimbursement policies and
other factors have resulted in increased competition for consumers of eye care
services. The Company believes that cost, accessibility and quality of services
are the principal factors that affect competition. There can be no assurance
that the affiliated practices will be able to compete effectively in the markets
that they serve, which inability to compete would adversely affect the Company.
The optical industry is highly competitive and includes chains of retail
optical stores, multi-site eye care centers, and a large number of individual
opticians, optometrists, and ophthalmologists who provide professional services
and/or dispense prescription eyewear. Since retailers of prescription eyewear
generally service local markets, competition varies substantially from one
location or geographic area to another. The Company believes that the principal
competitive factors affecting retailers of prescription eyewear are location and
convenience, quality and consistency of product and service, price, product
warranties, and a broad selection of merchandise, and that it competes favorably
in each of these respects. In its current regional markets, the Company faces
competition from national or regional retail optical chains which, in some
cases, have greater financial resources than those of the Company.
LVC competes with or supplements other surgical and non-surgical treatments
for refractive disorders, including eyeglasses, contact lenses, other types of
refractive surgery (such as radial keratotomy), corneal transplants and other
technologies currently under development. Other competitive factors which may
affect revenues include performance, pricing, convenience, ease of use, success
relative to alternative treatments and patient and general market acceptance.
The Company's laser suppliers are likely to compete with the Company in the
provision of LVC, either directly or indirectly, through marketing subsidiaries
or strategic partnerships with third parties. In addition, competition will come
from entities similar to the Company and from hospitals, hospital-affiliated
group
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entities, physician group practices and private ophthalmologists that, in order
to offer LVC to existing patients, purchase refractive lasers. Suppliers of
conventional vision correction alternatives (eyeglasses and contact lenses),
such as optometric chains, may also compete with the Company by purchasing laser
systems and offering LVC to their customers. The Company's current and
prospective competitors include many large domestic and foreign companies that
have substantially greater financial, operating, marketing and support resources
than the Company. Competition to provide LVC may lead to lower prices for LVC,
as has happened in some countries where the treatment has been available for
several years.
The Company and its affiliated practices compete with other providers for
managed care contracts. The Company believes that trends toward managed care
have resulted in increased competition for such contracts. Other practices and
management service organizations may have more experience than the Company in
obtaining such contracts. There can be no assurance that the Company and its
affiliated practices will be able to successfully acquire sufficient managed
care contracts to compete effectively in the markets they serve, which inability
to compete would adversely affect the Company.
GOVERNMENT REGULATION AND SUPERVISION
The health care industry is highly regulated, and there can be no assurance
that the regulatory environment in which the Company operates will not change
significantly in the future. The Company expects to modify its agreements and
operations from time to time as the business and regulatory environment changes.
While the Company believes it has been, and will continue to be, able to
structure all its agreements and operations in accordance with applicable law,
there can be no assurance that it will be able to successfully address changes
in the regulatory environment.
Each state imposes licensing requirements on individual opticians,
optometrists and ophthalmologists and on facilities and services operated by
these professionals. In addition, federal and state laws regulate HMOs and other
managed care organizations with which the Company's affiliated practices may
have contracts. Many states require regulatory approval, including certificates
of need, before establishing or expanding certain types of health care
facilities (including ambulatory surgery centers such as those that may be
managed by the Company), offering certain services or making expenditures in
excess of statutory thresholds for health care equipment, facilities or
programs. In connection with the expansion of existing operations and the entry
into new markets, the Company and its affiliated practices may become subject to
additional regulation.
In addition to extensive, existing government health care regulation, there
have been numerous initiatives on the federal and state levels for comprehensive
reforms affecting the payment for and availability of health care services. The
Company believes that such initiatives will continue during the foreseeable
future. Aspects of certain of these reforms as proposed in the past, such as
further reductions in Medicare and Medicaid payments and additional prohibitions
on physician ownership, directly or indirectly, of facilities to which they
refer patients, if adopted, could adversely affect the Company. Concern about
the potential effects of such reform measures has contributed to the volatility
of stock prices of many companies in health care and related industries and may
similarly affect the price of the Common Stock following this Offering.
The laws of many states prohibit the unlawful rebate or unlawful division
of professional fees and prohibit nonphysician entities from practicing
medicine. These laws vary from state to state and are enforced by the courts and
by regulatory authorities with broad discretion. The Company's business
operations have not been the subject of judicial or regulatory interpretation in
this context and there can be no assurance that review of the Company's business
by courts or regulatory authorities will not result in determinations that could
adversely affect the operations of the Company. In addition, the regulatory
framework of certain jurisdictions may limit the Company's expansion into such
jurisdictions if the Company is unable to modify its operational structure to
conform with such regulatory framework.
Federal law prohibits the offer, payment, solicitation or receipt of any
form of remuneration in return for, or in order to induce, the referral of a
person or the furnishing or arranging for the furnishing of items or services
reimbursable under Medicare or Medicaid. Pursuant to this anti-kickback law, the
federal government has recently announced a policy of increased scrutiny of
joint ventures and other transactions among
36
<PAGE> 40
health care providers in an effort to reduce potential fraud and abuse relating
to Medicare costs. The applicability of these provisions to many business
transactions in the health care industry has not yet been subject to judicial
and regulatory interpretation. Noncompliance with the federal anti-kickback
legislation can result in exclusion from Medicare and Medicaid programs and
civil and criminal penalties.
The Company believes that, although it receives fees under management
services contracts for management services, it is not in a position to make or
influence referrals of patients or services reimbursed under Medicare or
Medicaid programs to its affiliated practices or to receive such referrals. Such
service fees are intended by the Company to be consistent with fair market value
in arm's length transactions for the nature and amount of management services
rendered and therefore would not constitute unlawful remuneration under
anti-kickback laws and regulations. If the Company is deemed to be in a position
to make, influence or receive referrals from or to physicians, or the Company is
deemed to be a provider under the Medicare or Medicaid programs, the operations
of the Company could be subject to scrutiny under federal and state
anti-kickback and anti-referral laws.
The Company believes its operations as described in this Prospectus are in
compliance with applicable law. The ability of the Company to operate profitably
will depend in part upon the Company and its affiliated practices obtaining and
maintaining all necessary licenses, certificates of need and other approvals and
operating in compliance with applicable health care regulations.
ENVIRONMENTAL REGULATION
The Company's business activities are not significantly affected by
environmental regulations and no material expenditures are anticipated in order
for the Company to comply with environmental regulations. However, the Company
is subject to certain regulations promulgated under the Federal Environmental
Protection Act with respect to grinding, tinting, edging and disposing of
ophthalmic lenses and solutions and may be subject to additional environmental
regulations.
PROPRIETARY PROPERTY
The Company has no licenses, patents or registered copyrights. The Company
(i) has a registered trademark in the United States for "Cambridge Eye
Associates", (ii) has received a Notice of Allowance for use of the trademark
"Open Access Plan" and (iii) has had federal trademarks applications accepted
for the trademarks "Sight Resource" and "Frugal Frames."
EMPLOYEES
As of April 25, 1996, the Company and its affiliated professional practices
had 297 full time employees, including 37 affiliated optometrists. The Company
intends to hire additional key personnel it believes will be required for
advancement and expansion of the Company's activities.
The success of the Company's future operations depends in large part on the
Company's ability to recruit and retain qualified personnel over time. There can
be no assurance, however, that the Company will be successful in retaining or
recruiting key personnel.
CORPORATE LIABILITY AND INSURANCE
The provision of professional eye care services entails an inherent risk of
professional malpractice and other similar claims. The Company does not
influence or control the practice of medicine or optometry by professionals or
have responsibility for compliance with certain regulatory and other
requirements directly applicable to individual professionals and professional
groups. As a result of the relationship between the Company and its affiliated
practices, the Company may become subject to some professional malpractice
actions under various theories. There can be no assurance that claims, suits or
complaints relating to professional services provided by affiliated practices
will not be asserted against the Company in the future. The Company believes
that the providers with which the Company enters into LVC center agreements or
other strategic affiliation agreements are covered by such providers'
professional malpractice or liability
37
<PAGE> 41
insurance. The Company may not be able to purchase professional malpractice
insurance, and may not be able to purchase other insurance at reasonable rates,
which would protect it against claims arising from the professional practice
conducted by providers. Similarly, the use of laser systems in the Company's LVC
centers may give rise to claims against the Company by persons alleging injury
as a result of the use of such laser systems. The Company believes that claims
alleging defects in the laser systems it purchases from its suppliers are
covered by such suppliers' product liability insurance and that the Company
could take advantage of such insurance by adding such suppliers to lawsuits
against the Company. There can be no assurance that the Company's laser
suppliers will continue to carry product liability insurance or that any such
insurance will be adequate to protect the Company.
The Company maintains insurance coverage that it believes will be adequate
both as to risks and amounts. The Company believes that such insurance will
extend to professional liability claims that may be asserted against employees
of the Company that work on site at affiliated practice locations. In addition,
pursuant to the management services contracts, the affiliated practices are
required to maintain professional liability and comprehensive general liability
insurance. The availability and cost of such insurance has been affected by
various factors, many of which are beyond the control of the Company and its
affiliated practices.
There can be no assurance that the Company will be able to retain adequate
liability insurance at reasonable rates, or that the insurance will be adequate
to cover claims asserted against the Company, in which event the Company's
business may be materially adversely affected.
PROPERTIES
Cambridge Eye and Vision World lease the space for 21 and eight,
respectively, of the Company's eye care centers (which range in size from
approximately 1,100 to 6,300 square feet), under leases which expire as follows,
exclusive of renewal options:
<TABLE>
<CAPTION>
YEAR NUMBER OF LEASES EXPIRING
--------------------------------------- -------------------------
<S> <C>
1996................................... 9
1997................................... 3
1998................................... 6
1999................................... 3
2000................................... 4
2001 and thereafter.................... 4
</TABLE>
The centralized optical laboratory and distribution center is located at
the approximately 22,000 square feet of space leased by Cambridge Eye in an
industrial complex in Holliston, Massachusetts pursuant to a lease which expires
in 1998. In addition to the eye care centers and the centralized optical
laboratory and distribution center, the Company currently leases its executive
offices of approximately 5,400 square feet of space located at 67 South Bedford
Street, Burlington, Massachusetts 01803 pursuant to a lease which expires in
1998. The Company believes that its facilities are adequate for its present
needs and that suitable space will be available to accommodate its future needs.
LITIGATION
The Company's subsidiaries are defendants in certain lawsuits alleging
various claims incurred in the ordinary course of business. These claims are
generally covered by various insurance policies, subject to certain deductible
amounts and maximum policy limits. In the opinion of management, the resolution
of existing claims should not have a material adverse effect, individually or in
the aggregate, upon the Company's business or financial condition.
Sight Resource Corporation is not currently a party to any claims, suits or
complaints, although there can be no assurance that such claims will not be
asserted against Sight Resource Corporation in the future. From time to time
Sight Resource Corporation has been party to claims, litigation or other
proceedings in the ordinary course of its business, none of which has been
material to the Company or its business.
There can be no assurance that future claims against the Company or any of
its subsidiaries will not have a material adverse effect on the Company, its
operations or financial condition.
SEASONALITY
The Company's business is not subject to material seasonal fluctuations.
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<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
William G. McLendon(1)............. 44 President, Chief Executive Officer and Director
Stephen M. Blinn................... 48 Executive Vice President, Chief Operating Officer
and Director
Elliot S. Weinstock, O.D. ......... 48 Executive Vice President, President of Cambridge
Eye and Director
James H. Spevock................... 58 Vice President of Operations
Alan MacDonald..................... 43 Vice President, Finance and Administration and
Secretary
Jon W. Kerbs....................... 40 Vice President of Marketing
Russell E. Taskey(1)(2)............ 62 Director
Gary Jacobson, M.D. ............... 58 Director
Allen R. Kirkpatrick(1)(2)......... 54 Director
<FN>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</TABLE>
William G. McLendon has been President and a Director of the Company since
its inception in 1992 and Chief Executive Officer since April 1994. Mr. McLendon
served as Vice President and Chief Financial Officer of IBIS Technology
Corporation, a manufacturer of silicon-based materials for semiconductors, from
1990 to 1993. Prior thereto, Mr. McLendon was the Vice President, Chief
Financial Officer and Treasurer of Summit Technology, Inc. from 1986 to 1990,
and was Vice President and Chief Financial Officer of Zymet, Inc. from 1983 to
1985.
Stephen M. Blinn has been Executive Vice President, Chief Operating Officer
and a Director since joining the Company in May 1993. Mr. Blinn served as
Executive Vice President, Strategic Marketing Development of Summit Technology,
Inc. from 1991 to May 1993. Mr. Blinn first joined Summit in 1987 and served as
Vice President, Sales and Marketing. Prior thereto he was the co-founder and
President of Source Research, Inc., a distribution company for medical lasers
and cardiac pacemakers from 1985 to 1987.
Elliot S. Weinstock, O.D. was elected as a Director of the Company
following the acquisition by the Company of Cambridge Eye in February 1995. Dr.
Weinstock continues to serve as President of Cambridge Eye, which he founded in
1975. Dr. Weinstock has served on the advisory boards of several contact lens
manufacturers.
James H. Spevock, has been Vice President of Operations of the Company
since August 1995. Mr. Spevock has thirty-five years experience in acquiring,
consolidating and operating health-care related retail chains throughout the
country. From 1984 to 1995, Mr. Spevock served as Vice President of Operations
for Tri-State Leasing, Inc., a company whose holdings had included Vision World
and Douglas Drug, a chain of drug stores with annual sales of more than $65
million. Mr. Spevock's experience also includes serving as President and Chief
Executive Officer of Mall Drug, a New England based drug store chain with 165
locations. Prior to that, Mr. Spevock was responsible for the integration of the
initial 1,000 stores operated by the national drug store chain, Rite Aid.
Alan MacDonald, has been Vice President, Finance and Administration since
January 1996 and Secretary since March 1996. Mr. MacDonald has over twenty years
of financial and operational expertise in retail, consumer products and direct
marketing industries. Mr. MacDonald served as President of Home Infocus, a
direct marketer of consumer information services from May 1994 to January 1996.
Prior to that, Mr. MacDonald served as Vice President, Finance and Chief
Financial Officer of Saga International Holidays,
39
<PAGE> 43
Ltd. and National Leisure Group, Inc. respectively, from 1989 to 1994. Mr.
MacDonald held various financial management positions at PepsiCo. Inc. and
Harcourt General Corporation from 1979 to 1989.
Jon W. Kerbs, has been Vice President of Marketing since January 1996. Mr.
Kerbs has extensive experience in optical retail marketing and brand
development. Mr. Kerbs held various positions at LensCrafters from 1990 to
January 1996, where he most recently served as Marketing Director for
LensCrafters western region, and was responsible for the marketing programs for
155 optical retail stores. Prior to that, Mr. Kerbs served as an Assistant Brand
Manager at the Procter & Gamble Company from 1987 to 1990 for the Ivory Soap and
Crest Toothpaste product lines.
Russell E. Taskey has been a Director of the Company since November 1992.
Mr. Taskey is currently President of R. E. Taskey, Associates, a human resource
consulting firm. Mr. Taskey served as Vice President of Human Resources at The
Analytic Sciences Corporation ("TASC") from 1973 to 1994 where he was
responsible for a staff of 31 professionals servicing the human resources needs
of over 2,000 high technology professional employees at 16 locations throughout
the United States. Mr. Taskey was the founding President and is presently a
Director of the North East Human Resource Association, a 1,700 person human
resource professional association. He also serves on the Board of Directors of
Active Control Experts of Cambridge, Massachusetts, a materials engineering
company.
Gary Jacobson, M.D. has been a Director of the Company since November 1992.
Dr. Jacobson is a founder of two Massachusetts hospitals, Westwood Lodge and
Pembroke Hospital, and has served as President of each since 1990. He is a
physician, board-certified in psychiatry, and is a past President of the
Massachusetts Psychiatric Society. He has held an appointment at Massachusetts
General Hospital since 1969 and has served as Assistant Clinical Professor at
Harvard Medical School since 1977.
Allen R. Kirkpatrick has been a Director of the Company since December
1992. Mr. Kirkpatrick has been President of Epion Corporation, a contract
research organization dedicated to development of new technologies for advanced
materials, since 1984. Prior thereto he was General Manager of the Ion Materials
Systems Division of Eaton Corporation from 1981 through 1984 and Manager of the
Solid State Division of Spire Corporation from 1973 through 1980.
SCIENTIFIC ADVISORY BOARD
Myron Yanoff, M.D., has been an advisor to the Company since July 1994 and
is the Medical Director for the Delaware Valley Region. Dr. Yanoff is the
Professor and Chairman of the Department of Ophthalmology at the Medical College
of Pennsylvania and Hahnemann University and is currently Chief of Service at
Hahnemann University Hospital, specializing in cataract and refractive surgery.
Dr. Yanoff was the first surgeon in the Delaware Valley Region to perform
phototherapeutic keratectomy with an excimer laser and is currently performing
Summit Phase III clinical trials, under the auspices of the FDA, for
farsightedness and astigmatism. In 1988, in recognition of his scientific
achievements in research and teaching, Dr. Yanoff received the "Senior
Distinguished U.S. Scientist Award" (Humbolt-Award). Dr. Yanoff is a graduate of
the College and Medical School of the University of Pennsylvania and is the
author of 18 textbooks and over 130 papers published in peer-reviewed journals.
John D. Hunkeler, M.D., has been an advisor to the Company since October
1993. Dr. Hunkeler is the Chairman of the Department of Ophthalmology at Kansas
University Medical Center and was previously a Clinical Associate Professor of
Ophthalmology at the University. Mr. Hunkeler is a past President of the
American Society of Cataract and Refractive Surgery, an organization of 5,000
refractive care specialists and is the current President of the Kansas
University Ophthalmic Foundation. He is also the founder of the Hunkeler Eye
Clinic in Kansas City, Missouri, which specializes in cataract and refractive
surgery and also serves as a national training center for ophthalmologists
interested in learning about excimer laser for refractive correction in the
human eye. Dr. Hunkeler was the founding director of the Kansas City Eye Bank
and served as its medical director for ten years. Dr. Hunkeler is also a past
member of the board of the Eye Bank Association of America.
40
<PAGE> 44
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee that oversees the engagement
of the Company's independent accountants, reviews annual financial statements
and the scope of annual audits and considers matters relating to accounting
policy and internal controls. The Board also has a Compensation Committee that
reviews, approves and makes recommendations on the Company's compensation
policies, practices and procedures to ensure that legal and fiduciary
responsibilities of the Board of Directors are carried out and that such
policies, practices and procedures contribute to the success of the Company. The
Compensation Committee also administers the Company's 1992 Employee, Director
and Consultant Stock Option Plan (the "Stock Option Plan").
ELECTION AND COMPENSATION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a
classified Board of Directors consisting of three classes of directors, with
each class to be as nearly equal in number as is reasonably possible. The
Company has designated two Class A directors (Mr. Kirkpatrick and Mr. Blinn),
two Class B directors (Dr. Jacobson and Mr. Taskey) and two Class C directors
(Mr. McLendon and Dr. Weinstock). Class A, Class B and Class C directors will
serve until the annual meetings of stockholders to be held in 1997, 1998 and
1999, respectively, and until their respective successors are duly elected and
qualified. At each annual meeting of stockholders, nominees for director are
elected for a full term of three years to succeed those directors whose terms
are expiring.
The Company has implemented a stock option program under the Stock Option
Plan for non-employee directors. The Stock Option Plan provides for a grant to
each non-employee director immediately following each annual meeting of
stockholders of a non-qualified option to purchase 5,000 of shares of Common
Stock, provided that on such date such director has been in the continued and
uninterrupted services of the Company as a director for a period of at least one
year. Each such option has an exercise price equal to the fair market value of
the Common Stock on the date of grant and vests in equal annual installments
over two years. The Company currently has no other compensation arrangements for
members of the Board of Directors but may elect in the future to compensate
Board members for attendance at regular meetings of the Board of Directors and
for meetings of the committees of the Board.
41
<PAGE> 45
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth summary information as
to compensation received in fiscal 1995 by the Company's Chief Executive Officer
and each of the two other most highly compensated executive officers of the
Company who were serving as such at the end of fiscal 1995 (the "Named Executive
Officers") for services rendered to the Company in all capacities during fiscal
1995. No other executive officer of the Company received compensation exceeding
$100,000 for fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
-------------------- SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS(#) COMPENSATION($)(2)
- --------------------------- ------ --------- ------------ ------------------
<S> <C> <C> <C> <C>
William G. McLendon....................... 1995 $ 161,500 30,000 $ 895
President and Chief 1994 $ 140,000 -- $1,281
Executive Officer 1993 $ 85,000(1) -- $ 231
Stephen M. Blinn.......................... 1995 $ 158,975 30,000 $1,090
Executive Vice President and 1994 $ 136,800 125,000(4) $ 995
Chief Operating Officer 1993 $ 85,000(1) 150,000 $ --
Elliot S. Weinstock, O.D. ................ 1995 $ 183,656(3) -- $4,014
Executive Vice President and President
of Cambridge Eye
</TABLE>
- ---------------
(1) The Company commenced the payment of salaries to Messrs. McLendon and Blinn
in April 1993. The Company does not intend to pay in the future any cash
compensation to such Named Executive Officers for services rendered from
inception through April 1, 1993.
(2) Represents the cost to the Company of matching contributions under the
Company's 401(k) plan to Dr. Weinstock and the dollar value of premiums paid
by the Company with respect to term life insurance for all Named Executive
Officers.
(3) Dr. Weinstock became an executive officer effective January 1995 upon the
acquisition by the Company of Cambridge Eye.
(4) Includes 125,000 stock options that were repriced during fiscal 1994.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each stock option
granted during fiscal 1995 to each of the Named Executive Officers. The
potential realizable values that would exist for the respective options are
based on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date of grant over the full term of the option. Actual gains, if any,
on stock options, exercises and Common Stock holdings are dependent on the
future performance of the Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION --------------------
NAME (#)(1) FISCAL YEAR(2) ($/SHARES) DATE 5%($) 10%($)
- ---- --------------- -------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William G. McLendon...... 30,000(3) 8.14% $ 4.31 2/10/05 $210,616 $335,371
Stephen M. Blinn......... 30,000(3) 8.14% $ 4.31 2/10/05 $210,616 $335,371
</TABLE>
- ---------------
(1) The options were granted pursuant to the Company's Stock Option Plan at an
exercise price equal to or greater than the fair market value on the date of
grant.
(2) The Company granted options representing 368,400 shares of Common Stock in
fiscal 1995.
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<PAGE> 46
(3) These options were granted pursuant to the Company's Stock Option Plan and
are incentive stock options. Options vest annually in three equal
installments commencing one year from the date of grant. Options vest
immediately upon certain changes of control described with respect to their
employment agreements. See "--Employment Agreements, Termination of
Employment and Change of Control Arrangements."
FISCAL YEAR-END OPTION VALUES
The following table provides the following information regarding options
held by each of the Named Executive Officers: the number of shares covered by
both exercisable and unexercisable stock options as of December 31, 1995 and the
values of "in-the-money" options, which values represent the positive spread
between the exercise price of any such option and the fiscal year-end value of
the Company's Common Stock. No options were exercised by any Named Executive
Officer during fiscal 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END($)
-------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
---- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
William G. McLendon................. -- 30,000 $ -- $193,200
Stephen M. Blinn.................... 66,667 113,333 458,335 722,365
Elliot S. Weinstock, O.D. .......... 18,000 -- 114,300 --
<FN>
- ---------------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Company's Common Stock of $10.75, the closing sale
price per share of the Company's Common Stock as reported on the Nasdaq
National Market on December 29, 1995.
</TABLE>
INDEMNIFICATION
The Company's Restated Certificate of Incorporation contains provisions
eliminating or limiting the personal financial liability of the Company's
directors to the fullest extent permitted by Delaware General Corporation Law.
Delaware law provides that directors will not be personally liable to a
corporation or its stockholders for monetary damages for breach of their
fiduciary duties as directors, except for liability where there has been a
breach of the duty of loyalty, a failure to act in good faith, an act of
intentional misconduct, a knowing violation of law, certain unlawful payments of
dividends, stock repurchases or redemptions, or any transaction from which the
director derives an improper personal benefit. In addition, the Company's
Restated Certificate of Incorporation and By-Laws include provisions to
indemnify its officers and directors and persons serving at the request of the
Company to the fullest extent permitted by Delaware General Corporation Law
against expenses, judgments, fines and amounts paid in connection with
threatened, pending or completed suits and proceedings against such persons by
reason of having served as officers, directors or in other capacities. The
Company maintains a director's and officer's liability insurance policy in the
aggregate amount of $1,000,000 on behalf of its directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has 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 therefore unenforceable. See "-- Employment Agreements, Termination of
Employment and Change of Control Arrangements."
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with Messrs. McLendon
and Blinn which provide for Mr. McLendon to serve as President of the Company
until March 1999 and Mr. Blinn to serve as Executive Vice President and Chief
Operating Officer until April 1999. Under their respective agreements, each of
them is entitled to receive an annual salary of $178,000, subject to increase
from time to time by the
43
<PAGE> 47
Board of Directors. Each is eligible to receive a discretionary annual bonus not
to exceed 30% of his annual base salary, payable annually or semiannually at the
discretion of the Board. The agreements also provide for a payment of one year's
salary to each of them in the event his employment is terminated upon certain
changes of control of the Company. Changes in control which may trigger a
payment of one year's salary are (i) a person's becoming the beneficial owner of
25% or more of the outstanding Common Stock of the Company, (ii) if, ten days
following a tender offer or exchange offer, the consummation of which would
result in the beneficial ownership by a person of 25% or more of the outstanding
Common Stock of the Company, such person has not discontinued or rescinded the
tender offer or exchange offer, or (iii) a merger, consolidation, liquidation or
sale of substantially all of the Company's assets. In the event that Mr.
McLendon's or Mr. Blinn's employment is terminated by the Board of Directors
without cause or in certain other circumstances, each of them is entitled to one
year's base salary and the cost of one year's health benefits as severance.
The Company has entered into an employment agreement with Dr. Weinstock
which provides for Dr. Weinstock to serve as President of Cambridge Eye and
Director of the Company until February 24, 1998. Under this agreement, Dr.
Weinstock is entitled to receive an annual salary of $175,000, subject to
increase from time to time by the Board of Directors. Dr. Weinstock is also
entitled to an annual bonus not to exceed 30% of his yearly base salary, 75% of
which is to be based on the attainment of objective criteria and 25% of which is
to be determined by the Board of Directors at its discretion. The bonus is
payable annually or semiannually at the discretion of the Board of Directors.
The agreement also provides for a lump sum payment of one year's salary to Dr.
Weinstock in the event his employment is terminated upon certain changes of
control of the Company. Changes in control which may trigger a payment of one
year's salary are (i) a person's becoming the beneficial owner of 25% or more of
the outstanding Common Stock of the Company or Cambridge Eye, (ii) if, ten days
following a tender offer or exchange offer, the consummation of which would
result in the beneficial ownership by a person of 25% or more of the outstanding
Common Stock of the Company or Cambridge Eye, such person has not discontinued
or rescinded the tender offer or exchange offer, or (iii) a merger,
consolidation, liquidation or sale of substantially all of the Company's or
Cambridge Eye's assets. In the event that Dr. Weinstock's employment is
terminated by the Board of Directors without cause or in certain other
circumstances, he is entitled to his base salary and certain benefits under the
agreement, including health benefits, life insurance, and access to a car, for a
period of one year.
KEY MAN LIFE INSURANCE
The Company has obtained a $1,000,000 term life insurance policy covering
each of Mr. McLendon, Mr. Blinn and Dr. Weinstock. The Company is the sole
beneficiary on the policy.
STOCK OPTION PLAN
General. The Company's Stock Option Plan was approved by the Company's
Board of Directors on November 30, 1992 and by the Company's stockholders on
February 4, 1993. A total of 170,000 shares of Common Stock were initially
reserved for issuance under the Stock Option Plan. According to its terms, the
Stock Option Plan may be amended by the Board of Directors or the Compensation
Committee, provided that any amendment approved by the Board of Directors or the
Compensation Committee which is of a scope that requires stockholder approval in
order to ensure favorable federal income tax treatment for any incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or requires stockholder approval in order to ensure the qualification of
the Stock Option Plan under Rule 16b-3 under the Securities Exchange Act of
1934, is subject to obtaining such stockholder approval. On May 18, 1993,
October 1, 1993 and March 4, 1994 the Compensation Committee voted to approve
amendments to the Stock Option Plan to increase by 155,000, 175,000 and 500,000
shares, respectively, the aggregate number of shares of Common Stock for which
stock options may be granted under the Stock Option Plan. The stockholders of
the Company voted to approve such increases at the annual meeting of
stockholders held April 26, 1994. Consequently, the Company has reserved
1,000,000 shares of Common Stock for which options may be granted under the
Stock Option Plan. On March 5, 1996 the Board recommended, subject to
shareholder approval, that an additional 500,000 shares of Common Stock be
reserved for issuance under the Stock Option Plan. Assuming that the
stockholders vote to approve such increase at the Annual Meeting on May 29,
1996,
44
<PAGE> 48
the Company will have reserved an aggregate of 1,500,000 shares of Common Stock
for issuance pursuant to the Stock Option Plan.
To preserve the deductibility of compensation expense with respect to stock
options granted pursuant to the Stock Option Plan under new Section 162(m) of
the Code, which was added to the Code by the Omnibus Budget Reconciliation Act
of 1993, the Stock Option Plan also provides a per person limit of 300,000
shares of the aggregate number of shares of Common Stock for which options may
be granted to any person during any three year period.
All employees and consultants of the Company and the members of the Board
of Directors are eligible to participate in the Stock Option Plan.
Material Features of the Stock Option Plan. Options granted under the
Stock Option Plan may be either (i) options intended to qualify as "incentive
stock options" under Section 422 of the Code, or (ii) options that are not
incentive stock options ("non-qualified stock options"). Incentive stock options
may be granted under the Stock Option Plan to officers and other employees of
the Company and its affiliates (approximately 260 persons). Non-qualified stock
options may be granted to directors, employees, officers or consultants of the
Company and its affiliates (approximately 305 persons). The Stock Option Plan
provides for a grant to each non-employee director immediately following each
annual meeting of stockholders, provided that on such dates such director has
been in the continued and uninterrupted service of the Company as a director
since election or appointment for a period of at least one year and is a
director and not an employee at such times, of a non-qualified stock option to
purchase 5,000 shares of Common Stock. Each such option shall have an exercise
price equal to the fair market value of the Common Stock on the date of grant
and shall vest in equal annual installments over two years. See "-- Election and
Compensation of Directors."
The Stock Option Plan is administered by the Compensation Committee.
Subject to the provisions of the Stock Option Plan, the Compensation Committee
has the authority to administer the provisions of the Stock Option Plan, to
determine the persons to whom options will be granted, the number of shares to
be covered by each option and the terms and conditions upon which an option may
be granted.
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options which become exercisable in any
calendar year under any incentive stock option plan of the Company by an
employee or officer may not exceed $100,000. Incentive stock options granted
under the Stock Option Plan may not be granted at a price less than 100% of the
fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of employees or officers holding 10% or more of the
voting stock of the Company). Non-qualified stock options granted under the
Stock Option Plan may not be granted at an exercise price less than the par
value per share of Common Stock on the date of grant. Incentive stock options
granted under the Stock Option Plan expire not more than ten years from the date
of grant, or not more than five years from the date of grant in the case of
incentive stock options granted to an employee or officer holding 10% or more of
the voting stock of the Company.
An option granted under the Stock Option Plan is exercisable, during the
optionholder's lifetime, only by the optionholder and is not transferable by him
except by will or by the laws of descent and distribution. An option granted to
an individual who is subject to Section 16 of the Securities Exchange Act of
1934 is not exercisable within six months after the date of grant. An incentive
stock option granted under the Stock Option Plan may, at the Board of Director's
discretion, be exercisable after the termination of the optionholder's
employment with the Company (other than by reason of death, disability or
termination for cause as defined in the Stock Option Plan) to the extent
exercisable on the date of such termination, for up to 90 days following such
termination, provided that such incentive stock option has not expired on the
date of such exercise. In granting any non-qualified stock option, the Board of
Directors may specify that such non-qualified stock option shall be subject to
termination or cancellation provisions to be determined by the Board of
Directors. In the event of the optionholder's death, both incentive stock
options and non-qualified stock options may be exercised, to the extent
exercisable on the date of death, by the optionholder's survivors at any time
prior to the earlier of the option's specified expiration date or one year from
the date of the optionholder's death.
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<PAGE> 49
Certain options granted pursuant to the Stock Option Plan to Mr. McLendon
and Mr. Blinn may be subject to immediate vesting upon the event of a change in
control of the Company, as defined in each of their respective option agreements
with the Company. Currently, 307,500 options granted under the Stock Option Plan
are subject to a change of control provision. See "--Employment Agreements,
Termination of Employment and Change of Control Arrangements."
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<PAGE> 50
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of April 25, 1996, by (i)
persons known by the Company to be beneficial owners of more than 5% of the
outstanding Common Stock, (ii) each director of the Company, (iii) each Named
Executive Officer of the Company, and (iv) all directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP
SHARES ------------------------
BENEFICIALLY BEFORE THE AFTER THE
NAME AND ADDRESS** OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------------------------------------------ ------------ ---------- ---------
<S> <C> <C> <C>
Elliot S. Weinstock, O.D.(2)................................ 349,000 5.5% 4.4%
67 South Bedford Street
Burlington, MA 01803
William G. McLendon (3)..................................... 305,895 4.8% 3.8%
Stephen M. Blinn (4)........................................ 229,667 3.6% 2.9%
Russell E. Taskey (5)....................................... 31,400 * *
Gary Jacobson, M.D. (5)..................................... 24,500 * *
Allen R. Kirkpatrick (5).................................... 14,500 * *
All Directors and executive officers as a group (9 persons)
(6)....................................................... 956,962 14.7% 11.8%
<FN>
- ---------------
* Represents beneficial ownership of less than 1% of the Company's outstanding
Common Stock.
** Addresses are given for beneficial owners of more than 5% of the outstanding
Common Stock only.
(1) The number of shares of Common Stock issued and outstanding on April 25,
1996 was 6,346,715. The calculation of percentage ownership for each listed
beneficial owner is based upon the number of shares of Common Stock issued
and outstanding at April 25, 1996, plus shares of Common Stock subject to
options held by such person at April 25, 1996 and exercisable within 60 days
thereafter and shares underlying the Warrants held by such person. The
persons and entities named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them, except
as noted below.
(2) Includes 18,000 shares issuable upon exercise of stock options.
(3) Includes 10,000 shares issuable upon exercise of stock options.
(4) Includes 76,667 shares issuable upon exercise of stock options, and 45,908
shares gifted to Mr. Blinn's immediate family, of which Mr. Blinn disclaims
beneficial ownership.
(5) Includes 12,500 shares issuable upon exercise of stock options, and shares
issuable upon exercise of Warrants.
(6) Includes 144,167 shares issuable upon exercise of stock options and shares
issuable upon exercise of Warrants.
</TABLE>
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<PAGE> 51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION AND FINANCING OF THE PREDECESSOR PARTNERSHIP AND THE COMPANY
The Predecessor Partnership was formed in April 1992 with an initial
capital contribution of $40,000 (plus a loan of $360,000 from the partners to
the partnership). The partners at that time included Mr. McLendon, President and
a Director of the Company, and Mr. Blinn, Executive Vice President, Chief
Operating Officer and a Director of the Company. L. James Miller, a former
Executive Vice President and a Director of the Company who resigned from both
such positions in September 1993, became a partner of the Predecessor
Partnership in November 1992. The Company was formed in November 1992 with an
initial capitalization of approximately $200,000, or $.43 per share. On November
30, 1992, the Company acquired substantially all of the business of the
Predecessor Partnership for 861,900 shares of Common Stock pursuant to an
Assignment, Bill of Sale and Assumption Agreement between the Predecessor
Partnership and the Company. The business assets transferred included two laser
systems, cash of approximately $30,000, a revenue-sharing agreement with a
hospital in the United Kingdom, and all intangible assets of the Predecessor
Partnership's business. The transferred assets were subject to notes payable to
partners and other liabilities incurred in the operation of the business. The
assets acquired, amounting to $677,073, and the liabilities assumed, amounting
to $649,673, were recorded on the Company's books as the Predecessor
Partnership's historical costs since the stockholders of the Company had the
ability to exercise significant control over the Predecessor Partnership. The
861,900 shares of Common Stock transferred by the Company to the Predecessor
Partnership were valued at approximately $.05 per share. This valuation was
based upon the initial $40,000 capital contribution paid by the partners of the
Predecessor Partnership in establishing the partnership in April 1992, and was
determined in negotiations between the Predecessor Partnership and the
stockholders of the Company.
Mr. McLendon and Mr. Miller are the founders of the Company. In November
1992, Mr. McLendon and Mr. Miller each purchased 58,650 shares of Common Stock
for $25,220 ($.43 per share). In addition, Mr. McLendon was the President and
sole stockholder of the general partner and a limited partner of the Predecessor
Partnership and Mr. Blinn and Mr. Miller were limited partners of the
Predecessor Partnership. The Predecessor Partnership liquidated its assets in
March 1994 on a pro rata basis to its partners, whereupon Mr. McLendon received
295,895 shares of Common Stock, Mr. Miller received 302,275 shares of Common
Stock and Mr. Blinn received 35,700 shares of Common Stock.
In connection with the transfer of substantially all of the Predecessor
Partnership's business to the Company, the Company assumed the obligation to
repay notes with a face value of $360,000 to the partners of the Predecessor
Partnership, including a note with a face value of $108,000 to Mr. McLendon and
a note with a face value of $36,000 to Mr. Blinn. Such notes were repaid with
the proceeds from the initial public offering.
Pursuant to Mr. Miller's termination agreement, the Company agreed to pay
Mr. Miller a fee of $10,000 per month from September 1993 through June 1994. The
Company also agreed to continue Mr. Miller's health insurance benefits through
August 1994.
OPTOMETRIC PROVIDERS RELATIONSHIP
Dr. Weinstock, a Director of the Company, serves as a Director and
President of Optometric Providers. Pursuant to a management services contract
with Optometric Providers, the Company provides management, administrative,
marketing and related services in exchange for certain management fees. See
"Business -- Operations -- Management Services Contracts."
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<PAGE> 52
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company currently consists of
25,000,000 shares, consisting of 20,000,000 shares of Common Stock, par value
$.01 per share (the "Common Stock") and 5,000,000 shares of undesignated
preferred stock, par value $.01 per share (the "Preferred Stock").
COMMON STOCK
As of April 25, 1996, there were 6,346,715 shares of Common Stock issued
and outstanding and held of record by approximately 350 stockholders (and
beneficially owned by approximately 6,000 stockholders). After giving effect to
the Offering, there will be a total of 7,946,715 shares of Common Stock
outstanding. Such total excludes shares issuable upon the exercise of (i) the
Outstanding Stock Options, (ii) the Warrants, (iii) the UPO Units (including the
Warrants included in the UPO Units), (iv) the Class A Warrants, (v) the IPO
Representative's Warrants (including the warrants included in the units issuable
to the IPO Representative upon exercise thereof) and (vi) the Representative's
Warrants.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders and are not entitled
to cumulative voting rights. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of Preferred Stock that may be issued at such
future time or times. See "Price Range of Common Equity and Dividend Policy." In
the event of a dissolution, liquidation or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of all debts and other liabilities and subject to the prior rights of Preferred
Stock that may be issued at such time. Holders of Common Stock have no
preemptive or other subscription rights and no right to convert their Common
Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and the shares offered hereby upon issuance and sale will be, fully
paid and non-assessable. The rights, preferences and privileges of holders of
Common Stock are subject to the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
Under the Company's Restated Certificate of Incorporation, the Board of
Directors is authorized, subject to any limitations prescribed by law, without
further stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of the Company's authorized class of undesignated Preferred
Stock, in one or more series. Each such series of Preferred Stock shall have
such number of shares, designations, preferences, powers, qualifications and
special or relative rights or privileges as shall be determined by the Board of
Directors, which may include, among others, dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences, conversion
rights and preemptive rights.
The rights of the holders of Common Stock will be subject to the rights of
holders of any Preferred Stock issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring a majority of the outstanding voting stock of the Company. The
Company has no present plans to issue any shares of Preferred Stock.
Pursuant to the terms of the Underwriting Agreement entered into at the
time of the initial public offering, the Company may not issue preferred stock
for a period of five years from March 31, 1993 without the consent of the IPO
Representative.
WARRANTS
In connection with the Company's secondary public offering in August 1994
(the "Secondary Public Offering"), the Company issued 2,472,500 units (the
"Units"), each Unit consisting of one share of Common Stock and one Warrant. The
Warrants were issued pursuant to the terms of a Warrant Agreement between the
Company and American Stock Transfer & Trust Company, as Warrant Agent. Each
Warrant currently entitles the registered holder to purchase one share of Common
Stock at an exercise price of $6.00, subject to
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<PAGE> 53
adjustment, at any time prior to August 25, 1999. As of the date of this
Prospectus, 400 of the Warrants have been exercised.
The Company has the right to redeem the Warrants at a price of $.05 per
Warrant at any time, provided that (i) the average closing bid price for the
Company's Common Stock as reported by the Nasdaq National Market, (ii) the
average closing sale price on the primary exchange on which the Common Stock is
traded, if the Common Stock is traded on a national securities exchange, or
(iii) if the Common Stock is neither quoted on Nasdaq nor listed on an exchange,
the average high bid price as set forth in the National Quotation Bureau sheet
listing, shall have in each case exceeded $9.50 for a period of 20 consecutive
business days ending within 15 days prior to the date of notice of redemption,
and provided that the Company has complied with certain other conditions. The
Company is required to give Warrant holders at least 30 days' advance written
notice of its intention to redeem the Warrants, and, prior to the expiration of
this 30-day period, the Warrant holders may exercise the Warrants. The right to
exercise the Warrants will cease on the business day immediately preceding the
date fixed for redemption.
The exercise price and the number of shares of Common Stock (or any other
securities) to be obtained upon exercise of the Warrants are subject to
adjustment in the event of a stock dividend on or a split or combination of
Common Stock, or of a reclassification, reorganization, recapitalization, merger
or consolidation of the Company, or a sale of all or substantially all of its
assets.
Fractional shares will not be issued upon the exercise of Warrants, and, in
lieu thereof, there will be paid to the holder of the Warrants at the time of
such exercise an amount in cash equal to the same fraction of the current market
price (as determined pursuant to the Warrant Agreement) of a share of Common
Stock. The Warrants do not confer upon the holder any voting or preemptive
rights, or any other rights of a stockholder of the Company. In the event of the
liquidation, dissolution or winding up of the Company, holders of the Warrants
are not entitled to participate in the distribution of the Company's assets. The
Company will reserve from its authorized but unissued shares of Common Stock a
sufficient number of shares for issuance upon exercise of the Warrants. Exercise
of each Warrant may be effected by delivery of the Warrant Certificate, duly
endorsed for exercise and accompanied by payment of the exercise price, to the
Warrant Agent. The shares of Common Stock issuable upon exercise of the Warrants
will be, when issued and sold, fully paid and non-assessable.
Purchasers of the Warrants will have the right to exercise the Warrants to
purchase shares of Common Stock only if a current prospectus relating to such
shares is then in effect and only if the shares are qualified for sale under the
securities laws of the state or states in which the various holders of the
Warrants reside. The Company has undertaken to maintain the effectiveness of the
Registration Statement of which this Prospectus is a part so as to permit the
purchase and sale of the Common Stock underlying the Warrants, but there can be
no assurance that the Company will be able to do so. Although the Company is not
aware of any Units sold to purchasers in jurisdictions in which the Units were
not registered or otherwise qualified for sale, purchasers may have bought Units
or may buy Warrants in the aftermarket or may move to jurisdictions in which the
shares of Common Stock issuable upon exercise of the Warrants are not so
registered or qualified. In this event, the Company would be unable to issue the
shares of Common Stock to those persons desiring to exercise their Warrants
unless and until the shares of Common Stock could be qualified for sale in
jurisdictions in which such purchasers reside, or an exemption from such
qualification exists in such jurisdiction. No assurances can be given that the
Company will be able to effect any required registration or qualification. The
Warrants may be deprived of any value if a current prospectus covering the
shares issuable upon the exercise thereof is not kept effective or if such
Common Stock is not qualified or exempt from qualification in the jurisdiction
in which the holders of the Warrants reside.
CLASS A WARRANTS
In connection with the Company's private placement of $1,100,000 of Bridge
Notes in March 1994, the Company issued Class A Warrants to purchase 110,000
shares of Common Stock. Each Class A Warrant entitles the registered holder to
purchase from the Company one share of Common Stock at $6.00 per share, subject
to adjustment in certain circumstances, for a five year period terminating on
the close of business on
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<PAGE> 54
March 25, 1999. The Class A Warrants are not redeemable. Other than the term,
exercise price, and redemption, the Class A Warrants are identical to the
Warrants. As of the date of this Prospectus, 25,000 Class A Warrants have been
exercised.
UNIT PURCHASE OPTIONS AND UPO UNITS
In connection with the Secondary Public Offering, the Company sold to D.
Blech & Company, Incorporated (or its designees) and to Alan R. Ackerman (as a
finder's fee) 182,750 and 32,250 options (the "Unit Purchase Options"),
respectively, to purchase an aggregate of 215,000 units (the "UPO Units") at a
price of $.001 per option. The Unit Purchase Options are exercisable for the UPO
Units for a period of four years, which commenced on August 25, 1994 and
terminates on August 25, 1998, at an initial exercise price equal to $9.90 per
UPO Unit. The Warrants included in the UPO Units are exercisable at an exercise
price of $7.20 per Warrant, subject to adjustment in certain events. The Unit
Purchase Options contain antidilution provisions providing for appropriate
adjustment of the exercise price and the number of UPO Units which may be
purchased upon exercise upon the occurrence of certain events.
The Company has agreed that it will, at its expense on any one occasion
during the four-year period which commenced on August 25, 1995 and on any one
additional occasion at the expense of the holders thereof during such period,
register the Unit Purchase Options and the securities underlying, or issuable
upon the exercise of the securities underlying, the Unit Purchase Options at the
request of holders of a majority of the UPO Units issued upon exercise of the
Unit Purchase Options (including shares of Common Stock issuable upon exercise
of the Warrants included in the UPO Units). The Company has also agreed, during
the seven-year period commencing on the date of this Prospectus, to register on
a "piggyback" basis, on an unlimited number of occasions, such securities
whenever the Company files a registration statement.
IPO REPRESENTATIVE'S WARRANTS
In connection with the Company's initial public offering in March 1993, the
Company sold to Noble Investment Co. of Palm Beach (the "IPO Representative")
warrants (at an aggregate price of $85) to purchase 85,000 units, each
consisting of one share of Common Stock and one warrant, at an exercise price of
$7.98 per unit (the "IPO Representative's Warrants"). The warrants included in
the IPO Representative's Warrants are exercisable at an exercise price of $6.75
per warrant, subject to adjustment in certain events, and expire in October
1996. The IPO Representative's Warrants, which expire in March 1998, were non-
transferable until March 31, 1994, and became exercisable commencing on March
31, 1994. The exercise price of the IPO Representative's Warrants is subject to
adjustment pursuant to antidilution provisions contained in the warrant
agreement. The Company has agreed to set aside and at all times have available a
sufficient number of shares of Common Stock to be issued upon the exercise of
the IPO Representative's Warrants and the warrants included in the units to be
issued to the IPO Representative. The Company agreed to register the IPO
Representative's Warrants and the securities underlying the IPO Representative's
Warrants in the Registration Statement filed in connection with the IPO. The IPO
Representative's Warrants grant to the holders thereof certain rights with
respect to the registration under the Securities Act of the securities directly
and indirectly issuable upon exercise of the IPO Representative's Warrants. See
"Shares Eligible for Future Sale -- Registration Rights."
The exercise price and the number of shares of Common Stock (or any other
securities) to be obtained upon exercise of the IPO Representative's Warrants
are subject to adjustment in the event of a stock dividend on or a split or
combination of Common Stock, or of a reclassification, reorganization,
recapitalization, merger or consolidation of the Company, or a sale of all or
substantially all of its assets.
REPRESENTATIVE'S WARRANTS
In connection with the Offering, the Company has agreed to sell to
Commonwealth Associates and its designees warrants (at an aggregate price of
$160.00) to purchase an aggregate of 160,000 shares of Common Stock at an
exercise price per share equal to 130% of the public offering price (the
"Representative's Warrants"). The Company has agreed to set aside and at all
times have available a sufficient number of shares
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<PAGE> 55
of Common Stock to be issued upon the exercise of the Representative's Warrants.
The Representative's Warrants are not redeemable and may not be sold,
transferred, assigned, pledged or hypothecated for a period of one year from the
date of this Prospectus, except that they may be assigned, in whole or in part,
to any successor, officer, employee or partner of the Representative, or to
officers, employees or partners of any such successor or partner, and are
exercisable during the four-year period commencing one year from the date of
this Prospectus (the "Warrant Exercise Term").
The exercise price and the number of shares of Common Stock (or any other
securities) to be obtained upon exercise of the Representative's Warrants are
subject to adjustment in the event of a stock dividend on or a split or
combination of Common Stock, or of a reclassification, reorganization,
recapitalization, merger or consolidation of the Company, or a sale of all or
substantially all of its assets.
The Company has agreed that it will, at its expense on any one occasion
during the five-year period commencing on the date of this Prospectus, register
the shares of Common Stock underlying the Representative's Warrants at the
request of the holders of the Representative's Warrants. The Company has also
agreed, during the seven-year period commencing on the date of this Prospectus,
to register on a "piggyback" basis, on an unlimited number of occasions, the
shares of Common Stock underlying the Representative's Warrants whenever the
Company files a registration statement.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits certain publicly-held
Delaware corporations from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person or entity became an interested stockholder,
unless the business combination is or the transaction in which the person became
an interested stockholder was approved in a prescribed manner or certain other
exceptions apply. For purposes of Section 203 a "business combination" is
defined broadly to include mergers, asset sales and other transactions resulting
in a financial benefit to the interested stockholder. Subject to certain
exceptions, an "interested stockholder" is a person or entity who, together with
affiliates and associates, owns, or within the three immediately preceding years
of a business combination did own, 15% or more of the corporation's outstanding
voting stock.
The Company's Restated Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by the Delaware General Corporation
Law. Delaware law provides that the directors of the corporation will not be
personally liable to such corporation or its stockholders for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the corporation or its stockholders; (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law; (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided in Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derives an improper personal benefit. The Company's By-Laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by Delaware law and permit the Company to advance expenses to
such directors and officers to defend any action for which rights of
indemnification are provided. The By-Laws also permit the Company to grant such
rights to its employees and agents. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors, officers and employees.
Commencing with the Company's annual meeting of stockholders in 1993, the
Company's Board of Directors was classified into three classes, with the initial
terms of each class expiring at the 1994, 1995 and 1996 annual stockholders'
meetings, respectively. After the expiration of each initial term, the directors
in each class will be elected for three-year terms. See "Management -- Election
and Compensation of Directors." The Board of Directors is authorized to create
new directorships in any class and to fill such positions so created. The person
chosen to fill such position will serve for the term applicable to that class.
The Board of Directors (or its remaining members, even though less than a
quorum) is also empowered to fill vacancies on the Board of Directors occurring
for any reason for the remainder of the term of the class of directors in which
the vacancy occurred. The Company's Restated Certificate of Incorporation
provides that
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<PAGE> 56
subject to the rights of holders of any series of Preferred Stock then
outstanding, directors may be removed with cause by the vote of the holders of
at least a majority of the voting power of the outstanding voting stock of the
Company and may be removed without cause by the holders of at least 66% of the
voting power of the outstanding voting stock of the Company. The likely effect
of these provisions is that they will increase the time required for
stockholders to change the composition of the Board of Directors. For example,
in general, at least two annual meetings will be necessary for stockholders to
effect a change in a majority of the members of the Board of Directors.
The Company's By-Laws provide that, for nominations to the Board of
Directors or for other business to be properly brought by a stockholder before a
meeting of stockholders, the stockholder must first have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice generally must be delivered not less than sixty days nor
more than ninety days prior to the annual meeting. If the meeting is not an
annual meeting, the notice must generally be delivered not more than ninety days
prior to the special meeting and not later than the later of sixty days prior to
the special meeting or ten days following the day on which public announcement
of the meeting is first made by the Company. The notice must contain, among
other things, certain information about the stockholder delivering the notice
and, as applicable, background about the nominee or a description of the
proposed business to be brought before the meeting.
The Company's Restated Certificate of Incorporation provides that any
action required or permitted to be taken by the stockholders of the Company
shall be taken only at a duly called annual or special meeting of the
stockholders, and may not be effected by written consent. Special meetings may
be called by a majority of the whole Board of Directors or the President of the
Company.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless the corporation's certificate of incorporation or by-laws, as the case
may be, requires a greater percentage. The Company's Restated Certificate of
Incorporation requires the affirmative vote of the holders of at least 66% of
the outstanding voting stock of the Company to amend or repeal any of the
provisions discussed in this section or to reduce the number of authorized
shares of Common Stock. Such 66% vote is also required for any amendment to or
repeal of the Company's By-Laws by the stockholders. The By-Laws may also be
amended or repealed by a majority vote of the whole Board of Directors.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
American Stock Transfer & Trust Company is the transfer agent and registrar
for the Company's Common Stock and the Warrant Agent for the Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming the exercise of all of the Warrants and Class A Warrants, the
Company will have outstanding 8,903,815 shares of Common Stock (excluding (i)
the shares of Common Stock included in, and issuable upon exercise of the
Warrants included in, the UPO Units, (ii) the shares of Common Stock included,
and issuable upon the exercise of the warrants included in, The IPO
Representative's Warrants, (iii) the shares of Common Stock issuable upon the
exercise of the Representative's Warrants and (iv) the shares of Common Stock
issuable upon exercise of the Outstanding Stock Options). Of the 8,903,815
shares, 8,281,890 shares will be freely tradeable without restriction or further
registration under the Securities Act of 1933, except for shares held by
"affiliates" of the Company, as that term is defined under the Securities Act of
1933 and the regulations promulgated thereunder, which will be subject to the
resale limitations of Rule 144 promulgated under the Securities Act of 1933
("Rule 144"). The remaining 621,925 shares that are outstanding have been issued
and sold by the Company in reliance on one or more exemptions from the
registration requirements of the Securities Act of 1933 and are "restricted
securities" within the meaning of Rule 144 ("Restricted Shares") and, therefore,
may be publicly sold only (i) if subsequently registered under the Securities
Act, (ii) pursuant to Rule 144 or Rule 701 promulgated under the Securities Act
of 1933 ("Rule 701") or (iii) in other private transactions exempt from
registration under the Securities Act of 1933. None of such shares
53
<PAGE> 57
have been held for the minimum two-year period required by Rule 144 and
therefore will not become eligible for public sale pursuant to Rule 144 until
expiration of their respective two-year holding periods. The earliest date at
which any such two-year holding period will expire is in February 1997. In
addition, 60,000 Restricted Shares are eligible for sale in the public market in
accordance with Rule 701. Notwithstanding the foregoing, all of the Restricted
Shares are subject to the lock-up agreements described below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated with those of others), including any person who may
be deemed an "affiliate" of the Company, as that term is defined in Rule 144,
would be entitled to sell in brokers' transactions or directly to market makers
within any three-month period a number of Restricted Shares that does not exceed
the greater of (i) 1% of the class of such shares then outstanding (7,946,715
shares of Common Stock based on the number of shares to be outstanding after
consummation of the Offering) or (ii) the average weekly trading volume of the
class of such shares in the over-the-counter market during the four calendar
weeks preceding the date on which notice of such sale is filed with the
Securities and Exchange Commission, provided that certain current public
information concerning the Company is then available, the seller complies with
certain manner of sale provisions and notice requirements, and that at least two
years have elapsed since the Restricted Shares were fully paid for and acquired
by any person from the Company or an affiliate of the Company. A person (or
persons whose shares are aggregated with those of others) who is not an
affiliate of the Company at any time during the three months preceding any sale
by such person, would be entitled to sell such shares, under Rule 144(k),
without regard to the limitations described above, provided that at least three
years have lapsed since the Restricted Shares were fully paid for and acquired
by any person from the Company or an affiliate of the Company. The above is a
summary of Rule 144 and is not intended to be a complete description thereof or
of the rights of the parties to sell shares of Common Stock thereunder.
As of the date of this Prospectus, there are options to purchase an
aggregate of 875,333 shares of Common Stock, of which options to purchase
331,750 shares are immediately exercisable. Upon exercise of these options,
60,000 shares will be eligible for sale in public market in accordance with Rule
701. Of such 875,333 shares, 500,000 shares are subject to the lock-up
agreements described below.
In general, under Rule 701 as currently in effect, absent contractual
restrictions on transfer, any employee, officer, director, consultant or advisor
of the Company who was offered or sold shares by the Company prior to the
initial public offering pursuant to a written compensatory stock option or other
benefit plan or written contract relating to compensation prior to the initial
public offering is eligible to resell such shares 90 days after the effective
date of the initial public offering in reliance upon Rule 144, but without
compliance with certain restrictions contained in Rule 144. Shares acquired
pursuant to Rule 701 may be sold by non-affiliates without regard to the holding
period, volume limitations, information or notice requirements of Rule 144, and
by affiliates without regard to the holding period requirement.
As of the date of this Prospectus, the Company has reserved an aggregate of
1,000,000 shares of Common Stock for issuance pursuant to the Stock Option Plan
which the Company may elect to register (subject, during the 180 day period
following the date of this Prospectus, to obtaining the prior written consent of
the Representative) on a Form S-8 Registration Statement under the Securities
Act of 1933. On March 5, 1996, the Board of Directors recommended, subject to
stockholder approval, that an additional 500,000 shares of Common Stock be
reserved for issuance under the Stock Option Plan. Shares covered by such
registration statement will be eligible for sale in the public market after the
effective date thereof, subject to Rule 144 limitations applicable to affiliates
and subject to the lock-up agreements described below. See "Management -- Stock
Option Plan."
Except as indicated above, the Company is unable to estimate the amount,
timing or nature of future sales of outstanding Common Stock. Prior to the
initial public offering, there was no market for the Common Stock and no
predictions can be made of the effect, if any, that market sales of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. Nevertheless, sales of substantial amounts of the Common
Stock in the public market may have an adverse effect on the market price
thereof, and could impair the Company's ability to raise capital through the
sale of its equity securities.
54
<PAGE> 58
REGISTRATION RIGHTS
The Company has agreed that it will, at its expense on any one occasion
during the four-year period which commenced on August 25, 1995 and terminates on
August 25, 1999 and on any one additional occasion at the expense of the holders
thereof during such period, register the Unit Purchase Options and the
securities underlying, or issuable upon the exercise of the securities
underlying, the Unit Purchase Options at the request of holders of a majority of
the UPO Units issued upon exercise of the Unit Purchase Options (including
shares of Common Stock issuable upon exercise of the Warrants included in the
UPO Units). The Company has also agreed, during the seven-year period commencing
one year from the date hereof, to register on a "piggyback" basis, on an
unlimited number of occasions, such securities whenever the Company files a
registration statement.
The holders of the IPO Representative's Warrants may under certain
circumstances be entitled to certain rights with respect to the registration
under the Securities Act of 1933 of the IPO Representative's Warrants and the
securities underlying, or issuable upon the exercise of the securities
underlying, the IPO Representative's Warrants. If, prior to the expiration date
of the IPO Representative's Warrants on March 1998, the Registration Statement
filed in connection with the IPO ceases to be effective or the Prospectus
contained therein ceases to be current and is no longer amended or an exemption
under Rule 144 is not available, the holders of a majority of the IPO
Representative's Warrants or shares of Common Stock acquired upon exercise of
the IPO Representative's Warrants may, with the consent of the IPO
Representative, require the Company to use its best efforts to file one
post-effective amendment to such Registration Statement or one new registration
statement relating to the IPO Representative's Warrants and the securities
underlying, or issuable upon the exercise of the securities underlying, the IPO
Representative's Warrants. The Company will be required to use its best efforts
to register such securities for disposition by the holders thereof, to the
extent required to permit the public sale or other public disposition of such
securities for a period of at least six months. The Company is not obligated to
file more than one such post-effective amendment or new registration statement
at the request of a majority of the holders thereof. The Company is required to
bear substantially all the expenses of such post-effective amendment or new
registration statement and has agreed to indemnify the selling stockholders
against certain liabilities, including liabilities under the Securities Act of
1933.
The holder of an option for 10,000 shares may under certain circumstances
be entitled to certain rights with respect to the registration under the
Securities Act of 1933 of the Common Stock issuable upon exercise of the option.
In addition, the holders of a total of 550,525 shares of Common Stock have
the right to have such shares registered on a "piggyback" basis, on an unlimited
number of occasions.
The Representative's Warrants will provide, for a period of five years from
the date of this Prospectus, one "demand" registration right and for a period of
seven years from the date of this Prospectus, will provide unlimited "piggyback"
registration rights.
LOCK-UP AGREEMENTS
Pursuant to the Underwriting Agreement, all of the Company's directors and
executive officers (representing an aggregate of approximately 1,310,795 shares
of Common Stock, including vested and unvested stock options), are subject to
lock-up arrangements for a period of 180 days from the date of this Prospectus.
In addition, the Company, with certain exceptions, has agreed not to issue,
sell, grant any option for sale, or otherwise dispose of, directly or
indirectly, any shares of the Common Stock or other securities of the Company,
except shares of Common Stock issuable upon the exercise of currently
outstanding options, warrants and other rights, for a period of 180 days from
the date of this Prospectus without the prior consent of the Representative. See
"Underwriting."
55
<PAGE> 59
UNDERWRITING
The Underwriters named below, for which Commonwealth Associates is acting
as representative (the "Representative"), have agreed, severally but not
jointly, subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriters (the "Underwriting
Agreement"), to purchase from the Company, and the Company has agreed to sell to
the several Underwriters, an aggregate of 1,600,000 shares of Common Stock. The
number of shares of Common Stock that each Underwriter has agreed to purchase is
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Commonwealth Associates...................................
Total........................................... 1,600,000
=========
</TABLE>
The Underwriters are committed on a "firm commitment" basis to purchase and
pay for all of the shares of Common Stock offered hereby (other than shares
offered pursuant to the Underwriters' over-allotment option) if any shares are
purchased. The shares are being offered by the Underwriters, subject to prior
sale, when, as, and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by counsel and to certain other conditions.
Through the Representative, the Underwriters have advised the Company that
the Underwriters propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus and the
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD") concessions not in excess
of $ per share, of which not in excess of $ per share may be
reallowed to other dealers who are members of the NASD. After the commencement
of the Offering, the public offering price, the concessions, and reallowance may
be changed by the Underwriters.
The Company has granted to the Underwriters an option exercisable for 45
days from the date of this Prospectus to purchase up to an additional 240,000
shares of Common Stock (the "Overallotment Shares") at the public offering price
set forth on the cover page of this Prospectus, less the underwriting discounts
and commissions. The Underwriters may exercise this option in whole or, from
time to time, in part, solely for the purpose of covering overallotments, if
any, made in connection with the sale of the shares of Common Stock offered
hereby.
The Company has agreed to pay the Representative, in its individual rather
than representative capacity, a non-accountable expense allowance equal to
1 1/2% of the gross proceeds of the Offering in connection with certain expenses
incurred by the Representative and to reimburse the Representative for certain
other expenses incurred by the Representative.
The Company has agreed to sell to the Representative and its designees
warrants (the "Representative's Warrants") to purchase up to 160,000 shares of
Common Stock at an exercise price per share equal to 130% of the public offering
price. The Representative's Warrants are not redeemable and may not be sold,
transferred, assigned, pledged or hypothecated for a period of one year from the
date of this Prospectus, except that they may be assigned, in whole or in part,
to any successor, officer, employee or partner of the Representative, or to
officers, employees or partners of any such successor or partner, and are
exercisable during the four-year period commencing one year from the date of
this Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term,
the holders of the Representative's Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the Representative's Warrants are exercised or exchanged,
dilution to the interests of the Company's stockholders will occur. Further, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected since the holders of the Representative's Warrants can
be expected to exercise or exchange them at a time when the Company would, in
all likelihood, be able to obtain any needed
56
<PAGE> 60
capital on terms more favorable to the Company than those provided in the
Representative's Warrants. Any profit realized by the Representative on the sale
of the Representative's Warrants or the underlying shares of Common Stock may be
deemed additional underwriting compensation. The Representative's Warrants will
provide, for a period of five years from the date of this Prospectus, one
"demand" registration right and will provide, for a period of seven years from
the date of this Prospectus, unlimited "piggyback" registration rights.
The Company has agreed to indemnify the Underwriters, their officers,
directors, employees, affiliates, agents, legal counsel and controlling persons
or contribute to losses arising out of certain liabilities, including
liabilities under the Securities Act.
The Company and the Company's officers, directors and beneficial owners of
5% or more of the Company's outstanding Common Stock have agreed not to offer,
issue, sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any securities of the Company or other
rights to purchase any securities of the Company, other than the Overallotment
Shares, if any, for a period of 180 days from the date of this Prospectus,
without the prior written consent of the Representative.
The Company has entered into an arrangement with the Representative whereby
the Representative has agreed to assist the Company in identifying sources for a
credit facility for the Company during an 18-month period commencing April 3,
1996. Upon the closing of a definitive agreement relating to a credit facility,
the source of which was introduced to the Company by the Representative, the
Representative shall receive payment of a fee of up to 1 1/4% of such credit
facility.
In connection with this Offering, certain Underwriters and selling group
members or their affiliates may engage in passive market making transactions in
the Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A
under the Exchange Act. Passive market making consists of, among other things,
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and purchases limited by such prices and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the Common Stock during a specified prior period, and all
possible market making activity must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1, including amendments thereto, under the Securities Act of
1933 (the "Securities Act") with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules filed therewith, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to such Registration Statement and to the exhibits and schedules
filed therewith. Statements contained in this Prospectus regarding the contents
of any contract or other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being deemed to be qualified in its entirety by such reference. The Registration
Statement, including all exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048, and
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of all or any part thereof may be obtained from
such offices, upon the payment of prescribed fees. Electronic registration
statements made through the Electronic Data Gathering, Analysis, and Retrieval
system are publically available through the Commission's Web site
(http://www.sec.gov).
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by
57
<PAGE> 61
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically. The Company's
Common Stock is currently quoted on the Nasdaq National Market and such reports
and other information can also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.
LEGAL MATTERS
Certain legal matters in connection with the legality of the Common Stock
offered hereby will be passed upon for the Company by Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts. Mr. Irwin M. Heller, a
member of such firm, owns 15,000 shares of Common Stock. Certain legal matters
in connection with the Offering will be passed upon for the Underwriters by
Parker Chapin Flattau & Klimpl, LLP, New York, New York.
EXPERTS
The financial statements and schedules of the Company as of December 31,
1995 and 1994, and for the three years ended December 31, 1995 included herein
and elsewhere in the Registration Statement have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
58
<PAGE> 62
SIGHT RESOURCE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996........ F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31, 1995 and
1996................................................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31, 1996........... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31, 1995 and
1996................................................................................. F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Sight Resource Corporation:
We have audited the consolidated balance sheets of Sight Resource
Corporation (formerly NewVision Technology, Inc.) and its subsidiaries as of
December 31, 1994 and 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sight
Resource Corporation and its subsidiaries at December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
February 23, 1996
F-2
<PAGE> 64
SIGHT RESOURCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- -----------
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $10,194 $ 8,035 $ 6,579
Accounts receivable, net of allowance of $0, $277 and
$310................................................... 75 662 1,040
Inventories............................................... -- 1,865 1,978
Prepaid expenses and other current assets................. 65 171 545
------- ------- -------
Total current assets.............................. 10,334 10,733 10,142
------- ------- -------
Property and equipment, net (note 3)........................ 3,550 5,778 5,293
------- ------- -------
Other assets:
Intangible assets (note 4)................................ -- 6,908 6,810
Other assets.............................................. 27 135 173
------- ------- -------
Total other assets................................ 27 7,043 6,983
------- ------- -------
$13,911 $23,554 $22,418
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving note payable (note 6)........................... $ -- $ 475 $ 475
Current portion of long term debt (note 6)................ -- 400 400
Accounts payable.......................................... 199 1,727 2,047
Accrued expenses (note 5)................................. 348 2,804 2,085
------- ------- -------
Total current liabilities......................... 547 5,406 5,007
------- ------- -------
Non-current liabilities:
Long term debt, less current maturities (note 6).......... -- 1,000 900
Other liabilities......................................... -- 703 713
------- ------- -------
Total non-current liabilities..................... -- 1,703 1,613
------- ------- -------
Commitments (note 7)
Stockholders' equity (note 8):
Preferred Stock, $.01 par value. Authorized 5,000,000
shares; no shares issued and outstanding............... -- -- --
Common stock, $.01 par value. Authorized 20,000,000
shares; issued and outstanding 4,770,250, 6,346,615 and
6,346,715 shares in 1994, 1995 and 1996 respectively... 48 63 63
Additional paid-in capital................................ 17,636 25,794 25,795
Accumulated deficit....................................... (4,524) (9,412) (10,060)
Cumulative translation adjustment......................... 204 -- --
------- ------- -------
Total stockholders' equity........................ 13,364 16,445 15,798
------- ------- -------
$13,911 $23,554 $22,418
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 65
SIGHT RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue............................... $ 155 $ 529 $18,240 $ 4,200 $5,660
Cost of revenue........................... 292 928 8,147 1,872 2,262
------- ------- ------- ------- ------
Gross margin............................ (137) (399) 10,093 2,328 3,398
Selling, general and administrative
expenses................................ 1,434 2,492 15,265 3,518 4,082
------- ------- ------- ------- ------
Loss from operations...................... (1,571) (2,891) (5,172) (1,190) (684)
------- ------- ------- ------- ------
Other income (expense):
Interest income......................... 43 183 387 119 94
Interest expense........................ (7) (48) (253) (57) (58)
Other................................... 5 (189) 150 -- --
------- ------- ------- ------- ------
Total other income (expense).... 41 (54) 284 62 36
------- ------- ------- ------- ------
Net loss........................ $(1,530) $(2,945) $(4,888) $(1,128) $ (648)
======= ======= ======= ======= ======
Net loss per share........................ $ (.74) $ (.94) $ (.89) $ (.22) $ (.10)
======= ======= ======= ======= ======
Weighted average number of common shares
outstanding............................. 2,057 3,122 5,488 5,194 6,347
======= ======= ======= ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 66
SIGHT RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995,
AND THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------ PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT ADJUSTMENT EQUITY
------ --------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992............... 1,275 $13 $ 205 $ (49) $ -- $ 169
Proceeds from initial public offering,
net of offering cost................... 978 10 4,565 -- -- 4,575
Proceeds from exercise of IPO warrants... 34 -- 232 -- -- 232
Net loss................................. -- -- -- (1,530) -- (1,530)
Cumulative translation adjustment........ -- -- -- -- (27) (27)
----- --- ------- ------- ----- -------
Balance, December 31, 1993............... 2,287 23 5,002 (1,579) (27) 3,419
Proceeds from second public offering, net
offering cost.......................... 2,472 25 12,496 -- -- 12,521
Proceeds from exercise of IPO warrants... 11 -- 73 -- -- 73
Issuance of Class A warrants............. -- -- 65 -- -- 65
Net loss................................. -- -- -- (2,945) -- (2,945)
Cumulative translation adjustment........ -- -- -- -- 231 231
----- --- ------- ------- ----- -------
Balance, December 31, 1994............... 4,770 48 17,636 (4,524) 204 13,364
Issuance of common stock for
acquisitions........................... 556 6 1,721 -- -- 1,727
Issuance of common stock for equipment
and other.............................. 64 -- 206 -- -- 206
Proceeds from exercise of warrants (note
8)..................................... 955 9 6,221 -- -- 6,230
Proceeds from exercise of stock
options................................ 2 -- 10 -- -- 10
Net loss................................. -- -- -- (4,888) -- (4,888)
Cumulative translation adjustment........ -- -- -- -- (204) (204)
----- --- ------- ------- ----- -------
Balance, December 31, 1995............... 6,347 $63 $ 25,794 $ (9,412) $ -- $ 16,445
Proceeds from exercise of warrants....... -- -- 1 -- -- 1
Net loss................................. -- -- -- (648) -- (648)
----- --- ------- ------- ----- -------
Balance, March 31, 1996 (unaudited)...... 6,347 $63 $ 25,795 $ (10,060) $ -- $ 15,798
===== === ======= ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 67
SIGHT RESOURCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss............................... $(1,530) $(2,945) $(4,888) (1,128) (648)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization....... 292 928 1,688 387 435
Realization of foreign currency
gain.............................. -- -- (150) -- --
Amortization of debt financing
cost.............................. -- 65 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable................. (39) (33) (1) (52) (378)
Inventories......................... -- -- 424 192 (114)
Prepaid expenses and other current
assets............................ (19) (4) 75 (107) (373)
Accounts payable and accrued
expenses.......................... 1,475 (1,294) (844) (619) (399)
------- ------- ------- ------- -------
Net cash provided by (used in)
operating activities........... 179 (3,283) (3,696) (1,327) (1,477)
------- ------- ------- ------- -------
Investing activities:
Purchases of property and equipment.... (3,737) (175) (1,948) (36) (229)
Sale of assets......................... -- -- -- -- 376
Acquisition of subsidiaries............ -- -- (2,363) (1,421) --
Other assets........................... (6) (19) (4) 30 (37)
------- ------- ------- ------- -------
Net cash provided by (used in)
investing activities........... (3,743) (194) (4,315) (1,427) 110
------- ------- ------- ------- -------
Financing activities:
Principal payments on Bridge Notes and
long term debt...................... -- (1,100) (400) (100) (100)
Proceeds for sale of Bridge Notes and
Class A warrants.................... -- 1,100 -- -- --
Proceeds from exercise of warrants and
stock options....................... 233 73 6,240 -- 1
Net proceeds from public offerings..... 4,575 12,520 -- -- --
Payments of notes payable to
stockholders........................ (378) -- -- -- --
Other liabilities...................... -- -- -- -- 10
------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities........... 4,430 12,593 5,840 (100) (89)
------- ------- ------- ------- -------
Effect of exchange rate changes on
cash................................... (39) 75 12 (6) --
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................ 827 9,191 (2,159) (2,860) (1,456)
Cash and cash equivalents, beginning of
period................................. 176 1,003 10,194 10,194 8,035
------- ------- ------- ------- -------
Cash and cash equivalents, end of
period................................. $ 1,003 $10,194 $ 8,035 $ 7,334 $ 6,579
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 68
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
MARCH 31, 1995 AND 1996 (UNAUDITED)
(1) THE COMPANY
(a) Nature of Business
The business of Sight Resource Corporation is to participate in the
delivery of a complete range of eye care products and services through
integrated networks of opticians, optometrists and ophthalmologists. Effective
October 31, 1995, the Company changed its name to Sight Resource Corporation
from NewVision Technology, Inc. to better reflect its expanded corporate
mission.
(b) U.S. Acquisitions
Effective January 1, 1995, the Company purchased substantially all the
assets of Cambridge Eye Associates, Inc. ("Cambridge Eye") for $1,690,00 in
cash, 424,000 shares of common stock and the assumption of approximately
$1,600,000 of net liabilities. Cambridge Eye owns eye care centers located
throughout New England which provide comprehensive vision care products and
services to residents of this region. The transaction was accounted for using
the purchase method of accounting.
Effective July 1, 1995, the Company purchased certain assets and
liabilities of Douglas Vision World, Inc. ("Vision World") for approximately
$970,000 in cash, 131,525 shares of common stock, $660,000 payable over a 3 year
period and $250,000 payable over 18 months contingent upon the occurrence of
certain future events. Vision World owns eye care centers located throughout
Rhode Island which provide comprehensive vision care products and services to
residents of this state. The transaction was accounted for using the purchase
method of accounting.
The results of operations of the two acquisitions have been included in the
consolidated financial statements from their respective dates of acquisition.
The excess of the purchase price and expenses associated with each acquisition
over the estimated fair value of the net assets acquired has been recorded as
goodwill.
Had the acquisitions occurred at the beginning of 1994, pro forma results
of operations for fiscal year 1994 would have been: net revenue of $21.0
million, net loss of $2.9 million and net loss per share of $0.79 on a weighted
average number of common shares outstanding of 3.7 million. Pro forma results of
operations for fiscal year 1995, giving effect to the acquisitions as if the
transactions occurred at the beginning of 1995, would have been: net revenue of
$20.8 million, net loss of $4.8 million and net loss per share of $0.87 on a
weighted average number of common shares outstanding of 5.6 million. Such pro
forma financial information reflects certain adjustments, including amortization
of goodwill, and an increase in the weighted average shares outstanding. This
pro forma information does not necessarily reflect the results of operations
that would have occurred had the acquisitions taken place at the beginning of
1994 and 1995 and is not necessarily indicative of results that may be obtained
in the future.
(c) UK Operations
While the Company's initial efforts focused on building a LVC delivery
model in the UK, the Company is now fully concentrating its attention and
resources on the growth opportunities in the United States. As a result, the
Company fully discontinued its UK operations in the fourth quarter 1995. Excimer
lasers systems used in the UK are in the process of being retrofitted and
relocated to the US. In early 1996, six systems were in place in the U.S. The
costs associated with the discontinuance of UK operations is immaterial and is
included in operating expenses in 1995. The Company realized a foreign currency
gain of approximately $150,000 on the liquidation of the UK subsidiaries which
is included in other income at December 31, 1995.
F-7
<PAGE> 69
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and entities in which the Company's
subsidiaries assume the financial risks and rewards of such entities through a
management contract. The Company has no direct equity ownership in these
entities. All significant intercompany balances and transactions have been
eliminated.
In preparation of these consolidated financial statements in conformity
with generally accepted accounting principles, management of the Company has
made estimates and assumptions that affect the reported amounts of assets and
liabilities, particularly for accounts receivable and its effect on revenue.
Actual results could differ from those estimates.
The consolidated financial statements for the three months ended March 31,
1995 and 1996 have been prepared by the Company without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of the Company, these consolidated financial statements contain all adjustments
(consisting of only normal, recurring adjustments) necessary to present fairly
the financial position of Sight Resource Corporation as of March 31, 1996 and
the results of its operations and cash flows for the three months ended March
31, 1995 and 1996.
(b) Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate on the balance sheet date. Income and
expense items are translated at average rates of exchange prevailing during each
period. Translation adjustments are accumulated in a separate component of
stockholders' equity. Transaction gains and losses are included in the results
of operations and have not been material in any year. As described above, the UK
operations were discontinued as of December 31, 1995 and the assets and
liabilities were transferred to the U.S.
(c) Statement of Cash Flows
Cash and cash equivalents consist of cash in banks and short-term
investments with original maturities of three months or less.
(d) Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short maturity of these items. The carrying amount of other long-term maturities
approximates fair value. The carrying amount of the Company's revolving line of
credit approximates fair value because the borrowing rate changes with market
interest rates.
(e) Revenue Recognition
Under existing revenue sharing arrangements for refractive surgery where
the Company is not responsible for patient billing, the Company receives a
specified payment from the hospital or center for each refractive surgical
procedure performed. Accordingly, the Company recognizes revenue on a per
procedure basis at the time procedures are performed. Under existing
revenue-sharing arrangements for refractive surgery where the Company is
responsible for the collection from the patient and payment to the
ophthalmologist and other operating costs, the total patient charge is recorded
as revenue with the corresponding expenses recorded in cost of revenue.
F-8
<PAGE> 70
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue and the related costs from the sale of eyewear are recognized at
the time an order is placed. Revenue is reported net of the contractual
allowances.
(f) Inventories
Inventories primarily consist of the costs of eyeglass frames, contact
lenses, ophthalmic lenses, sunglasses and other optical products and are valued
at the lower of cost (using the first-in, first-out method) or market.
(g) Property and Equipment
Property and equipment is stated at cost. The Company provides for
depreciation at the time the property and equipment is placed in service. The
straight-line method is used over the estimated useful life of the assets.
(h) Intangible Assets
Intangible assets resulting from the business acquisitions consist of
customer lists, trademarks, and the excess cost of the acquisition over the fair
value of the net assets acquired (goodwill). Certain values assigned are based
upon independent appraisals and are amortized on a straight line basis over a
period of 11 to 25 years. The Company assesses the recoverability of unamortized
intangible assets on an ongoing basis by comparing anticipated operating profits
and future cash flows to net book value.
(i) Income Taxes
The Company follows the asset and liability method of accounting for income
taxes and records deferred tax assets and liabilities based on temporary
differences between the tax bases of assets and liabilities and their carrying
amounts for financial statement purposes.
(j) Net Loss Per Share
Net loss per share of common stock is based on the weighted average number
of common shares outstanding. Common stock equivalents are not included in the
calculation because they are antidilutive.
(k) Reclassification
Certain reclassifications were made to the 1995 Consolidated Financial
Statements to conform to the 1996 presentation.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- ----------
1994 1995 1996 USEFUL LIFE
------ ------ ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Laser equipment.......................... $4,550 $5,973 $5,328 5 years
Ophthalmic and other equipment........... 125 1,452 1,492 3 - 5 years
Computer equipment....................... 79 89 89 3 years
Furniture and fixtures................... 37 379 397 3 years
Leasehold improvements................... -- 261 444 Life of lease
Construction-in-progress................. -- 104 89
------ ------ ------
4,791 8,258 7,839
Less accumulated depreciation............ 1,241 2,480 2,546
------ ------ ------
Property and equipment, net.............. $3,550 $5,778 $5,293
====== ====== ======
</TABLE>
F-9
<PAGE> 71
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INTANGIBLE ASSETS
Intangible assets consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- -----------
1994 1995 1996
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill................................................. $-- $4,201 $ 4,201
Patient lists............................................ -- 2,659 2,659
Trademarks............................................... -- 413 413
--- ------ ------
-- 7,273 7,273
Accumulated amortization................................. -- 365 463
--- ------ ------
Total.......................................... $-- $6,908 $ 6,810
=== ====== ======
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- -----------
1994 1995 1996
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Professional fees....................................... $213 $ 344 $ 193
Payroll and related cost................................ 68 676 655
Acquisition payments.................................... -- 387 387
Other................................................... 67 1,397 850
---- ------ -------
$348 $2,804 $ 2,085
==== ====== =======
</TABLE>
(6) DEBT
Long term debt is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- -----------
1994 1995 1996
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Bank term loan, 9.44% interest rate at December 31, 1995
(8.81% interest rate at March 31, 1996), repayable in
quarterly installments of $100,000 through March 1998
followed by 4 quarterly installments of $125,000;
secured by all assets of one of the Company's
subsidiaries........................................... $-- $1,400 $ 1,300
Less current maturities.................................. -- 400 400
--- ------ -------
Long term debt, less current maturities.................. $-- $1,000 $ 900
=== ====== =======
</TABLE>
The Company also has available a revolving credit facility in the amount of
$500,000 based on eligible accounts receivable and inventory balances which
bears interest at the bank's base rate plus 1.5% (10% at December 31, 1995 and
9.75% at March 31, 1996). As of December 31, 1995 and March 31, 1996, $25,000
was unused.
(7) COMMITMENTS
The Company has operating leases primarily for its retail optical offices,
distribution center, corporate offices and certain equipment. The leases are
generally for periods of up to 10 years with renewal options at fixed rentals.
Certain of the leases provide for additional rentals based on sales exceeding
specified amounts.
F-10
<PAGE> 72
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease rental commitments for facilities and equipment
for the periods following December 31, 1995 are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................... $1,746
1997........................................................... 1,421
1998........................................................... 1,174
1999........................................................... 610
2000........................................................... 462
Thereafter..................................................... 612
------
$6,025
======
</TABLE>
Rental expenses charged to operations, including real estate taxes, common
area maintenance and other expenses related to the leased facilities and
equipment, were approximately $23,000, $58,000, $1,750,000, $374,000 and
$498,000 for fiscal years 1993, 1994 and 1995 and for the three months ended
March 31, 1995 and 1996, respectively.
(8) STOCKHOLDERS' EQUITY
Preferred Stock
As of December 31, 1995 and March 31, 1996, the Company has authorized
5,000,000 shares of preferred stock of $.01 par value of which none have been
issued and outstanding. The terms and conditions of the preferred stock,
including any preferences and dividends, will not be established until such
time, if ever, as such shares are in fact issued by the Company.
Common Stock
As of December 31, 1995 and March 31, 1996, the Company has authorized
20,000,000 shares of common stock at $.01 par value. Common stock is entitled to
dividends if declared by the Board of Directors, and each share carries one
vote.
Warrants
During the second half of 1995, the Company received net proceeds of
approximately $6,078,000 from the exercise of 929,140 IPO Warrants. Each IPO
Warrant entitled the holder to purchase one share of common stock at $6.75. On
October 31, 1995, the expiration date of the IPO Warrants, 3,110 IPO Warrants
expired unexercised.
At December 31, 1995, the Company had outstanding 85,000 Class A Warrants.
Each Class A Warrant entitles the holder to purchase one share of common stock
at a price of $6.00 and is exercisable at any time through March 25, 1999.
During 1995, 25,000 Class A Warrants were exercised providing the Company with
net proceeds of $150,000.
As part of the Company's second public offering completed in September
1994, the Company issued 2,472,500 redeemable common stock purchase warrants ("Z
Warrant"). Each Z Warrant entitles the holder to purchase one share of common
stock at a price of $6.00 and terminates on August 25, 1999, unless previously
redeemed. The Z Warrants are redeemable at the option of the Company at a price
of $.05 per warrant, upon 30 days written notice, provided that the closing
price of the common stock exceeds $9.50 for a period of 20 consecutive business
days. During fiscal 1995, 300 Z Warrants were exercised providing the Company
with $1,800 in proceeds. During the three months ended March 31, 1996, 100 Z
Warrants were exercised providing the Company with $600 in proceeds.
In connection with its second public offering, the Company sold to its
underwriter and a finder, 215,000 Unit Purchase Options (UPOs) at a price of
$.001 per UPO. The UPOs are exercisable for a period of four years commencing
August 25, 1995, at a price of $9.90. Each UPO consists of one share of common
stock and
F-11
<PAGE> 73
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
one redeemable common stock purchase warrant, which entitles the holder to
purchase one share of common stock at a price of $7.20. At December 31, 1995 and
March 31, 1996, no UPOs have been exercised.
In connection with its initial public offering, the Company sold to the IPO
Representative (at an aggregate price of $85), warrants to purchase up to 85,000
IPO Units at an exercise price of $7.98 per IPO Unit at any time during the
four-year period commencing March 31, 1994. Each IPO Unit consists of one share
of common stock and one redeemable common stock purchase warrant, which entitles
the holder to purchase one share of common stock at a price of $6.75. At
December 31, 1995 and March 31, 1996, no IPO Units have been exercised.
Stock Option Plan
On November 30, 1992, the Company's Board of Directors and the stockholders
approved the Company's 1992 Employee, Director and Consultant Stock Option Plan
(the "Plan"). On April 26, 1994, the Board of Directors and the stockholders
approved the increase shares of common stock reserved for issuance under the
Plan to an aggregate of 1,000,000 shares. In March 1996 the Board has
recommended, subject to shareholder approval, that an additional 500,000 shares
of common stock be reserved for issuance under the Plan. Under the Plan,
incentive stock options may be granted to employees of the Company.
Non-qualified stock options may be granted to consultants, directors, employees
or officers of the Company.
In December, 1994 the Compensation Committee of the Board of Directors
approved a Stock Option Exchange Program (the "Program"). All employees and
consultants with stock options with exercise prices in excess of $4.40 per share
were given the election to cancel the existing option for new options at a per
share price of $4.40. Upon election all prior vesting was forfeited and the
replacement options began vesting on the exchange date on a schedule equal to
the original option being canceled. The $4.40 exercise price was in excess of
the then current fair market value of the share on the date of exchange. Options
for a total of 270,800 were canceled and exchanged under the program.
A summary of the stock option transactions follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES SHARES UNDER PRICE PER
AVAILABLE OPTION SHARE
--------- ------------- -------------
<S> <C> <C> <C>
Balance, December 31, 1992.................. 135,000 35,000 $ 0.43
Shares reserved............................. 330,000 -- --
Granted..................................... (369,200) 369,200 3.00 -- 9.50
-------- -------- ------------
Balance, December 31, 1993.................. 95,800 404,200 $0.43 -- 9.50
Shares reserved............................. 500,000 -- --
Canceled.................................... 301,400 (301,400) 5.75 -- 9.50
Granted..................................... (373,200) 373,200 4.18 -- 6.87
-------- -------- ------------
Balance, December 31, 1994.................. 524,000 476,000 $0.43 -- 8.50
Canceled.................................... 173,667 (173,667) 4.125 -- 8.50
Granted..................................... (368,400) 368,400 4.125 -- 7.25
Exercised................................... -- (2,100) 4.40
-------- -------- ------------
Balance, December 31, 1995.................. 329,267 668,633 $0.43 -- 8.50
Canceled.................................... 2,700 (2,700) 5.00
Granted..................................... (52,500) 52,500 6.125 -- 7.50
-------- -------- ------------
Balance, March 31, 1996 (unaudited)......... 279,467 718,433 $0.43 -- 8.50
======== ======== ============
</TABLE>
There were 72,000, 253,012 and 320,917 shares exercisable at prices ranging
from $.43 to $8.50 under the Plan at December 31, 1994 and 1995 and March 31,
1996, respectively.
In October 1995, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" which permits either the recording of the estimated value of stock
based compensation over the applicable vesting period or disclosing the
unrecorded cost and the related effect on earnings per share in the Notes to the
Consolidated Financial Statements. At
F-12
<PAGE> 74
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
this time, the Company does not intend to adopt the new standard, however,
compliance with the new disclosure requirements will be made for the year ended
December 31, 1996.
(9) INCOME TAXES
Income tax benefit attributable to loss from continuing operations differed
from the amounts computed by applying the U.S. federal income tax rate of 34
percent as a result of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------
1993 1994 1995 1995 1996
----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Computed "expected" tax benefit................. $ 520 $1,001 $1,662 $ 384 $ 220
Increase in tax benefit resulting from:
State net operating loss...................... -- 126 466 29 40
Loss in foreign subsidiary.................... -- -- 868 -- --
Decrease in tax benefit resulting from:
Foreign net loss.............................. (198) (628) -- (222) --
Other......................................... 10 3 (6) (1) (1)
Increase in valuation allowance for deferred
tax assets allocated to income tax
expense.................................... (332) (502) (2,990) (190) (259)
----- ------- ------- ------ ------
$ -- $ -- $ -- $ -- $ --
===== ======= ======= ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------- ----------
1994 1995 1996
----- ------ ----------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforwards......................... $ 836 $3,861 $4,077
Vacation accrual......................................... 10 55 57
Bad debt reserve......................................... -- 92 165
Other reserves........................................... -- 586 552
----- ------ ------
Gross deferred tax assets........................ 846 4,594 4,851
Valuation allowance under SFAS 109....................... (843) (4,591) (4,851)
----- ------ ------
Net deferred tax assets.......................... 3 3 --
Less deferred tax liabilities:
Plant and equipment................................... 3 3 --
----- ------ ------
Net deferred tax................................. $ -- $ -- $ --
===== ====== ======
</TABLE>
A valuation allowance in the amount of $843,000, $4,591,000 and $4,851,000
has been established at December 31, 1994 and 1995 and March 31, 1996,
respectively. This allowance has been established due to the uncertainty in the
ability of the Company to benefit from the federal and state operating loss
carryforwards.
F-13
<PAGE> 75
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequently recognized tax benefit relating to the valuation allowance for
deferred tax assets will be allocated as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
<S> <C> <C>
(UNAUDITED)
Income tax benefit that would be reported in the
statement of earnings................................ $3,823 $ 4,083
Charge to goodwill for recognition of acquired tax
assets............................................... 768 768
---------- ----------
$4,591 $ 4,851
========== ==========
</TABLE>
The net operating loss carryforwards ("NOLs") for federal and state tax
purposes at December 31, 1995 are approximately $9,595,000 and $9,546,000,
respectively and expire through 2010 and 2000, respectively.
The NOLs for federal and state tax purposes at March 31, 1996 are
approximately $10,131,000 and $10,082,000, respectively and expire through 2011
and 2001, respectively.
(10) FOREIGN OPERATIONS
Revenue generated by the Company's UK operations was approximately
$155,000, $529,000 and $448,000 for fiscal years 1993, 1994 and 1995,
respectively, and $150,000 for the three months ended March 31, 1995. No revenue
was recorded in the first quarter of 1996, since the Company's operations had
been discontinued at the end of 1995. The Company incurred a loss from its UK
operations of approximately $540,000, $1.8 million and $2.1 million in fiscal
1993, 1994 and 1995, respectively and $654,000 for the three months ended March
31, 1995. As discussed in note 1, in order to better utilize its resources on
the growth opportunities in the U.S., the Company discontinued its UK operations
in the fourth quarter 1995 and its assets, consisting primarily of laser
equipment, have been transferred to the U.S. At December 31, 1993 and 1994, the
Company had total assets of $4.2 million and $3.9 million, respectively in the
UK.
(11) SUPPLEMENTARY CASH FLOW INFORMATION
The following represents supplementary cash flow information (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest paid.................................... $22 $48 $ 210 $ 51 $ 44
===== ===== ====== ====== ======
Non-cash financing activities:
Issuance of Class A Warrants in conjunction
with Bridge Notes........................... $-- $65 $ -- $ -- $ --
===== ===== ====== ====== ======
Issuance of stock for equipment and other........ $-- $-- $ 206 $ -- $ --
===== ===== ====== ====== ======
Acquisitions:
Assets acquired.................................. $-- $-- $7,696 $4,435 $ --
Net liabilities assumed.......................... -- -- (3,310) (1,600) --
Common stock issued.............................. -- -- (1,727) (1,145) --
----- ----- ------ ------ ------
Cash paid........................................ -- -- 2,659 1,690 --
Less cash acquired............................... -- -- (296) (269) --
----- ----- ------ ------ ------
Net cash paid for acquisition.................... $-- $-- $2,363 $1,421 $ --
===== ===== ====== ====== ======
</TABLE>
F-14
<PAGE> 76
===============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 16
Use of Proceeds....................... 17
Dilution.............................. 18
Capitalization........................ 19
Price Range of Common Equity and
Dividend Policy..................... 20
Selected Financial Data............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 27
Management............................ 39
Principal Stockholders................ 47
Certain Relationships and Related
Transactions........................ 48
Description of Securities............. 49
Shares Eligible for Future Sale....... 53
Underwriting.......................... 56
Available Information................. 57
Legal Matters......................... 58
Experts............................... 58
Index to Financial Statements......... F-1
</TABLE>
===============================================================================
===============================================================================
1,600,000 SHARES
[LOGO]
SIGHT RESOURCE
CORPORATION
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
COMMONWEALTH ASSOCIATES
, 1996
===============================================================================
<PAGE> 77
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.
SUBJECT TO COMPLETION, DATED MAY 29, 1996
PROSPECTUS
LOGO
SIGHT RESOURCE CORPORATION
2,472,100 SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Sight Resource Corporation, a Delaware corporation (the "Company"), hereby
offers 2,472,100 shares of Common Stock, $.01 par value per share (the "Common
Stock"), issuable upon exercise of outstanding redeemable common stock purchase
warrants (the "Warrants"). The Warrants were issued in connection with the
Company's firm commitment public offering in August 1994 of 2,472,500 units (the
"Units"), each Unit consisting of one share of Common Stock and one Warrant. Of
the 2,472,500 Units, 322,500 Units were issued upon the exercise of the
underwriter's overallotment option. Each Warrant entitles the holder to purchase
one share of Common Stock of the Company at an exercise price of $6.00, subject
to adjustment in certain events, at any time prior to August 25, 1999, unless
previously redeemed. The Warrants are redeemable, in whole but not in part, at
the option of the Company, at a redemption price of $.05 per Warrant at any
time, upon not less than 30 days' prior written notice to the registered holders
thereof, provided that the closing price per share of Common Stock has been at
least $9.50 for a period of 20 consecutive business days ending within 15 days
prior to the notice of redemption. See "Description of Securities."
The Common Stock is traded in the over-the-counter market and is quoted on
the Nasdaq National Market under the trading symbol "VISN." The closing sale
price for the Common Stock on May 28, 1996 was $7.00. The Warrants are traded in
the over-the-counter market and are quoted on the Nasdaq National Market under
the trading symbol "VISNZ." The closing sale price for the Warrants on May 28,
1996 was $3.125.
The maximum possible proceeds to the Company from the exercise of all of
the Warrants is approximately $14,800,000, before expenses of approximately
$50,000. There can be no assurance, however, that any of the Warrants will be
exercised.
The registration statement of which this Prospectus forms a part also
includes separate prospectuses relating to (i) the offering (the "Offering") by
the Company of 1,600,000 shares of Common Stock at an assumed offering price of
$7.00, and (ii) the offering of 85,000 shares of Common Stock issuable upon the
exercise of 85,000 Class A Warrants (the "Class A Warrants"), which Class A
Warrants were issued in March 1995 in connection with the Company's private
placement (the "Private Placement") of $1,100,000 aggregate principal amount of
promissory notes (the "Bridge Notes").
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS
FOR INFORMATION WHICH SHOULD BE CAREFULLY
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1996.
<PAGE> 78
THE WARRANT STOCK OFFERING
<TABLE>
<S> <C>
Securities Offered................. 2,472,100 shares of Common Stock issuable upon exercise
of outstanding Warrants.
The Warrants....................... Each Warrant entitles the holder to purchase one share
of Common Stock at an exercise price of $6.00, subject
to adjustment in certain events, at any time prior to
August 25, 1999, unless previously redeemed. The
Warrants are redeemable, in whole but not in part, at
the option of the Company, at a redemption price of $.05
per Warrant at any time, upon not less than 30 days'
prior written notice to the registered holders thereof,
provided that the closing price per share of Common
Stock has been at least $9.50 for a period of 20
consecutive business days ending within 15 days prior to
the notice of redemption.
Additional Securities.............. The registration statement of which this Prospectus
forms a part also includes separate prospectuses
relating to (i) the offering (the "Offering") by the
Company of 1,600,000 shares of Common Stock at an
initial offering price of $7.00, and (ii) the offering
of 85,000 shares of Common Stock issuable upon the
exercise of 85,000 Class A Warrants (the "Class A
Warrants"). Each Class A Warrant entitles the holder to
purchase one share of Common Stock, at an exercise price
of $6.00, subject to adjustment in certain events, until
August 25, 1999.
Common Stock Outstanding Before the
Offering......................... 6,346,715 Shares(1)
Common Stock to be Outstanding
After the Offering............... 7,946,715 Shares(1)(2)
Use of Proceeds.................... The maximum possible proceeds to the Company from the
exercise of all of the Warrants, approximately
$14,800,000 before expenses of approximately $50,000,
would be used by the Company for working capital and
general corporate purposes, including acquisitions.
Nasdaq National Market Symbols..... Common Stock -- VISN
Warrants -- VISNZ
Risk Factors....................... The Common Stock offered hereby involves a high degree
of risk. Prospective investors should carefully consider
the factors discussed under the heading "Risk Factors."
</TABLE>
- ---------------
(1) Excludes (i) 2,472,100 shares of Common Stock issuable upon the exercise of
2,472,100 Warrants issued and outstanding as of the date of this Prospectus,
(ii) 215,000 shares of Common Stock included in, and 215,000 shares of
Common Stock issuable upon the exercise of warrants included in, Units
(defined below) issuable in connection with the exercise of Unit Purchase
Options (defined below), (iii) 85,000 shares of Common Stock issuable upon
exercise of, and 85,000 shares of Common Stock issuable upon the exercise of
warrants issuable upon exercise of, the IPO Representative's Warrants
(defined below), (iv) 85,000 shares of Common Stock issuable upon the
exercise of the Class A Warrants (defined below) and (v) 875,333 shares of
Common Stock issuable upon the exercise of stock options outstanding as of
the date of this Prospectus (the "Outstanding Stock Options"). See
"Description of Securities."
(2) Excludes 160,000 shares of Common Stock included in the Representative's
Warrants. See "Description of Securities."
W-6
<PAGE> 79
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Warrants are redeemable by the Company, upon 30 days' prior written
notice, for $.05 per Warrant, provided certain specified market conditions are
met. The Company may choose to redeem the Warrants for $.05 per Warrant rather
than incur the cost of keeping a registration statement current with the
Commission for the shares of Common Stock underlying the Warrants. Redemption of
the Warrants could force the holders to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants for possible additional appreciation, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption. Any holder who does not
exercise its Warrants prior to their expiration or redemption, as the case may
be, will forfeit its right to purchase the shares of Common Stock underlying the
Warrants. See "Description of Securities -- Warrants."
THE COMPANY
Sight Resource Corporation was incorporated in Delaware on November 2, 1992
and commenced operations on November 30, 1992. The Company's operations are a
continuation of the business begun in April 1992 by PRK Limited Partnership, a
Massachusetts limited partnership (the "Predecessor Partnership"). On October
31, 1995 the Company changed its name to Sight Resource Corporation from
NewVision Technology, Inc. to better reflect its expanded corporate mission. The
Company has two wholly-owned consolidated British subsidiaries, NewVision
Technology Limited and NewVision Leasing Limited, which were registered under
the laws of the United Kingdom on September 7, 1993 and two wholly-owned
consolidated U.S. subsidiaries, Cambridge Eye Associates, Inc. ("Cambridge Eye")
and Douglas Vision World, Inc. ("Vision World"). As used in this Prospectus,
unless the context otherwise requires, "Sight Resource Corporation" or the
"Company" refers to Sight Resource Corporation and its consolidated subsidiaries
and, with respect to periods prior to its incorporation, to the business of the
Predecessor Partnership. See "Business."
In connection with its initial public offering in March 1993, the Company
sold to the lead underwriter (the "IPO Representative") warrants (the "IPO
Representative's Warrants") to purchase 85,000 units at an exercise price equal
to $7.98 per unit through March 1998, each unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.75 per share, subject to
adjustment. In March 1994, the Company issued 110,000 warrants (the "Class A
Warrants") to purchase 110,000 shares of Common Stock at an exercise price of
$6.00 per share, in connection with the Company's private placement of
$1,100,000 of bridge notes. In August 1994, the Company completed a public
offering of 2,472,500 units (the "Units"), each Unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.00 per share, subject to
adjustment (a "Warrant"). In connection with the public offering of the Units,
the Company issued to the lead underwriter and finder (the "Representatives")
options (the "Unit Purchase Options") to purchase an aggregate of 215,000 units
(the 'UPO Units") at an exercise price per unit equal to $9.90, exercisable
through August 25, 1999. See "Description of Securities."
The Company's executive offices are located at 67 South Bedford Street,
Burlington, Massachusetts 01803 and its telephone number is (617) 229-1100.
W-16
<PAGE> 80
CONCURRENT SALES
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten offering of 1,840,000 shares of
Common Stock of the Company was declared effective by the Commission, including
240,000 shares subject to the Underwriter's over-allotment option.
The sale of the shares of Common Stock by the Company will likely have an
adverse effect on the market price of the Common Stock and the Warrants. As a
result of the Offering, the freely tradeable Common Stock will be increased by
1,600,000 shares of Common Stock (1,840,000 if the Underwriter's over-allotment
option is exercised).
PLAN OF DISTRIBUTION
The shares of Common Stock issuable upon exercise of the Warrants are being
offered directly by the Company pursuant to the terms of the Warrants. No
underwriter is being utilized in connection with the Warrant Stock Offering.
In order to facilitate the exercise of the Warrants, the Company will
furnish, at its expense, such number of copies of this Prospectus to each
recordholder of the Warrants as the holder may request, together with
instructions that such copies be delivered to the beneficial owners thereof.
In connection with the public offering of the Warrants, the Company and the
underwriter agreed to indemnify each other against certain liabilities in
connection with such public offering and this Warrant Stock Offering, including
liabilities under the Securities Act. The Company and the underwriter have
agreed to provide for reciprocal indemnification between the Company and the
underwriter as to certain liabilities arising under the Securities Act, the
Exchange Act or other federal, state or statutory laws or regulations, at common
law or otherwise, based on any untrue statement or alleged untrue statement of
material fact contained in the registration statement relating to the public
offering and its attendant documents. As to these bases for liability, the
Company and the underwriter have agreed reciprocally to indemnify and hold each
other harmless, and to reimburse for legal or other expenses reasonably
incurred, in connection with any losses, claims, damages, liability or actions
incurred in connection with investigating, preparing or defending against any
litigation or claims whatsoever, and any and all accounts paid in settlement of
any claim or litigation. In the opinion of the Securities and Exchange
Commission, any indemnification provisions that purport to include
indemnification for liabilities arising under the Securities Act are against
public policy as expressed in the Securities Act and are, therefore,
unenforceable.
Prior to the public offering of the Warrants, there was no public market
for the Units or the Warrants. Consequently, the initial public offering price
for the Units and the exercise price and other terms of the Warrants were
determined by negotiations between the Company and the underwriter and may not
necessarily bear any relationship to the Company's assets, results of operations
or other generally accepted criteria of value. Among the factors considered in
such negotiations were prevailing market conditions, the results of operations
of the Company in recent periods, the market capitalizations and stages of
development of other companies that the Company and the underwriter believe to
be comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development and other factors deemed
to be relevant.
W-56
<PAGE> 81
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1, including amendments thereto, under the Securities Act of
1933 (the "Securities Act") with respect to the Warrants. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules filed therewith, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Warrants, reference is hereby
made to such Registration Statement and to the exhibits and schedules filed
therewith. Statements contained in this Prospectus regarding the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being deemed to
be qualified in its entirety by such reference. The Registration Statement,
including all exhibits and schedules thereto, may be inspected without charge at
the principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies of all or any part thereof may be obtained from such offices, upon the
payment of prescribed fees. Electronic registration statements made through the
Electronic Data Gathering, Analysis, and Retrieval system are publically
available through the Commission's Web site (http://www.sec.gov).
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048; and
Chicago Regional Office, Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically. The Company's Common Stock is currently quoted on the Nasdaq
National Market and such reports and other information can also be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.
W-57
<PAGE> 82
LEGAL MATTERS
Certain legal matters in connection with the legality of the Common Stock
offered hereby will be passed upon for the Company by Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts. Mr. Irwin M. Heller, a
member of such firm, owns 15,000 shares of Common Stock.
EXPERTS
The financial statements and schedules of the Company as of December 31,
1995 and 1994, and for the three years ended December 31, 1995 included herein
and elsewhere in the Registration Statement have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
W-58
<PAGE> 83
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 16
Use of Proceeds....................... 17
Dilution.............................. 18
Capitalization........................ 19
Price Range of Common Equity and
Dividend Policy..................... 20
Selected Financial Data............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 27
Management............................ 39
Principal Stockholders................ 47
Certain Relationships and Related
Transactions........................ 48
Description of Securities............. 49
Shares Eligible for Future Sale....... 53
Concurrent Sales...................... 56
Plan of Distribution.................. 56
Available Information................. 57
Legal Matters......................... 58
Experts............................... 58
Index to Financial Statements......... F-1
</TABLE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2,472,100 SHARES
LOGO
SIGHT RESOURCE CORPORATION
COMMON STOCK ISSUABLE
UPON EXERCISE OF REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
------------------------------
PROSPECTUS
------------------------------
, 1996
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE> 84
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.
SUBJECT TO COMPLETION, DATED MAY 29, 1996
PROSPECTUS
LOGO
SIGHT RESOURCE CORPORATION
85,000 SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF CLASS A WARRANTS
---------------------
Sight Resource Corporation, a Delaware corporation (the "Company"), hereby
offers 85,000 shares of Common Stock, $.01 par value per share (the "Common
Stock"), issuable upon exercise of outstanding class A common stock purchase
warrants (the "Class A Warrants"). The Class A Warrants were issued in March
1994 in connection with the Company's private placement (the "Private
Placement") of $1,100,000 aggregate principal amount of promissory notes (the
"Bridge Notes"). Each Class A Warrant entitles the holder thereof to purchase
one share of Common Stock at a price of $6.00, subject to adjustment in certain
events. The Class A Warrants are exercisable at any time prior to August 25,
1999. See "Description of Securities -- Class A Warrants."
The Common Stock is traded in the over-the-counter market and is quoted on
the Nasdaq National Market under the trading symbol "VISN." The closing sale
price for the Common Stock on May 28, 1996 was $7.00.
The maximum possible proceeds to the Company from the exercise of all of
the Class A Warrants is approximately $500,000. There can be no assurance,
however, that any of the Class A Warrants will be exercised.
The registration statement of which this Prospectus forms a part also
includes separate prospectuses relating to (i) the offering (the "Offering") by
the Company of 1,600,000 shares of Common Stock at an assumed offering price of
$7.00, and (ii) the offering of 2,472,100 shares of Common Stock issuable upon
the exercise of outstanding redeemable common stock purchase warrants (the
"Warrants"). Each Warrant entitles the holder to purchase one share of Common
Stock of the Company at an exercise price of $6.00, subject to adjustment in
certain events, at any time prior to August 25, 1999, unless previously
redeemed. The Warrants are redeemable, in whole but not in part, at the option
of the Company, at a redemption price of $.05 per Warrant at any time, upon not
less than 30 days' prior written notice to the registered holders thereof,
provided that the closing price per share of Common Stock has been at least
$9.50 for a period of 20 consecutive business days ending within 15 days prior
to the notice of redemption.
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS
FOR INFORMATION WHICH SHOULD BE CAREFULLY
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1996.
<PAGE> 85
THE CLASS A WARRANT STOCK OFFERING
<TABLE>
<S> <C>
Securities Offered................. 85,000 shares of Common Stock issuable upon exercise of
outstanding Class A Warrants.
The Class A Warrants............... Each Class A Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $6.00,
subject to adjustment in certain events, at any time
prior to August 25, 1999.
Additional Securities.............. The registration statement of which this Prospectus
forms a part also includes separate prospectuses
relating to (i) the offering (the "Offering") by the
Company of 1,600,000 shares of Common Stock at an
initial offering price of $7.00, and (ii) the offering
of 2,472,100 shares of Common Stock issuable upon the
exercise of outstanding redeemable common stock purchase
warrants (the "Warrants"). Each Warrant entitles the
holder to purchase one share of Common Stock at an
exercise price of $6.00, subject to adjustment in
certain events, at any time prior to August 25, 1999,
unless previously redeemed. The Warrants are redeemable,
in whole but not in part, at the option of the Company,
at a redemption price of $.05 per Warrant at any time,
upon not less than 30 days' prior written notice to the
registered holders thereof, provided that the closing
price per share of Common Stock has been at least $9.50
for a period of 20 consecutive business days ending
within 15 days prior to the notice of redemption.
Common Stock Outstanding Before the
Offering......................... 6,346,715 Shares(1)
Common Stock to be Outstanding
After the Offering............... 7,946,715 Shares(1)(2)
Use of Proceeds.................... The maximum possible proceeds to the Company from the
exercise of all of the Class A Warrants, approximately
$500,000, would be used by the Company for working
capital and general corporate purposes, including
acquisitions.
Nasdaq National Market Symbols..... Common Stock -- VISN
Warrants -- VISNZ
Risk Factors....................... The Common Stock offered hereby involves a high degree
of risk. Prospective investors should carefully consider
the factors discussed under the heading "Risk Factors."
</TABLE>
- ---------------
(1) Excludes (i) 2,472,100 shares of Common Stock issuable upon the exercise of
2,472,100 Warrants issued and outstanding as of the date of this Prospectus,
(ii) 215,000 shares of Common Stock included in, and 215,000 shares of
Common Stock issuable upon the exercise of warrants included in, Units
(defined below) issuable in connection with the exercise of Unit Purchase
Options (defined below), (iii) 85,000 shares of Common Stock issuable upon
exercise of, and 85,000 shares of Common Stock issuable upon the exercise of
warrants issuable upon exercise of, the IPO Representative's Warrants
(defined below), (iv) 85,000 shares of Common Stock issuable upon the
exercise of the Class A Warrants (defined below) and (v) 875,333 shares of
Common Stock issuable upon the exercise of stock options outstanding as of
the date of this Prospectus (the "Outstanding Stock Options"). See
"Description of Securities."
(2) Excludes 160,000 shares of Common Stock included in the Representative's
Warrants. See "Description of Securities."
AW-6
<PAGE> 86
THE COMPANY
Sight Resource Corporation was incorporated in Delaware on November 2, 1992
and commenced operations on November 30, 1992. The Company's operations are a
continuation of the business begun in April 1992 by PRK Limited Partnership, a
Massachusetts limited partnership (the "Predecessor Partnership"). On October
31, 1995 the Company changed its name to Sight Resource Corporation from
NewVision Technology, Inc. to better reflect its expanded corporate mission. The
Company has two wholly-owned consolidated British subsidiaries, NewVision
Technology Limited and NewVision Leasing Limited, which were registered under
the laws of the United Kingdom on September 7, 1993 and two wholly-owned
consolidated U.S. subsidiaries, Cambridge Eye Associates, Inc. ("Cambridge Eye")
and Douglas Vision World, Inc. ("Vision World"). As used in this Prospectus,
unless the context otherwise requires, "Sight Resource Corporation" or the
"Company" refers to Sight Resource Corporation and its consolidated subsidiaries
and, with respect to periods prior to its incorporation, to the business of the
Predecessor Partnership. See "Business."
In connection with its initial public offering in March 1993, the Company
sold to the lead underwriter (the "IPO Representative") warrants (the "IPO
Representative's Warrants") to purchase 85,000 units at an exercise price equal
to $7.98 per unit through March 1998, each unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.75 per share, subject to
adjustment. In March 1994, the Company issued 110,000 warrants (the "Class A
Warrants") to purchase 110,000 shares of Common Stock at an exercise price of
$6.00 per share, in connection with the Company's private placement of
$1,100,000 of bridge notes. In August 1994, the Company completed a public
offering of 2,472,500 units (the "Units"), each Unit consisting of one share of
Common Stock and one redeemable common stock purchase warrant to purchase one
share of Common Stock at an exercise price of $6.00 per share, subject to
adjustment (a "Warrant"). In connection with the public offering of the Units,
the Company issued to the lead underwriter and finder (the "Representatives")
options (the "Unit Purchase Options") to purchase an aggregate of 215,000 units
(the "UPO Units") at an exercise price per unit equal to $9.90, exercisable
through August 25, 1999. See "Description of Securities."
The Company's executive offices are located at 67 South Bedford Street,
Burlington, Massachusetts 01803 and its telephone number is (617) 229-1100.
AW-16
<PAGE> 87
CONCURRENT SALES
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten offering of 1,840,000 shares of
Common Stock of the Company was declared effective by the Commission, including
240,000 shares subject to the Underwriter's over-allotment option.
The sale of the shares of Common Stock by the Company will likely have an
adverse effect on the market price of the Common Stock and the Class A Warrants.
As a result of the Offering, the freely tradeable Common Stock will be increased
by 1,600,000 shares of Common Stock (1,840,000 if the Underwriter's over-
allotment option is exercised).
PLAN OF DISTRIBUTION
The shares of Common Stock issuable upon exercise of the Class A Warrants
are being offered directly by the Company pursuant to the terms of the Class A
Warrants. No underwriter is being utilized in connection with the Class A
Warrant Stock Offering.
In order to facilitate the exercise of the Class A Warrants, the Company
will furnish, at its expense, such number of copies of this Prospectus to each
recordholder of the Class A Warrants as the holder may request, together with
instructions that such copies be delivered to the beneficial owners thereof.
AW-56
<PAGE> 88
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1, including amendments thereto, under the Securities Act of
1933 (the "Securities Act") with respect to the Class A Warrants. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules filed therewith, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Class A
Warrants, reference is hereby made to such Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
regarding the contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being deemed to be qualified in its entirety by such
reference. The Registration Statement, including all exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of all or any part
thereof may be obtained from such offices, upon the payment of prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publically available through the Commission's
Web site (http://www.sec.gov).
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048; and
Chicago Regional Office, Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically. The Company's Common Stock is currently quoted on the Nasdaq
National Market and such reports and other information can also be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.
AW-57
<PAGE> 89
LEGAL MATTERS
Certain legal matters in connection with the legality of the Common Stock
offered hereby will be passed upon for the Company by Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts. Mr. Irwin M. Heller, a
member of such firm, owns 15,000 shares of Common Stock.
EXPERTS
The financial statements and schedules of the Company as of December 31,
1995 and 1994, and for the three years ended December 31, 1995 included herein
and elsewhere in the Registration Statement have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
AW-58
<PAGE> 90
<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN 110,000 AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
The Company............................ 16
Use of Proceeds........................ 17
Dilution............................... 18
Capitalization......................... 19
Price Range of Common Equity and
Dividend Policy...................... 20
Selected Financial Data................ 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 27
Management............................. 39
Principal Stockholders................. 47
Certain Relationships and Related
Transactions......................... 48
Description of Securities.............. 49
Shares Eligible for Future Sale........ 53
Concurrent Sales....................... 56
Plan of Distribution................... 56
Available Information.................. 57
Legal Matters.......................... 58
Experts................................ 58
Index to Financial Statements.......... F-1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
85,000 SHARES
LOGO
SIGHT RESOURCE CORPORATION
COMMON STOCK
ISSUABLE UPON EXERCISE OF CLASS A
COMMON STOCK PURCHASE WARRANTS
---------------------
PROSPECTUS
---------------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the Registrant's expenses in connection with
the issuance and distribution of the securities being registered. Except for the
Registration Fee and the Underwriter's nonaccountable expense allowance, the
amounts listed below are estimates:
<TABLE>
<S> <C>
Registration Fee.................................................. $ 5,000
Nasdaq Listing Fees............................................... 20,000
Legal fees and expenses........................................... 140,000
Blue Sky Fees and Expenses........................................ 15,000
Accounting fees and expenses...................................... 30,000
Printing and Engraving............................................ 100,000
Non-accountable expense allowance................................. 168,000
Financial Consulting Fee.......................................... 50,000
Miscellaneous..................................................... 88,000
-------
TOTAL................................................... $616,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification. The Registrant's Restated Certificate of Incorporation
contains provisions eliminating or limiting the personal financial liability of
the Registrant's directors to the fullest extent permitted by Delaware General
Corporation Law. Delaware law provides that directors will not be personally
liable to a corporation or its stockholders for monetary damages for breach of
their fiduciary duties as directors, except for liability (i) for any breach of
their duty of loyalty to the corporation or its stockholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law; or (iv) for any transaction from which the director derives an
improper personal benefit. In addition, the Registrant's Restated Certificate of
Incorporation and By-Laws include provisions to indemnify its officers and
directors and persons serving at the request of the Registrant to the fullest
extent permitted by Delaware General Corporation Law against expenses,
judgments, fines and amounts paid in connection with threatened, pending or
completed suits and proceedings against such persons by reason of having served
as officers, directors or in other capacities.
Insurance. The Registrant has obtained insurance which insures the
officers and directors of the Registrant against certain losses and which
insures the Registrant against certain of its obligations to indemnify such
officers and directors, subject to certain limitations.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In March 1994, the Company issued $1,100,000 aggregate principal amount of
promissory notes together with 110,000 Class A Warrants. Each Class A Warrant
entitles the holder thereof to purchase one share of Common Stock at an exercise
price of $6.00 per share. In February 1995, the Company issued 336,000 shares of
Common Stock to Elliot S. Weinstock, O.D. and 88,000 to Arab Banking Corp., in
connection with the acquisition of Cambridge Eye. In July 1995, the Company
issued an aggregate of 131,525 shares of its Common Stock to Kathleen and Lynn
Haronian and Shirley Santoro in connection with the acquisition of Vision World.
In December 1995, the Company issued 14,300 shares of Common Stock to Irwin
Mesch in connection with the settlement of disputed claims against Cambridge
Eye. In February 1995, the Company issued 50,000 shares of Common Stock to Jim
Beasley in connection with the purchase of equipment. No other stock, either
preferred or common, has been issued during the three years prior to the date of
this Registration Statement.
II-1
<PAGE> 92
Except with respect to the March 1994 issuance of promissory notes and the
Class A Warrants, no person acted as an underwriter with respect to the issuance
of the Company's securities. In each of the foregoing instances, the Registrant
relied on Section 4(2) of the Act, unless otherwise indicated, for the exemption
from the registration requirements of such Act, since no public offering was
involved. Each investor was furnished with information concerning the operations
of the Company and each investor had the opportunity to verify the information
supplied. Additionally, the Registrant obtained a signed representation from
each investor of his intent to acquire the Common Stock for the purpose of
investment only and not with a view toward the subsequent public distribution
thereof. The certificates representing the Common Stock issued to the foregoing
investors have been embossed with a legend restricting transfer of the Common
Stock represented thereby. In addition, certain of the investors above have
executed "lock-up" letter agreements with the Underwriter whereby they have
agreed that their shares will not be available for resale until 180 days from
the date of effectiveness of this Registration Statement, despite any available
exemption pursuant to Rule 144 promulgated under the Securities Act, until such
time period has expired.
II-2
<PAGE> 93
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------------------------------------------------------------------------
<S> <C> <C>
*(1.1) -- Form of Underwriting Agreement
(3.1) -- Restated Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 of the Company's Registration Statement filed with
the Securities and Exchange Commission on Form SB-2 File No. 33-56668)
(3.2) -- By-Laws of the Company (incorporated herein by reference to Exhibit 3.2 of the
Company's Registration Statement filed with the Securities and Exchange
Commission on Form SB-2 File No. 33-56668)
(4.1) -- Article 4 of the Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Company's Registration Statement filed with
the Securities and Exchange Commission on Form SB-2 File No. 33-56668)
(4.2) -- Form of Common Stock Certificate (incorporated herein by reference to Exhibit
4.2 of the Company's Registration Statement filed with the Securities and
Exchange Commission on Form SB-2 File No. 33-56668)
(4.3) -- Warrant Agreement dated August 24, 1994 between the Registrant and American
Stock Transfer and Trust Company (incorporated herein by reference to Exhibit
4.5 of the Company's Registration Statement filed with the Securities and
Exchange Commission on Form S-1 File No. 33-77030)
(4.4) -- Form of Redeemable Warrant Certificate (included in 4.3 above)
(4.5) -- Form of Class A Warrant (incorporated herein by reference to the Company's
Form 10-K for the year ended December 31, 1994 filed with the Securities and
Exchange Commission as Exhibit 4.7)
*(4.6) -- Form of Representative's Warrant Agreement to be entered into between the
Representative and the Registrant upon consummation of the offering
*(4.7) -- Form of Representative's Warrant (included in 4.6 above)
++(5.1) -- Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. with respect to
the legality of securities being registered
+(10.1) -- Employment Agreement, dated as of December 1, 1992, between the Registrant and
William G. McLendon, as amended as of February 29, 1996 (incorporated by
reference herein to Exhibit 10.5 of the Company's Registration Statement filed
with the Securities and Exchange Commission on Form S-1 File No. 33-77030)
+ ++(10.2) -- Amendment No. 4, dated as of March 1, 1996, to the Employment Agreement for
William G. McLendon
+(10.3) -- 1992 Employee, Director and Consultant Stock Option Plan (incorporated by
reference herein to Exhibit 10.7 of the Company's Registration Statement filed
with the Securities and Exchange Commission on Form S-1 File No. 33-77030)
(10.4) -- Letter from Summit concerning supply of six laser systems by Summit to the
Company (incorporated herein by reference to Exhibit 10.12 of the Company's
Registration Statement filed with the Securities and Exchange Commission on
Form SB-2 File No. 33-56668)
**(10.5) -- Purchase Agreement between Summit and the Company (incorporated herein by
reference to the Company's Form 10-Q for the period ending March 31, 1993
filed with the Securities and Exchange Commission as Exhibit 10.16)
+(10.6) -- Employment Agreement for Stephen M. Blinn, as amended as of April 22, 1996
(incorporated by reference herein to Exhibit 10.18 of the Company's
Registration Statement filed with the Securities and Exchange Commission on
Form S-1 File No. 33-77030)
+ ++(10.7) -- Amendment No. 2, dated as of April 23, 1996, to the Employment Agreement for
Stephen M. Blinn
+(10.8) -- Employment Agreement, dated as of February 24, 1995 between the Registrant and
Elliot S. Weinstock, O.D. (incorporated herein by reference to the Company's
Form 10-K for the year ended December 31, 1995 filed with the Securities and
Exchange Commission as Exhibit 10.9)
</TABLE>
II-3
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------------------------------
<S> <C> <C>
**(10.9) -- Contract for Professional Services, dated December 21, 1994, between the
Registrant and Massachusetts Eye and Ear Associates, Inc. (incorporated herein
by reference to the Company's Form 10-K for the year ended December 31, 1994
filed with the Securities and Exchange Commission as Exhibit 10.10)
**(10.10) -- Agreement dated December 21, 1994 between the Registrant and Massachusetts Eye
and Ear Infirmary (incorporated herein by reference to the Company's Form 10-K
for the year ended December 31, 1994 filed with the Securities and Exchange
Commission as Exhibit 10.11)
(10.11) -- Asset Purchase Agreement dated February 24, 1995 between the Registrant, CEA
Acquisition Corporation, Cambridge Eye Associates, Inc. and Elliot S.
Weinstock, O.D. (incorporated herein by reference to Exhibit 2.1 of the
Company's Form 8-K filed with the Securities and Exchange Commission on March
8, 1995)
(10.12) -- Amended and Restated Credit Agreement, dated as of February 24, 1995, between
Cambridge Eye Associates, Inc. and Arab Banking Corporation (incorporated
herein by reference to the Company's Form 10-K for the year ended December 31,
1994 filed with the Securities and Exchange Commission as Exhibit 10.13)
(10.13) -- Asset Purchase Agreement dated August 24, 1995 between the Registrant, Douglas
Vision World, Inc., S.J. Haronian, Kathleen Haronian, Lynn Haronian, Shirley
Santoro and Tri-State Leasing Company (incorporated herein by reference to
Exhibit 2.1 of the Company's Form 8-K filed with the Securities and Exchange
Commission on September 8, 1995)
++(21.1) -- Subsidiaries of the Company
***(23.1) -- Consent of KPMG Peat Marwick LLP
(23.2) -- Consent of Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. (included in 5.1
above)
***(24.1) -- Power of Attorney
</TABLE>
- ---------------
+ Management contract or compensatory plan, contract or arrangement.
++ Previously filed.
* Filed herewith.
** Confidential Treatment has been granted by the Securities and Exchange
Commission.
*** As filed in Part II of this Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such 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; and
II-4
<PAGE> 95
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person of the Registrant in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes (i) to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser, (ii) that for purposes
of determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
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 this Registration Statement as of the time
it was declared effective, and (iii) that for purposes 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.
II-5
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Burlington, Commonwealth
of Massachusetts, on May 29, 1996.
SIGHT RESOURCE CORPORATION
By: /s/ WILLIAM G. MCLENDON
------------------------------------
William G. McLendon, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ WILLIAM G. MCLENDON President, Chief Executive Officer May 29, 1996
- ------------------------------------- (principal executive officer), and
William G. McLendon Director
* Chief Operating Officer, Executive May 29, 1996
- ------------------------------------- Vice President, and Director
Stephen M. Blinn
* Vice President, Finance and May 29, 1996
- ------------------------------------- Administration and Secretary
Alan MacDonald (principal financial and
accounting officer)
* Director May 29, 1996
- -------------------------------------
Gary Jacobson, M.D.
* Director May 29, 1996
- -------------------------------------
Russell E. Taskey
* Director May 29, 1996
- -------------------------------------
Allen R. Kirkpatrick
* Director May 29, 1996
- -------------------------------------
Elliot S. Weinstock, O.D.
</TABLE>
- ---------------
* By executing his name hereto on May 29, 1996, William G. McLendon is signing
this document on behalf of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
By: /s/ WILLIAM G. MCLENDON
- -------------------------------------
William G. McLendon
(Attorney-in-Fact)
II-6
<PAGE> 97
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors
Sight Resource Corporation:
The audits referred to in our report dated February 23, 1996, included the
related consolidated financial statement schedules as of December 31, 1994 and
1995 and for the three years ended December 31, 1995 included in the
registration statement. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement schedules based on our audits.
In our opinion, such consolidated financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference
to our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
May 29, 1996
II-7
<PAGE> 1
EXHIBIT 1.1
SIGHT RESOURCE CORPORATION
1,600,000 Shares(1)
Common Stock
UNDERWRITING AGREEMENT
, 1996
------------
COMMONWEALTH ASSOCIATES
As Representative of the several Underwriters
733 Third Avenue
11th Floor
New York, New York 10017
Dear Sirs:
Sight Resource Corporation, a Delaware corporation (the "Company"),
hereby confirms its agreement (this "Agreement") with the several underwriters
named in Schedule 1 hereto (the "Underwriters"), for whom you have been duly
authorized to act as representative (in such capacity, the "Representative"), as
set forth below.
1. Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the several Underwriters an aggregate
of 1,600,000 shares (the "Firm Securities") of the Company's Common Stock, par
value $.0l per share (the "Common Stock"). The Company also proposes to issue
and sell to the several Underwriters an option to purchase up to an additional
240,000 shares of Common Stock as set forth in Schedule 2 hereto (the "Option
Securities") if requested by the Representative as provided in Section 3 of this
Agreement. The Firm Securities and the Option Securities are referred to herein,
collectively, as the "Securities."
The Company proposes to issue and sell to the Representative, warrants
(the "Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") for the purchase of an
additional 160,000 shares of Common Stock. The shares of Common Stock issuable
upon exercise of the Representative Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Securities, the
- ------------------------
(1) Plus an option to purchase from Sight Resource Corporation up to
240,000 additional shares to cover over-allotments.
<PAGE> 2
Option Securities, the Representative's Warrants and the Representative's
Securities are more fully described in the Registration Statement and the
Prospectus referred to below.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the several Underwriters
that:
(a) A registration statement on Form S-1 (File No. 333-03219)
with respect to the Securities, including a prospectus subject to completion,
has been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to such registration statement may have been so filed. After
the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Act or (B) if the
Company does not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act, and in the case of either clause (i)(A) or (i)(B) of
this sentence as have been provided to and approved by the Representative prior
to the execution of this Agreement, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, including
a form of prospectus, a copy of which amendment has been furnished to and
approved by the Representative prior to the execution of this Agreement. As used
in this Agreement, the term "Registration Statement" means such registration
statement, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with such registration
statement or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any amendment
thereto at the time it was or is declared effective); the term "Prospectus"
means: (x) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule 424(b)(7) under
the Act, together with the Preliminary Prospectus identified therein that such
Term Sheet supplements; (y) if the Company does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act; or (z) if the Company does not rely on Rule 434 under the Act and
if no prospectus is required to be filed pursuant to Rule 424(b) under the Act,
such term means the prospectus included in the Registration Statement; and the
term "Term Sheet" means any term sheet that satisfies the requirements of Rule
434 under the Act. Any reference herein to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
2
<PAGE> 3
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission it (i) contained all statements
required to be stated therein in accordance with, and complied in all material
respects with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement or any amendment thereto
was or is declared effective, it (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply in
all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. When the Prospectus or any Term
Sheet that is a part thereof or any amendment or supplement to the Prospectus is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or part
thereof or such amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment or
supplement to the Prospectus was or is declared effective) and on the Firm
Closing Date and any Option Closing Date (both as hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (i) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representative specifically for use therein.
(c) The Company is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
result in a material adverse change in the condition (financial or other),
management, business prospects, properties, net worth or results of operations
of the Company; and the Company has full power (corporate and other) to enter
into this Agreement and to carry out all the terms and provisions hereof to be
carried out by it.
(d) All the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Registration Statement. Each
Subsidiary is a corporation duly organized,
3
<PAGE> 4
validly existing and in good standing in the jurisdiction of its incorporation,
with full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
result in a material adverse change in the condition (financial or other),
management, business prospects, properties, net worth or results of operations
of such Subsidiary; all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by the Company directly, or indirectly through one
of the other Subsidiaries, free and clear of any lien, adverse claim, security
interest, equity, or other encumbrance; and, except as set forth in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities or commitments of sale, or
liens related to or entitling any person to purchase or otherwise to acquire
shares of the capital stock of, or other ownership in, each of the Subsidiaries;
other than capital stock, there are no other ownership interests in any of the
Subsidiaries. Other than with respect to the Subsidiaries, the Company does not
control, directly or indirectly, any corporation, partnership, joint venture,
association or other business organization.
(e) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. The Firm Securities and the Option Securities
have been duly authorized and at the Firm Closing Date or the related Option
Closing Date (as the case may be), and after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable. No holders of
outstanding shares of capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Securities, and except as
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), no holder of securities of the Company has any
right which has not been fully exercised or waived to require the Company to
register the offer or sale of any securities owned by such holder under the Act
in the public offering contemplated by this Agreement. The capital stock of the
Company conforms to the description thereof contained in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(f) The Company is the lawful owner of the Securities to be
offered and sold by the Company hereunder and upon sale and delivery of, and
payment for, such Securities, as provided herein, the Company will convey to the
Underwriters good and marketable title to such Securities, free and clear of any
security interests, liens, encumbrances, equities, claims or other defects.
(g) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no outstanding (i) securities or
4
<PAGE> 5
obligations of the Company convertible into or exchangeable for any capital
stock of the Company, (ii) warrants, rights or options to subscribe for or
purchase from the Company any such capital stock or any such convertible or
exchangeable securities or obligations, or (iii) obligations of the Company to
issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(h) The consolidated financial statements and schedules of the
Company and its Subsidiaries included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present the financial position of the Company and
its Subsidiaries and the results of operations and changes in financial
condition as of the dates and periods therein specified. Such financial
statements and schedules have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein) and include all financial
information required to be included by the Act. The selected financial data set
forth under the captions "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated in the Prospectus
(or such Preliminary Prospectus), the information included therein.
(i) KPMG Peat Marwick LLP, who have certified certain
financial statements of the Company and its Subsidiaries and delivered their
report with respect to the audited financial statements and schedules included
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and regulations
thereunder.
(j) The execution and delivery of this Agreement have been
duly authorized by the Company and this Agreement has been duly executed and
delivered by the Company, and is the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(k) The execution and delivery of the Representative's Warrant
Agreement and the Representative's Warrants have been duly authorized by the
Company and each of the Representative's Warrant Agreement, upon due execution
and delivery thereof by the Company, and the Representative's Warrants, upon
exercise thereof and payment therefor, shall be valid and binding obligations of
the Company to issue and sell the number and type of securities of the Company
called for thereby, enforceable against the Company in accordance with their
terms. The Representative's Securities have been duly authorized and, when
issued and delivered to and paid for, pursuant to the Representative's Warrant
Agreement, will be validly issued, fully paid and nonassessable. No holders of
outstanding shares of capital stock of the Company are entitled to any
preemptive or other rights to subscribe for any of the Representative's
Securities.
(l) No legal or governmental proceedings are pending to which
the Company or any of its Subsidiaries is a party or to which the property of
the Company or any of its
5
<PAGE> 6
Subsidiaries are subject that are required to be described in the Registration
Statement or the Prospectus and are not described therein (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and, to the best
knowledge of the Company, after due inquiry, no such proceedings have been
threatened against the Company or any of its Subsidiaries or with respect to any
of their properties; and no contract or other document is required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) or filed
as required.
(m) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by the
Company with the other provisions of this Agreement and the consummation of the
other transactions herein contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained, such as may be required under
state securities or blue sky laws and, if the registration statement filed with
respect to the Securities (as amended) is not effective under the Act as of the
time of execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act, or (ii) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound, or the charter documents or by-laws of the Company or any
of its Subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
applicable to the Company or any of its Subsidiaries.
(n) The issuance and sale of the Representative's Securities
to the Representative by the Company pursuant to the Representative's Warrant
Agreement, the compliance by the Company with other provisions of the
Representative's Warrant Agreement and the consummation of the other
transactions therein contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required under
states securities or blue sky laws and under the Act, or (ii) conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries or any of their
respective properties is bound, or the charter documents or by-laws of the
Company or any of its Subsidiaries, or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority or any
arbitrator applicable to the Company or any of its Subsidiaries.
(o) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither the
Company nor any of its Subsidiaries has sustained any material loss or
interference with its businesses or properties from fire, flood, hurricane,
accident
6
<PAGE> 7
or other calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding and there has not been any
material adverse change, or any development involving a prospective material
adverse change, in the condition (financial or other), management, business
prospects, properties, net worth, or results of operations of the Company or any
of its Subsidiaries, except in each case as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(p) The Company has not directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A) sold, bid
for, purchased, attempted to induce any person to purchase, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase any
other securities of the Company (except for the sale of Securities by the
Company under this Agreement).
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (i) neither the
Company nor any of its Subsidiaries has incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction not
in the ordinary course of business; (ii) neither the Company nor any of its
Subsidiaries has purchased any of the Company's outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on its
capital stock; and (iii) there has not been any material change in the capital
stock, short-term debt or long-term debt of the Company or any of its
Subsidiaries, except in each case as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(r) Each of the Company and its Subsidiaries has good and
marketable title in fee simple to all items of real property and marketable
title to all personal property owned by it, in each case free and clear of any
security interests, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not interfere with the use made or proposed to be made of such property
by the Company and each of its Subsidiaries, and any real property and buildings
held under lease by the Company and each of its Subsidiaries are held under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company and each of its Subsidiaries, in each case
except as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(s) No labor dispute with the employees of the Company or any
of its Subsidiaries exists or is threatened or imminent that could result in a
material adverse change in the condition (financial or other), management,
business prospects, properties, net worth or results
7
<PAGE> 8
of operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(t) The Company owns or possesses, or can acquire on
reasonable terms, all material patents, patent applications, trademarks, service
marks, trade names, licenses, copyrights and proprietary or other confidential
information currently employed by it in connection with its business, and
neither the Company nor any of its Subsidiaries have received any notice of
infringement of or conflict with asserted rights of any third party with respect
to any of the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material adverse
change in the condition (financial or other), management, business prospects,
properties, net worth or results of operations of the Company, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(u) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the business in which it is
engaged; neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for; and the Company does not have any
reason to believe that it will not be able to renew existing insurance coverage
for it and its Subsidiaries as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or other), management, business prospects, properties, net worth or
results of operations of the Company or any of its Subsidiaries, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(v) Each of the Company and its Subsidiaries possesses
adequate authorizations, approvals, orders, licenses, certificates and permits
(collectively, "Permits") issued by the appropriate federal, state and local
regulatory authorities necessary to conduct their businesses as described in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and each of the Company and
its Subsidiaries is and has been doing business in all material respects in
compliance with all necessary Permits and all federal, state and local laws,
rules and regulations; and neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such 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 other), management, business prospects, properties,
net worth or results of operations of the Company or any of its Subsidiaries,
except as disclosed in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). The disclosure in
the Registration Statement and the Prospectus (or, if the Prospectus in not in
existence, the most recent Preliminary Prospectus) concerning the effects of
federal, state and local laws, rules and regulations on the business of the
Company and each of its Subsidiaries as currently conducted and as contemplated
did not or will not include any untrue statement of a material fact or omit to
state
8
<PAGE> 9
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(w) The Company and each of its Subsidiaries conduct, and will
continue to conduct, their operations in a manner that will not subject them to
registration as investment companies under the Investment Company Act of 1940,
as amended, and the transactions contemplated by this Agreement will not cause
the Company or its Subsidiaries to become investment companies subject to
registration under the Investment Company Act of 1940, as amended.
(x) The Company and each of its Subsidiaries have filed all
foreign, federal, state and local tax returns that are required to be filed or
have requested extensions thereof (except in any case in which the failure so to
file would not have a material adverse effect on the Company or any of its
Subsidiaries) and have paid all taxes required to be paid by them and any other
assessment, fine or penalty levied against them, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or penalty
that is currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(y) Neither the Company nor any of its Subsidiaries is in
violation of any federal or state law or regulation relating to occupational
safety and health or to the storage, handling or transportation of hazardous or
toxic materials and the Company and each of its Subsidiaries have received all
permits, licenses or other approvals required of them under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct their business, and the Company and each of its Subsidiaries are in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, result in a material adverse change in the condition
(financial or other), management, business prospects, properties, net worth or
results of operations of the Company or any of its Subsidiaries, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(z) Each certificate signed by any officer of the Company and
delivered to the Representative or counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(aa) The Company and each of its Subsidiaries maintain 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 preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded
9
<PAGE> 10
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(bb) To the Company's knowledge, neither the Company nor any
of its Subsidiaries nor any employee or agent of the Company or any of its
Subsidiaries have made any payment of funds of the Company or any of its
Subsidiaries, or received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(cc) The Company and each of its Subsidiaries are in material
compliance with all applicable Federal, state and local environmental laws and
regulations including, without limitation, those applicable to emissions to the
environment, waste management and waste disposal (collectively, the
"Environmental Laws"), and to the Company's knowledge under current law, there
are no existing circumstances that would prevent, interfere with, or materially
increase the cost of such compliance in the future.
(dd) Except as set forth in the Registration Statement or
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there is no material claim under any Environmental Law,
including common law, pending or threatened against the Company or any of its
Subsidiaries and, to the Company's knowledge, under applicable law, there are no
past or present actions, activities, circumstances, events or incidents,
including, without limitation, releases of any material into the environment
that would reasonably be expected to form the basis of any material claim
against the Company or any of its Subsidiaries.
(ee) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective properties is bound or may be
affected in any material adverse respect with regard to property, business or
operations of the Company and its Subsidiaries.
(ff) The Company has not distributed and, prior to the later
of (i) the Firm Closing Date and (ii) the completion of the distribution of the
shares, will not distribute any offering material in connection with the
offering and sale of the shares other than the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or other materials, if any, permitted by the Act.
3. Purchase, Sale and Delivery of the Securities and the
Representative's Warrants. (a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters, severally and not jointly, agrees to
purchase from the Company, at a purchase price of $__________ per share, the
number of Firm
10
<PAGE> 11
Securities set forth opposite the name of such Underwriter in Schedule 1 hereto.
One or more certificates in definitive form for the Firm Securities that the
several Underwriters have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Representative
shall request upon notice to the Company at least 48 hours prior to the Firm
Closing Date, shall be delivered by or on behalf of the Company to the
Representative for the respective accounts of the Underwriters, against payment
by or on behalf of the Underwriters of the purchase price therefor by certified
or official bank check or checks drawn upon or by a New York Clearing House bank
and payable in next-day funds to the order of the Company. Delivery of the
documents, certificates and opinions described in Section 7 of this Agreement
and payment for the Firm Securities shall be made at the offices of Parker
Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, 18th Floor, New York,
New York 10036 and delivery of the Firm Securities shall be made at the offices
of Commonwealth Associates, 733 Third Avenue, 11th Floor, New York, New York
10017 at 9:30 a.m., New York time, on __________, 1996, or at such other place,
time or date as the Representative and the Company may agree upon or as the
Representative may determine pursuant to Section 9 hereof, such time and date of
delivery against payment being herein referred to as the "Firm Closing Date".
The Company will make such certificate or certificates for the Firm Securities
available for checking and packaging by the Representative at the offices in New
York, New York of the Company's transfer agent or registrar or Commonwealth
Associates at least 24 hours prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as contemplated
by the Prospectus, (i) the Company hereby grants to the several Underwriters an
option to purchase, severally and not jointly, the Option Securities. The
purchase price to be paid for any Option Securities shall be the same price per
share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 3. The option granted hereby may be exercised as
to all or any part of the Option Securities from time to time within forty-five
(45) days after the date of the Prospectus (or, if such 45th day shall be a
Saturday or Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange is open for trading). The Underwriters shall not be
under any obligation to purchase any of the Option Securities prior to the
exercise of such option. The Representative may from time to time exercise the
option granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate number of Option Securities
as to which the several Underwriters are then exercising the option and the date
and time for delivery of and payment for such Option Securities. Any such date
of delivery shall be determined by the Representative but shall not be earlier
than two business days or later than three business days after such exercise of
the option and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representative and the Company may agree upon or as the
Representative may determine pursuant to Section 9 hereof, is herein called the
"Option Closing Date" with respect to such Option Securities. Upon exercise of
the option as provided herein, the Company shall become obligated to sell to
each of the several Underwriters, and, subject to the terms and conditions
herein set forth, each of the Underwriters (severally and not jointly) shall
become
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<PAGE> 12
obligated to purchase from the Company, the same percentage of the total number
of the Option Securities as to which the several Underwriters are then
exercising the option as such Underwriter is obligated to purchase of the
aggregate number of Firm Securities, as adjusted by the Representative in such
manner as it deems advisable to avoid fractional shares. If the option is
exercised as to all or any portion of the Option Securities, one or more
certificates in definitive form for such Option Securities, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (a) of this Section 3,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) It is understood that you, individually and not as the
Representative, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
(d) On the Firm Closing Date, the Company shall issue and sell
to the Representative the Representative's Warrants, at an aggregate purchase
price of $160, which, upon exercise, shall entitle the holders thereof to
purchase an aggregate of 160,000 shares of Common Stock. The Representative's
Warrants shall be exercisable for a period of four (4) years commencing one (1)
year from the date of the Prospectus at an exercise price per share equal to
130% of the public offering price per share. The Representative's Warrant
Agreement and form of Representative's Warrant shall be in the forms filed as
exhibits to the Registration Statement.
4. Offering by the Underwriters. Upon the Company's authorization of
the release of the Firm Securities, the several Underwriters propose to offer
such securities for sale to the public upon the terms set forth in the
Prospectus. If the option set forth in Section 3(b) of this Agreement is
exercised, then upon the Company's authorization of the release of the Option
Securities, the several Underwriters propose to offer such securities for sale
to the public upon the terms set forth in the Prospectus.
5. Covenants of the Company. Except as otherwise stated below, the
Company covenants and agrees with each of the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as promptly as
possible. If required, the Company will file the Prospectus or any Term Sheet
that constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, the Company (i) will
comply with all requirements imposed upon it by the Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit the
12
<PAGE> 13
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the prospectus, Term Sheet or the
amendment referred to in the second sentence of Section 2(a) hereof, any
amendment or supplement to such prospectus, Term Sheet or any amendment to the
Registration Statement of which the Representative shall not previously have
been advised and furnished with a copy for a reasonable period of time prior to
the proposed filing and as to which filing the Representative shall not have
given its consent. The Company will use its best efforts to prepare and file
with the Commission, in accordance with the rules and regulations of the
Commission, promptly upon request by the Representative or counsel for the
Underwriters, any amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or advisable in connection
with the distribution of the Securities by the several Underwriters, and the
Company will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective by the Commission as promptly as
possible. The Company will advise the Representative, promptly after receiving
notice thereof, of the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any amendment
or supplement thereto has been filed and will provide evidence satisfactory to
the Representative of each such filing or effectiveness.
(b) The Company will advise the Representative, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any amendment thereto or any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Securities for offering
or sale in any jurisdiction, (iii) the institution, threatening or contemplation
of any proceeding for any such purpose or (iv) any request made by the
Commission for amending the Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company will use
its best efforts to prevent the issuance of any such stop order and, if any such
stop order is issued, to obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representative may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities; provided, however, that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (i) the final date
when a prospectus relating to the Securities is required to be delivered under
the Act or (ii) the Option Closing Date, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the
13
<PAGE> 14
Company will promptly notify the Representative thereof and, subject to Section
5(a) hereof, the Company will prepare and file with the Commission, at the
Company's expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
(e) The Company will, without charge, provide (i) to the
Representative and to counsel for the Underwriters a signed copy of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto), (ii) to each other
Underwriter, a conformed copy of such registration statement and each amendment
thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Securities is required to be delivered, under the
Act, as many copies of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Representative may reasonably request;
without limiting the application of clause (iii) of this sentence, the Company,
not later than (A) 6:00 p.m., New York City time, on the date of determination
of the public offering price, if such determination occurred at or prior to
12:00 noon, New York City time, on such date or (B) 6:00 p.m., New York City
time, on the business day following the date of determination of the public
offering price, if such determination occurred after 12:00 noon, New York City
time, on such date, will deliver to the Representative, without charge, as many
copies of the Prospectus and any amendment or supplement thereto as the
Representative may reasonably request for the purposes of confirming orders that
are expected to settle on the Firm Closing Date.
(f) The Company will use its best efforts to have the
Securities listed, subject to notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the Registration Statement.
(g) The Company will furnish to the Representative as early as
practicable prior to the Firm Closing Date and the Option Closing Date, if any,
but not later than two business days prior thereto, a copy of the latest
available unaudited interim financial statements, if any, of the Company and
each of its Subsidiaries which have been read by KPMG Peat Marwick LLP, as
stated in their letter to be furnished pursuant to section 7(d) hereof.
(h) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representative a consolidated
earnings statement of the Company and each of its Subsidiaries that satisfies
the provisions of Section 11(a) of the Act and Rule 158 thereunder.
(i) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.
(j) The Company will not, directly or indirectly, without the
prior written consent of the Representative, offer, issue, sell, offer to sell,
contract to sell, grant any option for sale of or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, grant of any option
to purchase or other sale or disposition) of any securities of the Company for
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<PAGE> 15
a period of 180 days after the date of the Prospectus, except the (i) Firm
Securities, (ii) Option Securities, if any, (iii) Representative's Warrants and
Representative's Securities, and (iv) any grants of options and issuances of
Common Stock upon exercise thereof pursuant to the Company's 1992 Employee,
Director and Consultant Stock Option Plan.
(k) The Company will not for 180 days from the date of the
Prospectus file any registration statement relating to the offer or sale of the
Company's securities (including any registration statement on Form S-8 and Form
S-4).
(l) The Company will obtain the agreements described in
Section 7(f) hereof prior to the Firm Closing Date.
(m) The Company will not, directly or indirectly, (i) take any
action designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(n) The Company will not issue press releases or engage in any
other form of publicity through and including 25 days after the Registration
Statement becomes effective without the prior written consent of the
Representative, other than normal and customary releases issued in the ordinary
course of the Company's business.
(o) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the Option
Closing Date, any rumor, publication or event relating to or affecting the
Company or any of its Subsidiaries shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(p) During the period of five years hereafter, the Company
will furnish to the Representative (i) as soon as available, a copy of each
report of the Company mailed to stockholders or filed with the Commission, and
(ii) from time to time such other information concerning the Company as the
Representative may request.
6. Expenses. The Company will pay all costs and expenses incident to
the performance of the Company's obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (a) the printing or other production of
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<PAGE> 16
documents with respect to the transactions, including any costs of printing the
registration statement originally filed with respect to the Securities and any
amendment thereto, any Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto, this Agreement, the Representative's Warrant
Agreement, the Agreement Among Underwriters, dated ___________ __, 1996, among
the Representative, the Underwriters and certain other parties thereto, the
Selected Dealer Agreement, dated _____________ __, 1996, among the
Representative, the Underwriters and certain other parties thereto, and any blue
sky memoranda, (b) all arrangements relating to the delivery to the Underwriters
of copies of the foregoing documents, (c) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Company, (d) the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Securities, including transfer agent's and
registrar's fees, (e) the qualification of the Securities under state securities
and blue sky laws, including filing fees and fees and disbursements of counsel
for the Underwriters relating thereto in an amount not to exceed $20,000, (f)
the filing fees of the Commission and the National Association of Securities
Dealers, Inc. relating to the Securities, (g) any quotation of the Securities on
the Nasdaq National Market relating to the Securities, (h) any meetings with
prospective investors in the Securities (other than as shall have been
specifically approved by the Representative to be paid for by the Underwriters)
and (i) advertising relating to the offering of the Securities (other than as
shall have been specifically approved by the Representative to be paid for by
the Underwriters). If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 7 hereof is not satisfied, because this Agreement is terminated
pursuant to Section 11 hereof or because of any failure, refusal or inability on
the part of the Company to perform all obligations and satisfy all conditions on
its or their part to be performed or satisfied hereunder other than by reason of
a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
counsel fees and disbursements) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities. The Company
shall not in any event be liable to any of the Underwriters for the loss of
anticipated profits from the transactions covered by this Agreement.
7. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representative's sole discretion, to the accuracy of the
representations and warranties of the Company contained herein as of the date
hereof and as of the Firm Closing Date, as if made on and as of the Firm Closing
Date, to the accuracy of the statements of the Company's officers made pursuant
to the provisions hereof, to the performance by the Company of its covenants and
agreements hereunder and to the following additional conditions:
(a) If the Registration Statement or any amendment thereto
filed prior to the Firm Closing Date has not been declared effective as of the
time of execution hereof, the Registration Statement or such amendment shall
have been declared effective not later than 11:00 a.m., New York time, on the
date on which the amendment to the Registration Statement originally filed with
respect to the Securities or to the Registration Statement, as the case may be,
16
<PAGE> 17
containing information regarding the public offering price of the Securities has
been filed with the Commission, or such later time and date as shall have been
consented to by the Representative; if required, the Prospectus or any Term
sheet that constitutes a part thereof and any amendment or supplement thereto
shall have been filed with the Commission in the manner and within the time
period required by Rules 434 and 424(b) under the Act; no stop order suspending
the effectiveness of the Registration Statement or any amendment thereto shall
have been issued, and no proceedings for that purpose shall have been instituted
or threatened or, to the knowledge of the Company or the Representative, shall
be contemplated by the Commission; and the Company shall have complied with any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise).
(b) The Representative shall have received an opinion, dated
the Firm Closing Date, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
counsel for the Company, to the effect that:
(i) The Company is a corporation duly organized,
validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus, and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct
of its business requires such registration or qualification, except
where the failure so to register or qualify would not result in a
material adverse change in the condition (financial or other),
management, business prospects, properties, net worth or results of
operations of the Company; and the Company has full power (corporate
and other) to enter into this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants and to carry out all the
terms and provisions hereof and thereof to be carried out by it.
(ii) All the Company's subsidiaries (collectively,
the "Subsidiaries") are listed in an exhibit to the Registration
Statement. Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
so to register or qualify would not result in a material adverse change
in the condition (financial or other), management, business prospects,
properties, net worth or results of operations of such Subsidiary; all
the outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity, or other encumbrance; and,
except as set forth in the Prospectus, there are no outstanding
subscriptions, rights, warrants, options,
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<PAGE> 18
calls, convertible securities or commitments of sale, or liens related
to or entitling any person to purchase or otherwise to acquire shares
of the capital stock of, or other ownership interest in, each of the
Subsidiaries; other than capital stock, there are no other ownership
interests in any of the Subsidiaries. Other than with respect to the
Subsidiaries, the Company does not control, directly or indirectly, any
corporation, partnership, joint venture, association or other business
organization.
(iii) the Company has an authorized, issued and
outstanding capitalization as set forth in the Prospectus; all of the
issued shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable, have been
issued in compliance with all applicable federal and state securities
laws and were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities; the
Firm Securities have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be validly issued,
fully paid and nonassessable; the Securities have been duly included
for trading on the Nasdaq National Market; no holders of outstanding
shares of capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Securities;
except as set forth in the Prospectus, no holders of securities of the
Company are entitled to have such securities registered under the
Registration Statement; and the capital stock of the Company conforms
to the description thereof contained in the Prospectus.
(iv) the execution and delivery of the
Representative's Warrant Agreement and the Representative's Warrants
have been duly authorized by all necessary corporate action of the
Company and have been duly executed and delivered by the Company; the
Representative's Warrant Agreement and the Representative's Warrants
are 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, enforceable against the
Company in accordance with their terms; the Representative's Securities
have been duly authorized by all necessary corporate action of the
Company and, when issued and delivered to and paid for pursuant to the
Representative's Warrant Agreement, will be validly issued, fully paid
and nonassessable; and no holders of outstanding shares of capital
stock of the Company are entitled as such to any preemptive or other
rights to subscribe for any of the Representative's Securities.
(v) the issuance and sale of the Representative's
Securities to the Representative by the Company pursuant to the
Representative's Warrant Agreement, the compliance by the Company with
other provisions of the Representative's Warrant Agreement and the
consummation of the other transactions therein contemplated do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or blue sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any
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<PAGE> 19
indenture, mortgage, deed of trust, lease or other instrument, known to
such counsel, to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of
their respective properties are bound, or the charter documents or
by-laws of the Company or any of its Subsidiaries, or any statute or
any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator known to such counsel and
applicable to the Company or any of its Subsidiaries;
(vi) the statements set forth under the heading
"Description of Securities" in the Prospectus, insofar as such
statements purport to summarize certain provisions of the capital stock
of the Company, provide a fair summary of such provisions; and the
statements set forth under the headings "Management's Discussion and
Analysis of Financial Condition and Results of Operations", "Business",
"Management", "Principal Stockholders", "Certain Relationships and
Related Transactions", and "Description of Securities" in the
Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, provide a
fair summary of such legal matters, documents and proceedings;
(vii) the execution and delivery of this Agreement
have been duly authorized by all necessary corporate action of the
Company and this Agreement has been duly executed and delivered by the
Company;
(viii) (A) no legal or governmental proceedings are
pending to which the Company or any of its Subsidiaries is a party or
to which the property of the Company or any of its Subsidiaries are
subject that are required to be described in the Registration Statement
or the Prospectus and are not described therein, and, to the best
knowledge of such counsel, no such proceedings have been threatened
against the Company or any of its Subsidiaries with respect to any of
their respective properties and (B) no contract or other document is
required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
that is not described therein or filed as required;
(ix) Each of the Company and its Subsidiaries
possesses adequate Permits issued by the appropriate federal, state and
local regulatory authorities necessary to conduct their businesses as
described in the Registration Statement and the Prospectus, and each of
the Company and its Subsidiaries is and has been doing business in all
material respects in compliance with all necessary Permits and all
federal, state and local laws, rules and regulations; and neither the
Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
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 other), management, business
prospects, properties, net worth or results of operations of the
Company or any of its Subsidiaries. The disclosure in the Registration
Statement and the Prospectus concerning the effects of federal, state
and local laws, rules and regulations on the business
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<PAGE> 20
of the Company and each of its Subsidiaries as currently conducted and
as contemplated did not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(x) the issuance, offering and sale of the Firm
Securities to the Underwriters by the Company pursuant to this
Agreement, the compliance by the Company with the other provisions of
this Agreement and the consummation of the other transactions herein
contemplated do not (A) require the consent, approval, authorization,
registration or qualification of or with any governmental authority,
except such as have been obtained and such as may be required under
state securities or blue sky laws, or (B) conflict with or result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
lease or other agreement or instrument, known to such counsel, to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective
properties are bound, or the charter documents or by-laws of the
Company or any of its Subsidiaries, or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental
authority or any arbitrator known to such counsel and applicable to the
Company or any of its Subsidiaries;
(xi) the Registration Statement is effective under
the Act; any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434 and
424(b); and no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
and
(xii) the Registration Statement originally filed
with respect to the Securities and each amendment thereto and the
Prospectus (in each case, other than the financial statements and other
financial information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the rules and regulations of the
Commission thereunder.
Such counsel shall also state that they have no reason to believe that the
Registration Statement, as of its effective date, contained 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 not misleading or that the
Prospectus, as of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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<PAGE> 21
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representative shall have received an opinion, dated
the Firm Closing Date, of Parker Chapin Flattau & Klimpl, LLP, counsel for the
Underwriters, with respect to the issuance and sale of the Firm Securities, the
Registration Statement and the Prospectus, and such other related matters as the
Representative may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(d) The Representative shall have received from KPMG Peat
Marwick LLP, a letter or letters dated, respectively, the date hereof and the
Firm Closing Date, in form and substance satisfactory to the Representative, to
the effect that:
(i) they are independent accountants with respect to
the Company and its Subsidiaries within the meaning of the Act and the
applicable rules and regulations thereunder;
(ii) in their opinion, the audited financial
statements and schedules examined by them and included in the
Registration Statement and the Prospectus comply in form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations;
(iii) on the basis of their limited review in
accordance with standards established by the American Institute of
Certified Public Accountants of any interim unaudited financial
statements of the Company and its Subsidiaries as indicated in their
report included in the Registration Statement and the Prospectus,
carrying out certain specified procedures (which do not constitute an
examination made in accordance with generally accepted auditing
standards) that would not necessarily reveal matters of significance
with respect to the comments set forth in this paragraph (iii), a
reading of the minute books of the shareholders, the board of directors
and any committees thereof of the Company and of each of its
Subsidiaries and inquiries of certain officials of the Company and of
each of its Subsidiaries who have responsibility for financial and
accounting matters, nothing came to their attention that caused them to
believe that:
(A) the unaudited financial statements of the Company
included in the Registration Statement and the Prospectus do
not comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations thereunder or are not in
conformity with generally
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<PAGE> 22
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement and the
Prospectus; and
(B) at a specific date not more than five business
days prior to the date of such letter, there were any changes
in the capital stock or long-term debt of the Company or any
of its Subsidiaries or any decreases in net current assets or
stockholders' equity of the Company or any of its
Subsidiaries, in each case compared with amounts shown on the
March 31, 1996 unaudited balance sheet included in the
Registration Statement and the Prospectus, or for the period
from April 1, 1996 to such specified date there were any
decreases, as compared with the corresponding period in the
preceding year, in net sales, cost of goods sold, selling
expenses, general and administrative expenses, operating
income, interest expense, income before income taxes,
provision for income taxes, net income or net income per share
of the Company or any of its Subsidiaries, except in all
instances for changes, decreases or increases set forth in
such letter; and
(iv) they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information that are derived from the general
accounting records of the Company and each of its Subsidiaries and are
included in the Registration Statement and the Prospectus under the
captions "Prospectus Summary", "Risk Factors", "Capitalization", "Price
Range of Common Equity and Dividend Policy", "Selected Financial Data",
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business", "Management", "Principal
Stockholders" and "Certain Relationships and Related Transactions",
have compared such amounts, percentages and financial information with
such records of the Company and each of its Subsidiaries and with
information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company and each of its Subsidiaries as to the
significance thereof, unless the Representative deems such explanation
unnecessary, and (B) such changes, decreases or increases do not, in the sole
judgment of the Representative, make it impractical or inadvisable to proceed
with the purchase and delivery of the Securities as contemplated by the
Registration Statement, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(e) The Representative shall have received a certificate,
dated the Firm Closing Date, of Mr. William G. McLendon, President and Chief
Executive Officer of the Company and
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<PAGE> 23
Mr. Alan MacDonald, Vice President, Finance and Administration of the Company to
the effect that:
(i) the representations and warranties of the Company
in this Agreement are true and correct as if made on and as of the Firm
Closing Date; the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and the Prospectus, as amended or supplemented as
of the Firm Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and the Company has performed all
covenants and agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or threatened
or, to the best of the Company's knowledge, are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Company nor any of its Subsidiaries have sustained any
material loss or interference with their business or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse
change, or any development involving a prospective material adverse
change, in the condition (financial or otherwise), management, business
prospects, net worth or results of operations of the Company or any of
its Subsidiaries except in each case as described in or contemplated by
the Prospectus (exclusive of any amendment or supplement thereto); and
(f) The Representative shall have received from each person
who is an officer, director or beneficial owner of 5% or more of the Company's
outstanding Common Stock, an agreement to the effect that such person will not
offer, issue, sell, contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any securities of the Company or
other rights to purchase any securities of the Company, other than the Option
Securities, if any, for a period of 180 days from the date of the Prospectus
without the prior written consent of the Representative.
(g) On or before the Firm Closing Date, the Representative and
counsel for the Underwriters shall have received such further certificates,
documents or other information as they may have reasonably requested from the
Company.
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<PAGE> 24
(h) Prior to the commencement of the offering of the
Securities, the Securities shall have been included for trading on the Nasdaq
National Market.
(i) On or before the Firm Closing Date, the Company shall have
executed and delivered to the Representative the Representative's Warrant
Agreement in the form filed as an exhibit to the Registration Statement, and the
Representative's Warrants, in the form filed as an exhibit to the Registration
Statement, in such denominations and to such designees as shall have been
provided to the Company.
All opinions, certificates, letters and documents delivered
pursuant to this Agreement will comply with the provisions hereof only if they
are reasonably satisfactory in all material respects to the Representative and
counsel for the Underwriters. The Company shall furnish to the Representative
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representative and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to
purchase and pay for any Option Securities shall be subject, in their
discretion, to each of the foregoing conditions to purchase the Firm Securities,
except that all references to the Firm Securities and the Firm Closing Date
shall be deemed to refer to such Option Securities and the related Option
Closing Date, respectively.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement
made by the Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the
Securities under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange
(each an "Application"),
(iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any
24
<PAGE> 25
amendment or supplement thereto, or any Application a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or
(iv) any untrue statement or alleged untrue statement
of any material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films, tape recordings,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representative specifically for use therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of the Underwriter
or Underwriters purchasing, in the aggregate, more than fifty percent (50%) of
the Securities, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Underwriter or
any person who controls any such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to such claim, action, suit
or proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling persons
from all liability arising out of such claim, action, suit or proceeding.
(b) Each Underwriter will, severally and not jointly,
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities to which
the Company, any such director or officer of the Company or any such controlling
person of the Company may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application, necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with
25
<PAGE> 26
written information furnished to the Company by any Underwriter through the
Representative specifically for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company, any such director, officer
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability or any action in respect thereof. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Representative in the case of
paragraph (a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 8 is unavailable or
insufficient, for any reason, to hold
26
<PAGE> 27
harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. 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 proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the parties
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 the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations
referred to above in this paragraph (d). Notwithstanding any other provision of
this paragraph (d), no Underwriter shall be obligated to make contributions
hereunder that in the aggregate exceed the total public offering price of the
Securities purchased by such Underwriter under this Agreement, less the
aggregate amount of any damages that such Underwriter has otherwise been
required to pay in respect of the same or any substantially similar claim, and
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. The Underwriters' obligations to
contribute hereunder are several in proportion to their respective underwriting
obligations and not joint, and contributions among Underwriters shall be
governed by the provisions of the Agreement Among Underwriters. For purposes of
this paragraph (d), each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
9. Default of Underwriters. If one or more Underwriters default in
their obligations to purchase Firm Securities or Option Securities hereunder and
the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten
27
<PAGE> 28
percent or less of the aggregate number of Firm Securities or Option Securities
to be purchased by all of the Underwriters at such time hereunder, the other
Underwriters may make arrangements satisfactory to the Representative for the
purchase of such Securities by other persons (who may include one or more of the
non-defaulting Underwriters, including the Representative), but if no such
arrangements are made by the Firm Closing Date or the related Option Closing
Date, as the case may be, the other Underwriters shall be obligated severally in
proportion to their respective commitments hereunder to purchase the Firm
Securities or Option Securities that such defaulting Underwriter or Underwriters
agreed but failed to purchase. If one or more Underwriters so default with
respect to an aggregate number of Securities that is more than ten percent of
the aggregate number of Firm Securities or Option Securities, as the case may
be, to be purchased by all of the Underwriters at such time hereunder, and if
arrangements satisfactory to the Representative are not made within 36 hours
after such default for the purchase by other persons (who may include one or
more of the non-defaulting Underwriters, including the Representative) of the
Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company other than as provided in Section 10 hereof. In the event of any default
by one or more Underwriters as described in this Section 9, the Representative
shall have the right to postpone the Firm Closing Date or the Option Closing
Date, as the case may be, established as provided in Section 3 hereof for not
more than seven business days in order that any necessary changes may be made in
the arrangements or documents for the purchase and delivery of the Firm
Securities or Option Securities, as the case may be. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers and the
several Underwriters set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, any Underwriter or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated with respect to
the Firm Securities or any Option Securities in the sole discretion of the
Representative by notice to the Company given prior to the Firm Closing Date or
the related Option Closing Date, respectively, in the event that the Company
shall have failed, refused or been unable to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Firm Closing Date or such Option Closing Date,
respectively,
(i) the Company or any of its Subsidiaries shall
have, in the sole judgment of the Representative, sustained any
material loss or interference with their business or properties from
fire, flood, hurricane, accident or other calamity, whether or
28
<PAGE> 29
not covered by insurance, or from any labor dispute or any legal or
governmental proceeding or there shall have been any material adverse
change, or any development involving a prospective material adverse
change (including without limitation a change in management or control
of the Company), in the condition (financial or other), managment,
business prospects, properties, net worth or results of operations of
the Company or any of its Subsidiaries, except in each case as
described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
(ii) trading in the Common Stock shall have been
suspended by the Commission or the Nasdaq National Market or trading in
securities generally on the New York Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on such exchange or market system;
(iii) a banking moratorium shall have been declared
by New York, Massachusetts or United States authorities; or
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign
power, (B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or (C) any other calamity or
crisis or material adverse change in general economic, political or
financial conditions having an effect on the U.S. financial markets
that, in the sole judgment of the Representative, makes it impractical
or inadvisable to proceed with the public offering or the delivery of
the Securities as contemplated by the Registration Statement, as
amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by Underwriters. The statements set forth in
the last paragraph on the front cover page and under the heading "Underwriting"
in any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representative to the Company for the purposes of
Sections 2(b) and 8 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
13. Notices. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Commonwealth Associates, 733
Third Avenue, 11th Floor, New York, New York 10017; and if sent to the Company,
shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to the Company at 67 South Bedford Street, Burlington, MA
01803, Attention: William G. McLendon, President.
29
<PAGE> 30
14. Successors. This Agreement shall inure to the benefit of and shall
be binding upon the several Underwriters, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company contained in Section 8 of this Agreement shall
also be for the benefit of any person or persons who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Underwriters contained in Section 8 of this
Agreement shall also be for the benefit of the directors of the Company, the
officers of the Company who have signed the Registration Statement and any
person or persons who control the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of Securities from any
Underwriter shall be deemed a successor because of such purchase.
15. Applicable Law. The validity and interpretation of this Agreement,
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
30
<PAGE> 31
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and each
of the several Underwriters.
Very truly yours,
SIGHT RESOURCE CORPORATION
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
COMMONWEALTH ASSOCIATES
By: COMMONWEALTH ASSOCIATES MANAGEMENT
COMPANY, INC., General Partner
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
For itself and as Representative.
31
<PAGE> 32
SCHEDULE 1
UNDERWRITERS; FIRM SECURITIES
<TABLE>
<CAPTION>
Number of Firm
Securities to
Underwriter be Purchased
- ----------- ------------
<S> <C>
Commonwealth Associates...........................
---------
Total............................................. 1,600,000
</TABLE>
32
<PAGE> 33
SCHEDULE 2
UNDERWRITERS; OPTION SECURITIES
<TABLE>
<CAPTION>
Number of Option
Securities to
Underwriter be Purchased
- ----------- ------------
<S> <C>
Commonwealth Associates.......................
-------
Total......................................... 240,000
</TABLE>
33
<PAGE> 1
EXHIBIT 4.6
REPRESENTATIVE'S WARRANT AGREEMENT
BETWEEN
SIGHT RESOURCE CORPORATION
AND
COMMONWEALTH ASSOCIATES
---------------
Dated as of _______ __, 1996
---------------
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT dated as of ________, 1996
between SIGHT RESOURCE CORPORATION, a Delaware corporation (the "Company"), and
COMMONWEALTH ASSOCIATES ("Commonwealth").
The Company proposes to sell to Commonwealth common stock purchase
warrants (the "Warrants") to purchase an aggregate of 160,000 shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), in connection with a public offering by the Company, pursuant to a
registration statement (the "Registration Statement") on Form S-1 (File No.
333-03219) filed by the Company with the Securities and Exchange Commission, of
1,600,000 shares of Common Stock (the "Offering").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Company and Commonwealth hereby agree as
follows:
1. Issuance of Warrants; Form of Warrant; Execution of Warrants.
The Company shall issue, sell and deliver the Warrants to Commonwealth or, at
Commonwealth's direction, to its bona fide officers or designees, for an
aggregate purchase price of $160.00, concurrently with the closing (the
"Closing") under the underwriting agreement dated _________, 1996 between the
Company and Commonwealth (the "Underwriting Agreement") relating to the
Offering. The Warrants, together with the purchase and assignment forms to be
printed on the reverse thereof or attached thereto, shall be substantially in
the form of Exhibit A attached hereto. The Warrants shall be executed on behalf
of the Company by the manual or facsimile signature of its present or any future
Chairman or President, under its corporate seal affixed or in facsimile, and
attested by the manual or facsimile signature of its Secretary or Assistant
Secretary.
2. Registration. The Warrants shall be numbered and shall be
registered in a Warrant register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant (the "Holder") as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrants on the part of any
other person, and shall not be liable for any registration or transfer of
Warrants that are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with such knowledge of such facts that its
participation therein amounts to bad faith. The Warrants shall be registered
initially in the name of "Commonwealth Associates" in such denominations as
Commonwealth may request in writing to the Company; provided, however, that
prior to the Closing, Commonwealth may designate that the Warrants be issued in
varying amounts directly to its bona fide officers or designees and not to
Commonwealth. Such designation will only be made by Commonwealth if it
determines such issuances would not violate the interpretation of the Board of
Governors of the National Association of Securities Dealers, Inc. (the "NASD")
relating to the review of corporate financing arrangements.
-2-
<PAGE> 3
3. Transfer of Warrants.
3.1 The Warrants may not be sold, assigned, transferred, pledged or
hypothecated for a period of one year after the effective date of the
Registration Statement, except that they may be assigned, in whole or in part,
to any successor, officer, employee or partner of Commonwealth or to officers,
employees or partners of any such successor or partner. The Warrants shall be
transferable only on the books of the Company maintained at its principal
executive office (the "Company Office") upon delivery thereof duly indorsed by
the Holder or by the Holder's duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or a copy thereof, duly certified, shall be deposited
and remain with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited and remain with
the Company in its discretion.
3.2 Upon any registration of transfer, the Company shall deliver a
new Warrant or Warrants to the persons entitled thereto. The Warrants may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Holder or Holders thereof
shall furnish to the Company evidence of compliance with the Securities Act of
1933 (the "Act") in accordance with the provisions of section 11 of this
agreement.
4. Exercise of Warrants; Term of Warrants.
4.1 Each Warrant shall entitle the Holder thereof to purchase from
the Company one share of Common Stock at a purchase price of $_____ per share or
at such adjusted purchase price as may be established from time to time pursuant
to the provisions of section 8 hereof, payable in full at the time of exercise
of the Warrant. Except as the context otherwise requires, the term "Exercise
Price" as used in this agreement shall mean the purchase price of one share of
Common Stock, reflecting all appropriate adjustments made in accordance with
section 8 hereof. Each Warrant may be exercised for a four-year period
commencing on the first anniversary of the effective date of the Registration
Statement. The term "Expiration Date" as used in this agreement shall mean the
latest time and date at which the Warrants may be exercised. After the
Expiration Date, any unexercised Warrants shall be void and all rights of
Holders with respect thereto shall cease.
4.2 During the period specified in and subject to the provisions of
this section 4, Warrants may be exercised by their surrender at the Company
Office with the election-to-purchase form set forth on (or attached to) the
Warrant duly completed and executed, accompanied by payment in full to the
Company of the aggregate Exercise Price in effect at the
-3-
<PAGE> 4
time of the exercise, together with any taxes payable pursuant to section 5
hereof, for each share of Common Stock with respect to which Warrants are being
exercised, which amounts shall be paid in full, in United States currency, by a
bank cashier's check or money order payable to the order of the Company or by
wire transfer to an account designated by the Company. Within five (5) business
days after the exercise of any Warrants, the Company shall issue a certificate
or certificates for the number of full Shares to which the Holder is entitled,
registered in accordance with the instructions set forth in the election to
purchase, together with cash as provided in section 9 of this agreement payable
in respect of fractional shares. All Shares shall be duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights, and free from
all taxes, liens, and charges. Certificates representing such Shares shall be
delivered by the Company in such names and denominations as are required for
delivery to, or in accordance with the instructions of, the Holder.
4.3 Each person in whose name any such certificate for Shares is
issued shall for all purposes be deemed to have become the holder of record of
the Shares represented thereby on the date upon which such Warrants were
surrendered for exercise, accompanied by payment of the Exercise Price as
aforesaid, irrespective of the date of issuance or delivery of such certificate
for Shares; provided, however, that if, at the date of the surrender of such
Warrants and payment of the Exercise Price, the transfer books for the Common
Stock or other class of stock purchasable upon the exercise of such Warrants
shall be closed, the certificates for the Shares or for shares of such other
class of stock in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Expiration Date) and, until such date, the Company shall be under
no duty to deliver any certificate for such Shares or for shares of such other
class of stock; provided further, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than twenty (20) days.
4.4 The Warrants shall be exercisable, at the election of the
Holders thereof, in full or from time to time in part and, in the event that
less than all of the surrendered Warrants are exercised, the Company shall
execute and mail, by first-class mail, within thirty (30) days of the date upon
which the Warrants were exercised, to the Holder of such Warrants or such other
person as shall be designated in the election to purchase, a new Warrant
representing the number of full Warrants not exercised. In no event shall a
fraction of a Warrant be exercised, and the Company shall distribute no
fractions of Warrants under this or any other section of this agreement.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Shares upon the exercise of any
Warrants, but any transfer taxes that may be payable in connection with the
issuance of Warrants or certificates for Shares in any name other than that of
the Holder of the Warrant surrendered shall be paid by such Holder.
6. Mutilated or Missing Warrants. In case any of the Warrants shall
be mutilated, lost, stolen, or destroyed, the Company shall issue and deliver in
exchange and substitution for
-4-
<PAGE> 5
and upon cancellation of the mutilated Warrant, or in lieu of and substitution
for the lost, stolen, or destroyed Warrant, a new Warrant of like tenor and
representing an equivalent right or interest; but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction of
such Warrant. Applicants for such substitute Warrants shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
7. Reservation of Shares. The Company shall at all times reserve
and keep available for issuance upon the exercise of Warrants a number of its
authorized but unissued shares of Common Stock that will be sufficient to permit
the exercise in full of all outstanding Warrants. American Stock Transfer &
Trust Company, the transfer agent for the Company's Common Stock (the "Transfer
Agent"), and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of Warrants, shall be irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued shares as shall be requisite for such purpose. The Company will keep a
copy of this agreement on file with the Transfer Agent and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of Warrants. The Company shall supply the Transfer Agent (and any such
subsequent transfer agent) with duly executed stock certificates for such
purpose and will provide or otherwise make available any cash that may be
payable as provided in section 9 hereof. All Warrants surrendered upon the
exercise thereof shall be canceled and such canceled Warrants shall constitute
sufficient evidence of the number of shares of Common Stock (or other shares of
capital stock) that have been issued upon the exercise of the Warrants. After
the Expiration Date, no shares shall be subject to reservation in respect of any
unexercised Warrants.
8. Adjustments.
8.1 Adjustment of Number of Shares. The number of shares of Common
Stock that the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying:
(a) the number of shares of Common Stock that would
otherwise (but for the provisions of this section 8) be issuable
upon such exercise, as designated by the holder hereof pursuant to
section 4; by
(b) a fraction of which the numerator is $_____ and the
denominator is the Exercise Price in effect on the date of such
exercise;
provided, however no adjustment pursuant to this section 8 shall occur as a
result of (i) shares of Common Stock issued pursuant to the Underwriting
Agreement (including the over-allotment shares referred to therein), and (ii) up
to ________ shares of Common Stock issued upon the exercise of options granted
pursuant to the Company's 1992 Employee, Director and Consultant Stock Option
Plan (collectively, the "Excluded Issuances").
-5-
<PAGE> 6
8.2 Adjustment of Exercise Price.
8.2.1 Initial Exercise Price. The Exercise Price, which initially
will be $_____, shall be adjusted and readjusted from time to time as provided
in this section 8 and, as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is required by this section
8; provided, however there shall be no adjustment of the Exercise Price due to
the Excluded Issuances.
8.2.2 Issuance of Additional Shares of Common Stock. In case the
Company, at any time or from time to time after ________, 1996 (the "Effective
Date"), shall issue or sell Additional Shares of Common Stock (as defined
below), including Additional Shares of Common Stock deemed to be issued pursuant
to section 8.3 or section 8.4, without consideration or for a consideration per
share less than either the Exercise Price or the Fair Market Value (as defined
below) of the shares of Common Stock outstanding immediately prior to such issue
or sale, then, and in each such case, the Exercise Price shall be reduced,
subject to section 8.8, concurrently with such issue or sale, to a price
(calculated to the nearest cent) determined by multiplying such Exercise Price
by a fraction of which
(a) the numerator shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
plus (ii) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of
Additional Shares of Common Stock so issued or sold would purchase
at the lesser of such Exercise Price or Fair Market Value
immediately prior to such issue or sale, and
(b) the denominator shall be the number of shares of
Common Stock outstanding immediately after such issue or sale.
For the purposes of this section 8.2.2, (x) immediately after any Additional
Shares of Common Stock shall be deemed to be issued pursuant to section 8.3 or
section 8.4, such Additional Shares shall be deemed to be outstanding, and (y)
treasury shares shall not be deemed to be outstanding. "Additional Shares of
Common Stock" shall mean all shares (including treasury shares) of Common Stock
issued or sold (or pursuant to sections 8.3 or 8.4, deemed to be issued) by the
Company after the Effective Date hereof, whether or not subsequently reacquired
or retired by the Company, other than shares of Common Stock issued upon the
exercise of the Warrants. "Fair Market Value", with respect to shares of Common
Stock outstanding at any time shall be determined as follows:
(a) If a public market exists for the Common Stock, the
Fair Market Value of the Common Stock shall be (i) the closing
price of the Common Stock on the Business Day prior to such
issuance on the National Market System of the National Association
of Securities Dealers Automated Quotations System ("NASDAQ") or on
the principal national securities exchange on which the Common
Stock is at the time
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traded or (ii) if there is not such a sale on such day or if the
Common Stock is not at that time traded on the National Market
System of the NASDAQ or on a national securities exchange, the
average of the lowest closing bid and highest closing asked prices
on such day as reported by the National Association of Securities
Dealers (or any successor organization); or
(b) If a public market for the Common Stock does not
exist, the Fair Market Value of the Common Stock shall be
determined in good faith by the Board of Directors promptly after
the issuance of any Additional Shares of Common Stock or the
occurrence of any other event or the existence of any other
circumstance as a result of which the Fair Market Value of the
Common Stock would be required for any provision of this agreement
and the Company shall promptly deliver to each Holder a certificate
of the Secretary of the Company setting forth the amount of the
Fair Market Value of the Common Stock and certifying that the
amount was determined by the Board of Directors of the Company. If
any Holder disagrees with the Fair Market Value set forth in that
certificate, such Holder may, together with any other Holders who
so disagree, engage an independent investment bank or firm of
independent public accountants to act as appraiser, the expense of
which shall be shared equally by such Holder or Holders, to
determine the Fair Market Value of the Common Stock, and such
Holder shall deliver such appraisal to the Company within 30 days
after the date of delivery of the certificates referenced to above.
Within five days after delivery to the Company of such appraisal,
the appraiser engaged by the Holder and a person designated by the
Board (the expense of which shall be borne by the Company) shall
meet in order to resolve any questions or differences with respect
to the Fair Market Value of the Common Stock. If such persons agree
on a Fair Market Value of the Common Stock, such Fair Market Value
shall be the Fair Market Value. If no such agreement is reached,
the Fair Market Value shall be determined within ten days after
such meeting by an appraiser who shall be selected by the appraiser
engaged by the Holder and the person designated by the Board (or,
if they do not agree on an appraiser within ten days, another
independent investment bank or firm of independent public
accountants to act as appraiser selected by the American
Arbitration Association), the expense of which shall be shared
equally by such Holder or Holders, on the one hand, and the
Company, on the other hand, and the determination of that third
appraiser shall be conclusive and binding on both the Company and
the Holders. In determining the Fair Market Value of any share of
Common Stock, all Warrants shall be treated as if they had been
exercised for the number of shares of Common Stock issuable upon
their exercise, and the Fair Market Value of any Warrant shall be
equal to the Fair Market Value of the Shares of Common Stock
issuable upon the exercise of such Warrant less the exercise price
of such Warrant.
8.2.3 Dividends and Distributions. In case the Company at any time
or from time to time after the Effective Date shall declare, order, pay or make
a dividend or other distribution on Common Stock (including, without limitation,
any distribution of stock or other securities,
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property or options by way of dividend, spin-off, reclassification, corporate
rearrangement, and any redemption or acquisition of stock or options or other
securities), then, and in each such case, the Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution shall be reduced, subject to section 8.8,
effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Exercise Price
by a fraction of which
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date
minus the value of such dividends or other distributions (as
determined in good faith by the Board of Directors of the Company)
applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in effect
immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this section
8.2.3 for a dividend payable in Additional Shares of Common Stock or in Options
(as defined below) for Common Stock, or a dividend payable in cash or other
property and declared out of the earned surplus (i.e., retained earnings, when
and if the Company has any) of the Company (excluding any portion thereof
resulting from a reevaluation of property). For purposes of the foregoing, a
dividend payable other than in cash shall be considered payable out of earned
surplus only to the extent that such earned surplus is charged an amount equal
to the fair value of such dividend at the time of declaration as determined in
good faith by the Board of Directors of the Company. "Options" shall mean
rights, options or warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible Securities. "Convertible
Securities" shall mean any shares (other than Common Stock), evidences of
indebtedness or other securities directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock.
8.3 Treatment of Options and Convertible Securities. In case the
Company, at any time or from time to time after the Effective Date shall issue,
sell, grant or assume, or fix a record date for the determination of holders of
any class of securities entitled to receive, any Options or Convertible
Securities, then, and in each such case, the maximum number of Additional Shares
of Common Stock issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities shall be deemed to be issued for
purposes of section 8.2.2 as of the time of such issue, sale, grant or
assumption, or, in case such a record date shall have been fixed, as of the
close of business on such record date; provided, however, that such Additional
Shares of Common Stock shall not be deemed to be issued if the consideration per
share of such shares, as determined pursuant to section 8.5, would be equal to
or greater than the greater of the Exercise Price or the Fair Market Value of
the shares of Common Stock on the Business Day (as defined below) on which such
Additional Shares of Common Stock shall be deemed to be issued; and provided
further, however, that in each such case in which Additional Shares of Common
Stock would have been deemed to be issued,
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<PAGE> 9
(a) no further Additional Shares of Common Stock shall be
deemed to be issued upon the subsequent issue or sale of Common
Stock or any other securities of the Company pursuant to the
exercise of such Options or the conversion or exchange of such
Convertible Securities;
(b) if such Options or Convertible Securities by their
terms shall provide in any manner for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Exercise Price computed upon
the original issue, sale, grant or assumption of such Options or
Convertible Securities (or upon the fixing of the record date with
respect thereto), and any subsequent adjustments in such Exercise
Price, shall, upon any such increase in consideration or decrease
in the number of Additional Shares of Common Stock issuable
becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of
conversion or exchange under such Convertible Securities, as are
outstanding at the time such increase or decrease becomes
effective;
(c) upon the expiration of any such Options or of the
rights of conversion or exchange under any such Convertible
Securities which shall not have been exercised, or upon purchase by
the Company and cancellation or retirement of any such Options
which shall not have been exercised or of any such Convertible
Securities the rights of conversion or exchange under which shall
not have been exercised, the Exercise Price computed upon the
original issue, sale, grant or assumption of such Options or
Convertible Securities (or upon the fixing of the record date with
respect thereto), and any subsequent adjustments in such Exercise
Price, shall, upon such expiration, cancellation or retirement, be
recomputed as if:
(i) in the case of Options for Common Stock or of
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional Shares of
Common Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities and the consideration received
thereupon was
(A) in the case of Options, an amount
equal to (x) the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, plus (y) the
consideration actually received by the Company
upon exercise of any such Options, minus (z) the
consideration paid by the Company for any purchase
of such Options which were not exercised, or
(B) in the case of Convertible
Securities, an amount equal to (x) the
consideration actually received by the Company for
the issue,
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<PAGE> 10
sale, grant or assumption of all such Convertible
Securities (unless theretofore taken into account
pursuant to clause (ii) below) which were actually
converted or exchanged, plus (y) the consideration
actually received by the Company upon such
conversion or exchange, minus (z) the
consideration paid by the Company for any purchase
of such Convertible Securities the rights of
conversion or exchange under which were not
exercised, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such Options
were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received
by the Company for the Additional Shares of Common Stock
deemed to have then been issued was an amount equal to (x)
the consideration actually received by the Company for the
issue, sale or grant of all such Options, plus (y) the
consideration deemed to be received by the Company
(pursuant to section 8.5) upon the issue or sale of the
Convertible Securities with respect to which such Options
were actually exercised, minus (z) the consideration paid
by the Company for any purchase of such Options that were
not exercised; and
(d) no readjustment pursuant to subdivision (b) or (c)
above shall have the effect of increasing the Exercise Price by an
amount in excess of the amount of the adjustment thereof originally
made pursuant to the issue, sale, grant or assumption of such
Options or Convertible Securities.
"Business Day" shall mean any day of the year which is not a
Saturday, Sunday or a day on which banks are required or authorized to close in
the State of New York.
8.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the Effective Date shall fix a
record date for the determination of holders of any class of securities entitled
to receive any dividend or other distribution on any class of stock of the
Company payable in Common Stock, or shall otherwise effect any subdivision of
the outstanding shares of Common Stock into a greater number of shares of Common
Stock, then, and in each such case, Additional Shares of Common Stock shall be
deemed to be issued (a) in the case of any such dividend or other distribution,
immediately after the close of business on such record date, or (b) in the case
of any such subdivision, at the close of business on the day immediately prior
to the day upon which such corporate action shall have become effective.
8.5 Computation of Consideration. For the purposes of this
section 8:
(a) The consideration for any Additional Shares of Common
Stock actually issued or sold or for the issue, sale, grant or
assumption of any Options or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall
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<PAGE> 11
(i) insofar as it consists of cash, be computed as
the amount of cash actually received by the Company,
without deducting any expenses paid or incurred by the
Company, or any commissions or compensation paid or
concessions or discounts allowed by the Company, to
underwriters, dealers or others performing similar
services in connection with any such issue or sale,
(ii) insofar as it consists of consideration
(including securities as defined in the Act) other than
cash, be computed as the market value thereof at the time
of any such issue, sale, grant or assumption as determined
in good faith by the Board of Directors of the Company
(which determination shall be evidenced in a certificate
delivered promptly to each Holder and which determination
shall be subject to the procedures for disagreement as
provided in item (b) of the definition of "Fair Market
Value" in section 8.2.2), and
(iii) insofar as Additional Shares of Common Stock
are issued or sold, Options or Convertible Securities are
issued, sold, granted or assumed together with other stock
or securities or other assets of the Company for a
consideration that covers both, be the proportion of such
consideration (computed as provided in clauses (i) and
(ii) above) allocable to such Additional Shares of Common
Stock or Convertible Securities as determined in good
faith by the Board of Directors of the Company (which
determination shall be evidenced in a certificate
delivered promptly to each Holder and which determination
shall be subject to the procedures for disagreement as
provided in item (b) of the definition of "Fair Market
Value" in section 8.2.2).
(b) The following shall be deemed to be issued without
consideration: (i) all Additional Shares of Common Stock, Options
or Convertible Securities issued in payment of any dividend or
other distribution on any class of stock of the Company, and (ii)
all Additional Shares of Common Stock issued to effect a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock otherwise than by payment
of a dividend in Common Stock. Additional Shares of Common Stock,
Options or Convertible Securities issued to directors, management,
employees and related parties shall be deemed to be issued (i)
without consideration if not issued for cash or property and (ii)
for less than either the Exercise Price or the Fair Market Value to
the extent that any cash or the fair value of property, as
determined in good faith by the Board of Directors, received for
such securities is less than either the Exercise Price or the Fair
Market Value of such securities.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to section 8.3 shall be deemed to
have been issued for a consideration per share determined by
dividing
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(i) the total amount, if any, actually received by
the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable
to the Company upon the exercise of all such Options or
the conversion or exchange of all such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of all such Options for
Convertible Securities and the conversion or exchange of
all such Convertible Securities, in each instance
computing such consideration as provided in the foregoing
subdivision (a), by
(ii) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options and
the conversion or exchange of such Convertible Securities.
8.6 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
increased proportionately.
8.7 Dilution in Case of Other Securities. In case any Other
Securities (as defined below) shall be issued or sold, or shall become subject
to issue or sale upon the conversion or exchange of any Common Stock or Other
Securities of the Company (or any issuer of Other Securities or any other Person
(as defined below) referred to in section 9), or shall become subject to
subscription, purchase or other acquisition pursuant to any Options issued,
sold, granted or assumed by the Company (or any such other issuer or Person) for
a consideration that dilutes, in accordance with the standards established in
the other provisions of this section 8 or otherwise, the purchase rights granted
by this Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this section 8 with respect to the Exercise Price
shall be made and applied as nearly as possible in the manner so provided, to
determine the amount of Other Securities that the holder of this Warrant shall
be entitled to receive upon the exercise of this Warrant, in order to protect
such holder against such dilution of purchase rights. "Person" shall mean an
individual, a corporation, a partnership, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Other Securities" shall mean any stock (other than Common Stock) of the Company
or of any other Person that the Holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or that at any time shall be
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issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 9 or otherwise.
8.8 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this section 8 would be
less than $0.10, such amount shall be carried forward, and adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount or amounts so
carried forward, shall aggregate at least $0.10.
9. Consolidation, Merger, Sale of Assets, Reorganization, etc.
General Provisions.
9.1 In case the Company, after the Effective Date, (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving Person of such consolidation or merger, or (b) shall permit any
other Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, Common Stock or Other Securities shall be changed into or exchanged
for cash, stock or other securities of any other Person or any other property,
or (c) shall transfer, directly or indirectly through transactions involving any
of or all its subsidiaries, all or substantially all its properties and assets
to any other Person or (d) shall effect a capital reorganization or
reclassification of Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Exercise Price is provided in
section 8.2.2 or section 8.2.3), then, and in the case of each such transaction,
the Company shall make proper provision such that, upon the terms and in the
manner provided in section 8, the holder of this Warrant, upon the exercise
hereof at any time after the consummation of each such transaction, shall be
entitled to receive, at the Exercise Price in effect immediately prior to such
consummation, in lieu of the Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation, the highest amount of cash,
securities or other property to which such holder would actually have been
entitled as a shareholder upon such consummation if such holder had exercised
this Warrant immediately prior thereto, subject to adjustments subsequent to
such consummation as nearly equivalent as possible to the adjustments provided
for in section 8 and this section 9; provided, however, that if prior to the
consummation of such transaction, a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the holder of this Warrant, by
written notice to the Company (in compliance with section 15) signed on or
before the date immediately preceding the date of expiration of such purchase,
tender or exchange offer, declares an intention to exercise this Warrant in
whole or in part, such holder shall be entitled, upon consummation of such
offer, to receive upon exercise the highest amount of cash, securities or other
property to which such holder would actually have been entitled as a shareholder
if such holder had exercised this Warrant prior to the expiration of such
purchase, tender or exchange offer, and if all shares of Common Stock which such
holder would have owned as a result of such exercise had been purchased pursuant
to such purchase, tender or exchange offer, subject to adjustments from and
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after the consummation of such purchase, tender or exchange offer as nearly
equivalent as possible to the adjustments provided for in section 8.
9.2 Assumption of Obligations. Notwithstanding anything contained
in this agreement to the contrary, the Company shall not effect any of the
transactions described in subdivisions (a) through (d) of section 9.1 unless,
prior to the consummation thereof, each Person (other than the Company) that may
be required to deliver any cash, stock or other securities or other property
upon the exercise of this Warrant as provided herein shall assume, by written
instrument delivered to the holder of the Warrants, and reasonably satisfactory
to Commonwealth or holders of a majority-in-interest of the Warrants (a) the
obligations of the Company under this agreement and the Warrants (and if the
Company shall survive the consummation of any such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this agreement and the Warrants) and (b) the
obligation to deliver to such holder such cash, stock or other securities or
other property as such holder may be entitled to receive in accordance with the
provisions of this section 9.
9.3 Other Dilutive Events. The Board of Directors of the Company
shall have an ongoing obligation to determine in good faith whether any event
has occurred as to which the provisions of section 8 shall not be strictly
applicable, but with respect to which the failure to make any adjustment to the
Exercise Price would not fairly protect the purchase rights represented by this
Warrant in accordance with the intent and principles of that section. In each
case in which such determination shall be made, the Company shall appoint a firm
of independent public accountants reasonably acceptable to Commonwealth or a
majority-in-interest of the Warrants, which shall give its opinion upon the
adjustments, if any, consistent with the intent and principles established in
sections 8 and 9, necessary to preserve without dilution the purchase rights
represented by this agreement and the Warrants. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the holder of the Warrants and
shall make the adjustments described therein.
9.4 No Dilution or Impairment. The Company shall not, by amendment
of its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this agreement or the
Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holders of the Warrants against dilution or other impairment. Without limiting
the generality of the foregoing, the Company
(a) shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the
exercise of all Warrants from time to time outstanding, and
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(b) shall not take any action that results in any
adjustment of the Exercise Price if the total number of shares of
Common Stock (or Other Securities) issuable after such action upon
the exercise of all Warrants from time to time outstanding would
exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such
exercise.
9.5 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted, as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Shares issuable upon
exercise of each Warrant to be mailed to the Holders, at their last addresses
appearing in the Warrant register, and shall cause a certified copy thereof to
be mailed to the Transfer Agent. The Company shall retain a firm of independent
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Company) to make any
computation required by section 8, and a certificate signed by such firm shall
accompany said notice and shall be conclusive evidence of the correctness of
such adjustment.
10. Fractional Interests. The Company shall not be required to
issue fractions of shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this section 10, be issuable
on the exercise of any Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the same fraction of
the Exercise Price then in effect on the date of exercise.
11. Restrictions on Dispositions. The Shares have not been
registered under the Act. Commonwealth represents and warrants to the Company
that it understands that (a) the Shares may not be transferred except pursuant
to (i) an effective registration statement under the Act relating thereto, or
(ii) any available exemption from registration under the Act permitting such
disposition of securities and an opinion of counsel, reasonably satisfactory to
counsel for the Company, that an exemption from such registration is available
and (b) the Warrants may not be transferred except in accordance with the
provisions of section 3, pursuant to an effective registration statement under
the Act relating thereto or pursuant to any available exemption from
registration under the Act permitting such disposition of securities and an
opinion of counsel, reasonably satisfactory to counsel for the Company, that an
exemption from such registration is available.
12. Certificates to Bear Legends. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend:
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NEITHER THE WARRANTS NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE
SOLD OR TRANSFERRED PRIOR TO ________, 1997 (SUBJECT TO CERTAIN LIMITED
EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO, OR (ii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE, AND
THE WARRANTS MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 3 OF THE WARRANT AGREEMENT DATED THIS DATE BETWEEN SIGHT RESOURCE
CORPORATION AND COMMONWEALTH ASSOCIATES PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT RELATING THERETO OR PURSUANT TO ANY AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE ACT PERMITTING SUCH DISPOSITION OF SECURITIES AND AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
The Shares or other securities issued upon exercise of the Warrants
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Shares or securities shall bear a legend in substantially
the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). SUCH SHARES MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
RELATING THERETO, OR (ii) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
ACT RELATING TO THE DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
13. Registration Rights.
13.1 Demand Registration Rights. Upon written request of the then
Holder(s) of at least a majority of the Warrants, including Shares, if issued,
made at any time within the period commencing one (1) year and ending five (5)
years after the effective date of the Registration Statement, the Company shall
file within a reasonable period of time and, in any event, within forty-five
(45) days after receipt of such written request, at its sole expense, on no more
than one occasion, a registration statement under the Act registering the
Warrants and/or Shares for sale to the public. Within 15 days after receiving
any such notice, the Company shall give notice to the other Holders of the
Warrants and/or Shares advising that the Company is proceeding with such
registration statement, and offering to include therein the Warrants and/or
Shares of such other Holders. The Company shall not be obligated to so include
the Warrants and/or Shares of any
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such other Holder unless such other Holder shall accept such offer by notice in
writing to the Company within ten (10) days after receipt of such notice from
the Company. Without the consent of each Holder who elects to include Warrants
and/or Shares in such registration (which consent may be unreasonably withheld),
no other securities of the Company shall be entitled to participate in such
registration. The Company shall use its best efforts, through its officers,
directors, auditors and counsel in all matters necessary or advisable, to file
and cause to become effective such registration statement as promptly as
practicable and for a period of one (1) year thereafter to reflect in the
registration statement financial statements that are prepared in accordance with
section 10(a)(3) of the Act and any facts or events arising that, individually
or in the aggregate, represent a fundamental and/or material change in the
information set forth in the registration statement to enable any Holders of
Warrants to exercise Warrants and/or sell the underlying Shares during said
one-year period. If any registration pursuant to this section 13.1 is an
underwritten offering, the Company will select an underwriter (or managing
underwriter if such offering should be syndicated) approved by the Holders of a
majority of the Warrants and/or Shares to be included in such registration, such
approval not to be unreasonably withheld.
13.2 Piggyback Registration Rights. If, at any time within the
period commencing on the effective date of the Registration Statement and ending
seven (7) years thereafter, it proposes to register any class of security under
the Act in a primary registration on behalf of the Company and/or in a secondary
registration on behalf of holders of such securities and the registration form
to be used may be used for registration of the Warrants and/or Shares underlying
the Warrants, the Company will give prompt written notice (which, in the case of
a registration pursuant to the exercise of demand registration rights other than
those provided in section 13.1 above, shall be within ten (10) business days
after the Company's receipt of notice of such exercise and, in any event, shall
be at least thirty (30) days prior to such filing) to the Holders of Warrants
and/or Shares (regardless of whether some of the Holders shall have theretofore
availed themselves of the right provided in section 13.1 above) at the
address(es) appearing on the records of the Company of its intention to effect a
registration and will offer to include in such registration such number of
Warrants and/or Shares with respect to which the Company has received written
requests for inclusion therein within ten (10) days after receipt of such notice
from the Company. All registrations requested pursuant to this section 13.2 are
referred to herein as "Piggyback Registrations". This section 13.2 is not
applicable to any Registration Statement to be filed by the Company on Forms S-4
or S-8 or any successor forms.
Notwithstanding the foregoing, if the managing underwriter of the
offering being registered shall determine in good faith and advise the Company
in writing that the distribution of the Warrants and/or Shares requested to be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company, then the Holders of such Warrants and/or Shares shall
delay their offering and sale for such period ending on (a) the earlier of (i)
ninety (90) days following the effective date of the Company's registration
statement and (ii) the day upon which the underwriting syndicate, if any, for
such offering shall have been disbanded or, (b) such date as the Company, the
managing underwriter and Holders of Warrants and/or Shares shall otherwise
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<PAGE> 18
agree. In the event of such delay, the Company shall file such supplements or
post-effective amendments and take any such other steps as may be necessary to
permit such Holders to make their proposed offering and sale for a period of one
hundred eighty (180) days immediately following the end of such period of delay.
If any party disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter.
13.3 Other Registration Rights. In addition to the rights above
provided, the Company will cooperate with the then-Holders of the Warrants
and/or Shares in preparing and signing any registration statement or
notification on Form 1-A, in addition to the registration statements and
notifications discussed above, required in order to sell or transfer the
aforesaid Shares and will supply all information required therefor, but such
additional registration statement or notification shall be at the then-Holders'
cost and expense unless the Company elects to register or qualify additional
shares of the Common Stock, in which case the cost and expense of such
registration statement or notification will be pro rated between the Company and
the Holders according to the aggregate sales price of the securities being
issued. Notwithstanding the foregoing, the Company will not be required to file
a registration statement or notification on Form 1-A pursuant to this section 13
at a time when the audited financial statements required to be included therein
are not available, which time shall be deemed to be the period commencing 45
days prior to the end of a fiscal year of the Company and ending 90 days after
the end of such fiscal year.
13.4 Action to be Taken by the Company. In connection with the
registration of Warrants and/or Shares in accordance with sections 13.1, 13.2 or
13.3, the Company shall:
(a) Bear the expenses of any registration under section
13.1 or section 13.2, including but not limited to legal,
accounting and printing fees, provided, however, that in no event
shall the Company be obligated to pay (A) any fees and
disbursements of legal counsel retained by Holders of Warrants
and/or Shares, or (B) any underwriters' discount or commission
payable in respect of such Warrants and/or Shares, payment of which
shall, in each case, be the sole responsibility of the Holders of
the Warrants and/or Shares;
(b) Use its best efforts to register or qualify the
Warrants and/or Shares for offer or sale under state securities or
blue sky laws of such jurisdictions in which the participating
Holders propose to offer Warrants and/or Shares, and to do any and
all other acts and things that may be necessary or advisable to
enable the Holders to consummate the proposed sale, transfer or
other disposition of such securities in any jurisdiction; and
(c) Enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any, and each Holder of securities
included in such Registration Statement provided that, if so
requested by the underwriter, such holders shall provide
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<PAGE> 19
the underwriters with several indemnity agreements as to
information regarding such holders.
13.5 Information by Holders. Each Holder shall provide, upon
reasonable request by the Company, information for inclusion in such
Registration Statement as may be required by the applicable rules and
regulations of the Act.
14. Notices to Holders.
14.1 Nothing contained in this agreement or in any of the Warrants
shall be construed as conferring upon the Holders thereof the right to vote or
to receive dividends or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company; provided, however, that in the event that a meeting of stockholders
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger, or sale of all, or substantially all, of its property, assets, business
and good will as an entirety, then and in that event the Company shall cause a
notice thereof to be sent by first-class mail, postage prepaid, at least twenty
(20) days prior to the date fixed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of
Warrants at such Holder's address appearing on the Warrant register; but failure
to mail or to receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such voluntary dissolution. If such notice shall have been so given and if such
a voluntary dissolution shall be authorized at such meeting or any adjournment
thereof, then from and after the date on which such voluntary dissolution shall
have been duly authorized by the stockholders, the purchase rights represented
by the Warrants and all other rights with respect thereto shall cease and
terminate.
14.2 In the event the Company intends to:
(a) make any distribution on or to holders of its Common
Stock (or other securities that may be purchasable in lieu thereof
upon the exercise of Warrants), including, without limitation, any
dividend or distribution from earned surplus, any dividend or
distribution of stock, assets or evidences of indebtedness, any
distribution to be made in connection with a consolidation or
merger in which the Company is the surviving corporation or any
distribution of shares of stock of any corporation at least a
majority of whose outstanding stock is owned by the Company,
(b) issue subscription rights or warrants to holders
of its Common Stock,
(c) issue shares of its Common Stock (excluding shares
issued in any of the transactions described in section 8 above) for
a consideration per share less than the
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<PAGE> 20
Fair Market Value on the date the Company fixes the offering price
of such additional shares or
(d) issue any securities convertible into or exchangeable
for its Common Stock for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such
securities (determined as provided below) less than the then Fair
Market Value or less than the Exercise Price in effect immediately
prior to the issuance of such securities,
then the Company shall cause a notice of its intention to make such distribution
or issuance to be sent by first-class mail, postage prepaid, at least twenty
(20) days prior to the date fixed as a record date or the date of closing the
transfer books in relation to such distribution, to each registered Holder of
Warrants at such Holder's address appearing on the Warrant register, but failure
to mail or to receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such distribution or issuance. All computations for purposes of this section 14
shall be made in accordance with the provisions of section 8 hereof.
15. Notices. Any notice or demand required by this agreement to be
given or made by the Holder to or on the Company shall be sufficiently given or
made if sent by first-class or registered mail, postage prepaid, or by facsimile
transmission addressed as follows:
SIGHT RESOURCE CORPORATION
67 South Bedford Street
Burlington, Massachusetts 01803
Facsimile No. (617) 229-1155
Attention: William G. McLendon
Any notice or demand required by this agreement to be given or made by the
Company to or on the Holder of any Warrant shall be sufficiently given or made,
whether or not such Holder receives the notice, if sent by first-class or
registered mail, postage prepaid, addressed to such Holder at his last address
as shown on the books of the Company.
16. Governing Law. The validity, interpretation and performance of
this agreement, of each Warrant issued hereunder and of the respective terms and
provisions thereof shall be governed by the law of the state of New York.
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<PAGE> 21
17. Counterparts. This agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
SIGHT RESOURCE CORPORATION
By:
-----------------------------------
Name: William G. McLendon
Title: President
COMMONWEALTH ASSOCIATES
By:
-----------------------------------
Name: Andres V. Bello
Title: Managing Director
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<PAGE> 22
EXHIBIT A
(Form of Warrant Certificate)
NEITHER THE WARRANTS NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE
SOLD OR TRANSFERRED PRIOR TO __________, 1997 (SUBJECT TO CERTAIN LIMITED
EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO, OR (ii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE AND
THE WARRANTS MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 3 OF THE WARRANT AGREEMENT DATED THIS DATE BETWEEN SIGHT RESOURCE
CORPORATION AND COMMONWEALTH ASSOCIATES, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT RELATING THERETO OR PURSUANT TO ANY AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE ACT PERMITTING SUCH DISPOSITION OF SECURITIES AND AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
No. __________ __________ Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
On _________, 2001
SIGHT RESOURCE CORPORATION
Warrant Certificate
THIS CERTIFIES THAT for value received COMMONWEALTH ASSOCIATES, or
registered assigns, is the registered holder of the number of Warrants set forth
above, each of which entitles the owner thereof to purchase at any time from
__________, 1997 until 5:00 p.m., New York City time on __________, 2001 (the
"Expiration Date"), one fully paid and nonassessable share of the common stock,
par value $.01 per share (the "Common Stock"), of Sight Resource Corporation, a
Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $____ upon presentation and surrender of
this Warrant Certificate with the Form of Election to Purchase duly executed.
The number of Warrants evidenced by this Warrant Certificate (and the number of
shares that may be purchased upon exercise thereof) set forth above, and the
Exercise Price per share set forth above, are the number and Exercise Price as
of the date of original issuance of the Warrants, based on the shares
<PAGE> 23
of Common Stock of the Company as constituted at such date. As provided in the
Warrant Agreement referred to below, the Exercise Price and the number or kind
of shares that may be purchased upon the exercise of the Warrants evidenced by
this Warrant Certificate are, upon the happening of certain events, subject to
modification and adjustment.
This Warrant Certificate is subject to, and entitled to the
benefits of, all of the terms, provisions and conditions of an agreement dated
as of __________, 1996 (the "Warrant Agreement") between the Company and
Commonwealth Associates, which Warrant Agreement is hereby incorporated herein
by reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights, duties
and immunities hereunder of the Company and the holders of the Warrant
Certificates. Copies of the Warrant Agreement are on file at the principal
office of the Company.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the principal office of the Company, may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled such holder to
purchase. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
to receive dividends or to consent or to receive notice as a stockholder at the
meetings of stockholders for the election of directors of the Company or any
other matter, or to any rights whatsoever as stockholder of the Company, except
as provided in the Warrant Agreement, until the Warrant or Warrants evidenced by
this Warrant Certificate shall have been exercised and the shares of Common
Stock shall have become deliverable as provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise
within any period during which the transfer books for the Company's Common Stock
or other class of stock purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for shares purchasable upon such exercise until the date of the
reopening of said transfer books.
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<PAGE> 24
IN WITNESS WHEREOF, Sight Resource Corporation has caused the
signature (or facsimile signature) of its President and Secretary to be printed
hereon and its corporate seal (or facsimile) to be printed hereon.
Dated: ________ __, 1996
SIGHT RESOURCE CORPORATION
By:
----------------------------------
William G. McLendon
[Corporate Seal]
Attest:
- -----------------------------
Alan MacDonald, Secretary
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<PAGE> 25
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates).
TO SIGHT RESOURCE CORPORATION:
FOR VALUE RECEIVED ______________________ hereby sells, assigns and
transfers unto _______________ this Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint _______________, to transfer the within Warrant Certificate on the books
of the within-named Company, with full power of substitution.
DATED: ,
Signature _________________________
Signature Guaranteed:
NOTICE
The signature of the foregoing assignment must correspond to the
name as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 26
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO SIGHT RESOURCE CORPORATION:
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
Please insert social security or other
identifying number
- -----------------------
- -----------------------
- -------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
- -----------------------
- -----------------------
- -------------------------------
(Please print name and address)
Dated: ,
- ------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
Signature Guaranteed:
