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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
(Amendment No. 1)
General Form for Registration of Securities
Of Small Business Issuers Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
EYE CARE INTERNATIONAL, INC.
(Name of Small Business Issuer in its Charter)
Delaware
(State or other jurisdiction 59-3206480
of incorporation or organization) (IRS Employer Identification No.)
1511 North Westshore Boulevard, Suite 925
Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)
(813) 289-5552
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.001 par value
(Title of Class)
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Item 1. Description of Business.
Our Business
We market memberships in a comprehensive national non-insurance based
quality discount eye care/eyewear plan. The memberships entitle plan
participants to obtain eye care service and products from our network of
providers at significantly reduced rates.
We believe that we are the only national discount vision network with
ophthalmologists who have agreed to discount all of their medical services, as
well as the nation's largest optometric discount vision network. This would make
ECI the only national discount vision network which combines ophthalmology
services provided by medical doctors with optometric products and services
provided by optometrists, opticians and optical locations. Our network has
providers in all fifty states at over 11,000 locations, and is comprised of over
1,600 ophthalmologic practices and nearly 10,000 optometric, optician and
optical locations. The composition of our optometric network is both large chain
companies and a wide variety of boutiques and specialty shops. Most other
discount vision networks only offer discounts on optometric products and
services.
By offering a full range of eye care/eyewear services, members of our
vision care plan are able to obtain a comprehensive eye care service package,
including elective cosmetic surgical procedures such as lasik surgery, photo
refractive keratectomy, radial keratotomy, CO2 laser skin resurfacing and other
laser surgeries, performed by ophthalmologists. These procedures are
traditionally not covered by insurance or Medicare and are generally quite
expensive. ECI members can obtain these and all other procedures from our
providers at discounts that typically range from 20% to 68%. ECI providers offer
eyewear products to our members at nationally listed wholesale prices, plus a
$30 to $50 dispensing fee. This generally creates a savings in the range of 40%
to 60% off retail prices. We also offer a mail order program through which
members of our vision care network may order replacement contact lenses and
designer or non-designer sunglasses at nationally listed wholesale prices.
Our Target Market
We market our vision care plan to corporations, large sales
organizations and affinity groups. We are involved in all stages of product
development from training individual sales agents to the design and
implementation of a specific marketing program at the corporate and affinity
group level. These organizations can either purchase our vision care plan for,
or offer it to, their employees as a supplement to existing health care
insurance plans or other employee benefit programs or as a stand-alone benefit.
Sponsors of healthcare programs, including other discount vision plans, may
access our vision care network for a fee. This is a particularly significant
aspect of our marketing plan due to the national scope of our network and the
ophthalmology services offered.
Our History
We are a Delaware corporation incorporated on May 31, 1994, and a
successor by merger to Eye Care International, Inc., a Florida corporation. Our
principal executive offices are at 1511 North Westshore Boulevard, Suite 925,
Tampa, Florida 33607 and our telephone number is (813) 289-5552.
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Industry Overview
Approximately $20 billion is spent on eye care products and services each year
in the United States.
o Approximately $11 billion is spent on eyeglasses
o Approximately $2 billion is spent on contact lenses.
o Approximately $4 billion is spent on eye examinations and related
services
o Approximately $3 billion represents the costs of related surgical
procedures performed by ophthalmologists.
Ophthalmologists (eye M.D.'s) perform more than three million surgical
procedures in the United States annually.
Eye care products and services in the United States are delivered
through a fragmented system of providers composed of approximately 10,500 Board
certified ophthalmologists, 31,000 optometrists and 65,000 opticians.
o Opticians make and adjust eyewear using prescriptions supplied by
optometrists or ophthalmologists
o Optometrists specialize in examination, diagnosis and treatment
of conditions of the vision system, including fitting and
prescribing contact lenses
o Ophthalmologists are medical doctors who have at least three years
of hospital-based training in the diagnosis and medical and
surgical treatment of eye disorders
The optical dispensing industry in the United States is highly
fragmented with the top 100 optical chains accounting for less than 27% of total
retail sales in 1995. The retail optical industry is consolidating and will
continue to consolidate. Concerns about accelerating healthcare costs have
resulted in the increasing prominence of managed care in the eye care industry.
However, concerns about the quality of care received under managed care programs
and patient access have similarly created a renewed interest in fees for
services based programs. Concerns about costs of these programs and services
remain, thus giving rise to a type of fee for services programs.
Most optometric locations offer basic eye care services, including eye
examinations and contact lens fittings in order to increase sales. This has had
a significant impact on the number of individuals who have begun to use
optometrists, instead of ophthalmologists, for general eye care.
While approximately 90% of general health maintenance organizations
cover routine eye examinations, fewer than 15% cover corrective lenses and none
effectively cover cosmetic-type surgeries, including lasik, photo refractive
keratectomy, radial keratotomy, C02 laser skin resurfacing and other laser
procedures. Comprehensive eyecare/eyewear benefit programs are generally not
offered as an employee benefit.
We have designed our plan to be suitable as a stand-alone product, as a
supplement to existing insurance programs or within existing insured/indemnity
corporate programs currently being offered by insurance companies, as well as
packagers of insurance-type programs, such as health maintenance organizations
and preferred provider organizations. Our plan is particularly attractive to
sellers of health care insurance and packagers of broad-based health care
programs, since we provide substantial national coverage
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and the only discount network combining ophthalmology with optometric products
and services. Because of the availability of ophthalmology services under our
plan and the fee structure agreed to by our M.D. providers, by accessing the ECI
network, costs otherwise being incurred by insurance companies, health
maintenance and preferred provider organizations and self-insured entities can
be substantially reduced. Furthermore, since our discount vision plan is not
insurance based, it may be added to existing health care benefits packages.
Market
In 1995, approximately 157 million of the 263 million people in the
United States needed, but only 96 million people wore, some form of corrective
eyewear. Therefore, there are approximately 60 million people who need
corrective lenses but do not have them. We estimate that in excess of 90% of all
American families have a member who wears some form of glasses, prescription
and/or non-prescription. The market for corrective eyewear has grown steadily
and the demographic trends of an aging population are expected to generate
increased demand for corrective eyewear and optical services. As "baby boomers"
move further into the 40-64 age bracket, the market for eye wear and eyecare is
expected to expand significantly. This is the age group when most people
experience presbyopia, difficulty in reading small print. Treatment for diseases
predominantly affecting elderly patients such as cataracts and glaucoma, as well
as eyewear designed to appeal to mature customers, also is increasing. People
over the age of 40 typically require more complex lenses and more expensive
prescriptions than younger people. In addition, the increasing use of video
display terminals in the workplace has created a further need for eyecare and
eyewear. Consequently, the aging of the "baby boom" generation and technology
driven advances in the workplace are expected to further expand the size of the
optical industry.
U.S. Population Needing Some Form of Vision Correction
(in Millions)
<TABLE>
<CAPTION>
Percentage of
Number of People Population
1995 Wearing Wearing
Age Population Corrective Lens Corrective Lenses
----- ------------- ------------------ -------------------
<S> <C> <C> <C>
0-14 57.5 8.9 15%
15-24 35.9 15.0 42%
25-44 83.4 52.4 63%
45-64 52.2 49.6 95%
65 and over 33.6 31.2 93%
----- ----- ----
Total 262.6 157.1 60%
===== ===== ====
</TABLE>
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Our Vision Plan
Our vision plan offers members the following services and products:
o One free eye exam, annually, for prescription glasses
(contact lens exam excluded) per membership at
participating provider locations.
o Network ophthalmologists offer discounts to members of up
to 68% for eye examinations and medical and surgical
procedures.
Procedures typically covered by Medicare ("coded") are discounted to 20%
below the allowed Medicare rate. For example, a physician's usual and customary
fee for cataract surgery may be $2,500. Medicare may allow only $1,000. An
ophthalmologist participating in our vision network would, thus, charge our
member only $800 as full payment, resulting in a $1,700 savings, or 68% less
than the usual and customary rate. It is important to understand that although
our physicians utilize the Medicare fee structure for determining the fee to be
charged to our members, that fee structure is applied only to non-Medicare
members. It is not applicable to members who may be otherwise Medicare eligible.
Procedures not coded by Medicare, such as lasik, photo refractive keratectomy,
radial keratotomy, C02 laser skin resurfacing and other laser surgeries, are
discounted to 20% below the physician's usual and customary fee.
o Network optical locations and other dispensers of eyewear
offer discounts of up to 60% off of the retail price of
prescription glasses. Network optical locations dispense
prescription eyeglasses and safety glasses at the
nationally listed wholesale price, plus a dispensing fee
of $30 to $50, depending upon the complexity of the
lenses; contact lenses (other than disposable brands) and
sunglasses at prices 20% below retail; and sundry eyewear
products at 30% below retail.
o Through our mail-order program, members can purchase
replacement contact lenses, sunglasses, including most
national and designer brands such as Revo, Ray-Ban,
Serengeti and Bolle', and safety glasses at wholesale
prices, plus a small shipping and handling fee.
o We maintain a 24-hour toll-free customer service line and
a database of a member's prescription, that allows us to
transmit a member's prescription to any network provider,
at any time, in case of an emergency.
o Members have unlimited access to all providers in the
network and their services and products.
o We do not have any exclusions for pre-existing conditions,
or restrictions on a member's purchase selections, and we
do not require members to complete forms when purchasing
services or goods.
o We guarantee members that as long as they use our plan in
good faith during the year, they will save at least the
cost of their membership. If they do not realize the
savings, we will refund the difference.
o We offer our members an unconditional, 30-day money-back
satisfaction guarantee.
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Each person in a participating member's immediate family also is
entitled to the benefits offered by the plan upon presentation of a membership
card bearing our name or logo. One membership card is provided to each family
enrolled in the plan. Additional membership cards will be furnished, upon
request, to family members for a small processing fee for each additional card.
Providers
We believe we are the only national vision care network that offers its
members access to ophthalmologists who discount all of their services. Our
network includes over 1,600 ophthalmic practices, and almost all of our
participating ophthalmologists are either Board certified or Board eligible for
certification. Approximately 20% of all Board certified ophthalmologists in the
United States are part of our network, and most of these ophthalmologists have
agreed to not join any other national discount vision plan. Ophthalmologists
participating in our network discount their usual and customary fees by 20% for
procedures not coded by Medicare, while Medicare coded procedures are discounted
to 20% off the Medicare allowable rate. This may result in savings as high as
68%.
Our plan has nearly 10,000 optometric, optician and optical locations
composed of both large chain companies and a wide variety of boutiques and
specialty shops.
Marketing
Over the first two and one-half to three years of operation we
concentrated our efforts on the development of our vision care network, in
particularly, the establishment of the first national discount network of
ophthalmologists who would agree to discounts on all of their services. We made
little to no effort to market the "combined" network until such time as we
believed we had achieved material coverage in all 50 states. Once we believed
this to have been accomplished, we commenced the marketing of our plan to a
select number of employer organizations, including major corporations and small
to medium-sized business entities. During that period, our objective was to
demonstrate the market acceptability of our plan and to establish relationships
with large national sales and benefit consulting organizations, insurance
companies, health maintenance and preferred provider organizations and third
party administrators.
It was, and remains, our belief that once we could establish market
acceptability of our plan, it would automatically be marketed primarily through
health care consultants and other organizations marketing health care programs
at retail and, to a much lesser extent, our own sales efforts. We believe this
strategy has proven, and will continue to prove, itself to be effective,
especially in view of our continued unique position in the vision care industry
as not only being easily "affordable" at both a wholesale and retail price
level, but also as a result of our continued position as the only national
discount vision plan combining the services of ophthalmologists with optometric
providers.
Through the marketing vehicles described above, the ECI plan is
marketed, directly and indirectly, to businesses, affinity groups, individuals
and packagers of other health care programs. It may be offered as a supplement
to already existing forms of health care coverage or may be purchased on a
free-standing basis. A corporation or individual need not have insurance
coverage to access our plan. Additionally, by combining our plan as a supplement
to an existing health insurance or indemnity program, the plan may provide our
customer with a new form of profit center, while, at the same time, keeping
their existing program affordable and effective for plan members. Also, by
reason of the breadth of our provider network, our plan can usually match all of
the geographic requirements of any national insurance program and certainly
meets the needs of migratory populations, such as retirees. We believe this
makes our plan particularly attractive to large health care insurance companies,
health maintenance and, preferred provider organizations and other packagers of
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various health programs who market their health care programs over a large
geographical area. Our plan is currently being so marketed by several such
entities that have commenced marketing our plan through their own sales forces.
As part of our marketing efforts, we work closely with our customers'
internal benefits departments on the design and implementation of a specific
marketing program. Once the "sale" is made, we generally receive from our
customer a computer disk with all of the pertinent personnel information (name,
social security or identification number and address) of the employees/members
and/or retirees that will be covered by the plan. We are then able to upload all
of this information and within approximately ten business days, send out
customized "Welcome Packs" which outline the benefits of the plan, as well as a
list of providers in the new member's zip code. The "Welcome Pack" also includes
a personalized ECI membership card, listing the member's name, identification
number and plan expiration date. Depending on the requirements of the client, we
either send the "Welcome Packs" directly to the individuals, or bulk ship them
to a designated location.
When marketed as a stand-alone product, we maintain two pricing
structures: an individual/ family annual membership price of $39.95; and a
corporate/affinity group annual membership price of $28. We have a "sliding
scale" purchase price ranging from $16 to $28, in order to provide discounts to
large quantity purchasers of our plan. Additionally, we maintain a "private
label" pricing structure. When our plan is sold through an existing insurance
agency or packager, the insurance agency or packager incurs practically no
additional overhead. This enhances the attractiveness of our plan to such
selling entities, providing them with a relatively inexpensive vehicle for
establishing an internal profit center with a product that fills an otherwise
overlooked need in health care. There are no record keeping burdens on
corporate/affinity group clients. We handle all clerical administrative
functions.
We intend to strengthen and broaden our overall marketing efforts by:
o establishing a dedicated regional support staff that will work
directly with our independent sales agents, corporate/affinity
accounts and marketing partners to facilitate and encourage sale
of our vision plan
o instituting targeted public relations campaigns on both national
and local levels
o enhancing promotional support programs, including image promotion
and sales incentives
o establishing and maintaining, through personnel and computer
software programs, the capability of functioning as a third party
administrator, either through the establishment of a wholly-owned
subsidiary or otherwise.
We have retained the services of a public relations firm to increase
public awareness of our network. In addition, Clark Marcus, our president, has
made a number of speaking appearances, published various articles in health care
magazines and participated as a guest speaker on several nationally broadcasted
radio talk shows, all of which serve to bring our company to the forefront of
both the ultimate consumer and corporate/affinity group health care managers.
Competition
We are not aware of any other national entity that offers a
non-insurance based, discount eye care/eyewear program which has, as an integral
part of the program, ophthalmologists who have agreed to discount all of their
services to members. There are currently a number of national non-insurance
based discount eyewear programs, but to our knowledge, no program offers the
national eye care feature of our discount vision plan. On a general level, we
compete in the highly competitive field of health care service
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against established organizations, including health maintenance and preferred
provider organizations that provide group health care on a discount basis to
their members. These organizations are insurance related, and individuals must
therefore be members of the insured group to participate in discounts. Although
these types of organizations may represent competition, they also represent a
viable market for the sale of our vision care plan, since our vision care plan
can be sold as a supplement to an insurance program, or may be used to decrease
these entities' costs through utilization of our lower price structure with our
ophthalmological providers and our serving as a third party administrator. To a
lesser extent, we compete against individual ophthalmologists who do not offer
discounts to their patients but who may have a loyal patient base. Our success
in the marketplace will depend, in part, upon our ability to attract and retain
a large number of ophthalmologists in our network.
Although other entities offer discount vision programs, we are not
aware of any that maintain a national medical network of ophthalmologists who
discount all of their services. The following entities offer vision programs
that compete with the ECI plan:
o Vision Service Plan, Inc. offers an optometric insurance-based
program.
o Cole National Corp. owns or operates optical locations located at
JC Penney, Sears, Montgomery Ward and Pearle, Inc.
o MemberWorks, a packager of various affinity programs having in the
aggregate over 4 million members, offers a discount vision plan
(optometric only) which, until recently, was serviced by Cole
National Corp. and Outlook Vision. We are the vision eye
care/eyewear provider for various MemberWorks private label
programs.
o Spectera, Inc., a health care insurer, offers a discount vision
benefit as part of its benefit programs.
Although ECI competes with these and other entities, as part of our
marketing strategy we seek to attract our competitors as customers since our
program includes ophthalmologists who discount all of their services
substantially below Medicare allowable rates which are usually substantially
below the rates that our competitors are able to negotiate. As an indication of
the effectiveness of ECI's marketing strategy, although we continue to compete
with those entities described above, we have recently entered into relationships
with both MemberWorks and Spectera which gives those entities access to ECI's
network, in whole or in part, to service their accounts, thus making those
entities ECI's customers. We expect this trend to continue and, indeed,
accelerate since these entities continue to compete not only against ECI but
themselves as well, and now, at least some of them can promote the fact that
they too, are in a position to offer discounts on ophthalmology services. ECI
receives "access fees" as a result of the establishment of these relationships.
Notwithstanding the fact that ECI now services, in whole or in part,
some of its vision care competitors, ECI believes it has a number of competitive
advantages over all other vision care plans.
o We offer the only national discount eye care/eyewear network that
combines ophthalmologic and optometric services on a discount
fee-for-service basis. No other national discount program offers a
full range of ophthalmologic services, all of which are
discounted. All of our participating ophthalmologists contract
exclusively with us and agree not to provide their services to any
other national, non-insurance based, discount fee-for-service
network.
o All ECI programs carry with it one eye exam at no additional cost,
per family membership.
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o Our network is the largest national discount vision network in
the U.S.
o We maintain a nationally recognized fee schedule for both
ophthalmologic and optometric services and products.
o We offer a discount on traditionally non-covered surgical
procedures such as Lasik, PRK, radial keratotomy, C02 laser skin
resurfacing surgery and other laser surgeries.
o We market to major insurance companies, health maintenance and
preferred provider organizations, which may offer our vision plan
as part of, or as a supplement to, their existing programs.
o Our network is not dependent on any one or several retail chains.
The nationwide breadth and density of our network provides members
with the convenience of having a provider nearby, and protects
both our members and us from loss of service because of retail
closures.
o We do not require that our corporate customers attain minimum
employee participation to implement the plan.
o We have a mail-order program for replacement contact lenses and
sunglasses at wholesale prices.
o We have exclusive contracts directly with 100% of our
ophthalmologists and approximately 65% of the optometric locations
in our network. This direct contact has a positive impact on our
ability to handle customer grievances.
Medical Advisory Board
We have organized a panel of prominent physicians to serve as our
Medical Advisory Board. Members of this panel periodically report on new
developments in ophthalmologic treatment. All members of the Medical Advisory
Board have served since inception.
Ira A. Abrahamson, M.D. is an Associate Professor of Ophthalmology and Assistant
Clinical Professor of Family Medicine at the University of Cincinnati College of
Medicine, Cincinnati, Ohio. He received his medical degree from the University
of Cincinnati School of Medicine and performed his Ophthalmology residency in
Chicago at the Illinois Eye and Ear Infirmary and at Cook County Hospital. Dr.
Abrahamson has been on several Ophthalmic Editorial boards and has been a member
of the editorial advisory board of the American Family Physician Journal since
1974. He has authored more than 95 scientific publications and four textbooks.
Dr. Abrahamson specializes in cataract and anterior segment surgery. Dr.
Abrahamson also serves as special consultant to the Company.
Leo D. Bores, M.D. received his medical degree from Wayne State University,
College of Medicine and completed his ophthalmologic residency at Detroit
Medical Center. He is a Fellow of the American Academy of Ophthalmology,
founding member and past-President of the Keratorefractive Society, and has
served as Chairman of several educational and scientific committees, as well as
being a member of the International Society for Refractive Keratoplasty, and
American Society for Cataract and Refractive Surgery. Dr. Bores has lectured,
written and taught extensively both in this country and abroad. He has authored
in excess of thirty papers and books. Dr. Bores is the founder of and practices
at the Bores Eye Institute in Scottsdale, Arizona.
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Warren D. Cross, M.D. graduated from the University of Southern California,
attended Baylor College of Medicine and did his residency in eye surgery at the
University of Texas Medical Branch, Houston. He has been Chief of Staff at the
institute of Eye Surgery, Houston, Texas, since 1984. Dr. Cross has been
performing refractive surgery since 1979 and has done over 14,000 cases. He also
speaks and teaches at numerous professional meetings and courses on both
cataract and refractive surgery. He authored the "Complications of Radial
Keratotomy" chapters in two surgical test books.
David B. Davis, M.D. received his medical degree from the University of Texas,
Medical Branch, Galveston, Texas, and performed his ophthalmology residency at
the United States Naval Hospital. Dr. Davis has served on numerous elected and
appointed boards, including the International Committee for standards of
Ophthalmic Devices and Instruments, American Society of Cataract and Refractive
Surgery; Board of Directors, American College of Eye Surgeons; International
Scientific Advisory Board, American Society of Cataract and Refractive Surgery.
He is a member of numerous professional organizations and also participates in
extensive speaking engagements. Dr. Davis practices medical surgery at the
Davis/Mandel Eye Center in Hayward, California.
Robert H. Marmer, M.D. received his medical degree from the University Autonoma
de Guadalajara and completed his ophthalmic residency program at the Mayo Clinic
in Rochester, Minnesota. Prior to beginning his private practice in Atlanta,
Georgia, he served as a Professor of Ophthalmology at Ahmadubello University in
Kaduna and Zaria, Nigeria, West Africa. Dr. Marmer was the first surgeon to
introduce and perform Radial Keratotomy surgery in Georgia. Dr. Marmer is a
member of numerous professional associations, including the American Academy of
Ophthalmology, the American College of Eye Surgeons and the International
Association for Ocular Surgeons. He has been the official team ophthalmologist
for the NBA Atlanta Hawks for over 15 years, and is the official team
ophthalmologist of the International Hockey League Atlanta Knights.
Lee T. Nordan, M.D. received his medical degree from the University of New
Mexico School of Medicine, Albuquerque, New Mexico, and did his ophthalmic
residency at West Virginia University Hospital, Morgantown, West Virginia. Dr.
Nordan serves on numerous professional boards including the Scientific Advisory
Board, American Society of Cataract and Refractive surgery, and the Board of
Directors of the International Society of Refractive Keratoplasty. He has
authored numerous scientific publications and is in private practice in La
Jolla, California.
Spencer P. Thornton, M.D. earned his medical degree from the Bowman Gray School
of Medicine of Wake Forest University, Winston-Salem, SC, and completed his
residency in Ophthalmology at Vanderbilt University School of Medicine,
Nashville, TN. Dr. Thornton is certified by the American Board of Ophthalmology,
Fellow of the American Academy of Ophthalmology, Fellow of the American College
of Surgeons, and is President of the Board of Directors of the American Society
of Cataract and Refractive Surgery and serves as Chairman of the International
Committee of Standards and Quality Control for Ophthalmic Instruments and
Devices. Dr. Thornton has served on several publication editorial boards, has
co-authored and been a contributor to twelve textbooks on ophthalmic surgery and
is the author of more than 100 published papers on cataract and refractive
surgery. He has lectured in 27 countries and been adjunct or guest professor in
universities in ten countries. Dr. Thornton is a member of the Board of Visitors
of Baylor University and Director of the Thornton Eye Surgery Center in
Nashville, Tennessee. Dr. Thornton also serves as special consultant to the
Company.
Special Consultants
Herbert Gould, M.D., In addition to advising us on new developments in the field
of ophthalmology, Dr. Gould writes a regular column in a number of publications
throughout the United States directed toward the senior market. This is through
arrangements made by ECI as part of our marketing efforts. Dr. Gould is
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widely recognized throughout the United States as a pioneer in the delivery of
refractive surgery and aesthetic laser treatment and training. He currently is
President of the New York Keratorefractive Society and is past-President of the
New York Intraocular Lenses Society. Dr. Gould was also awarded the Bronze Medal
of the Cannes Film Festival for his film on intraocular transplantation. He has
performed over 6,000 refractive procedures, trained hundreds of physicians in
the refinement of the procedures and is considered a leader in his field. Dr.
Gould serves as Special Consultant to the Company and is active in a number of
the Company's promotional marketing activities.
Philip J. Shelton, M.D., J.D.,F.A.C.S., F.C.L.M., practices both ophthalmology
and law in West Hartford, CT. He received his medical degree from New York
University and completed his ophthalmology training at the Mount Sinai Hospital
in New York City. He earned his J.D. degree from the University of Connecticut
School of Law. Dr. Shelton has authored numerous publications and lectures
internationally on managed care and other medical legal topics. He is presently
Assistant Clinical Professor at the University of Connecticut Medical School, a
guest professor at Yale University, and a lecturer in ophthalmology at Tufts
University. Dr. Shelton is certified by the American Board of Ophthalmology and
specializes in the treatment of cataracts and glaucoma. One of the first
ophthalmologists in the Hartford area to implant intraocular lenses, Dr. Shelton
has always been at the forefront of his field. Dr. Shelton is President of the
New York Intraocular Lens Implant Society and has served as an officer of
several professional organizations. He is on the Board of Governors of the
American College of Legal Medicine and was a founding director, as well as past
Chairman and past President, of ConnectiCare, one of the State's largest HMO's.
Employees
As of September 1, 1999, we had twelve full-time employees, including
two in sales and marketing, and eleven in customer service and administration.
Year 2000
We have conducted a review to identify, evaluate and implement changes
to computer systems and applications necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations. We
also will be communicating with suppliers, financial institutions and others
with which we conduct business to coordinate year 2000 conversions. The total
cost of compliance and its effect on our future results of operations will be
determined as a part of this project. Based on initial review, the total cost is
not expected to have a material effect on our results of operation or financial
statements. However, there can be no assurance that the systems of other
companies on which we may rely will be timely converted or that such failure to
convert by another company would not have an adverse effect on our systems.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our financial condition and
results of operation should be read in conjunction with the financial statements
and notes thereto included in Part F/S of this Form 10-SB/A.
Results of Operations
Nine Months Ended September 30, 1999 as Compared to Nine Months Ended
September 30, 1998
Sales. Sales for the nine months ended September 30, 1999, of $354,225 were
nearly $36,000, or 9%, less than the $390,755 recorded during the same time
period in 1998. This decrease was primarily due to 100% of the revenues of a
three-year contract being recorded in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $1,732,229 were approximately $206,000, or about 11%,
lower than the $1,938,095 for the first nine months of 1998. A $79,000 decline
in commission expenses, as well as a $56,000 decline in telephone expenses and a
$163,000 decline in professional/consulting fees, was partially offset by an
$75,000 increase in payroll and related employee expenses.
Commissions declined because fewer equity dollars, upon which commissions are
paid, were raised in the first nine months of 1999 as compared to the same
period in 1998.
Telephone expenses decreased because lower rates were negotiated in early 1999
and allowed credits were used to offset 1999 charges.
Consulting/professional expenses declined mainly due to an extraordinary level
of legal activity in early 1998, and fewer consulting activities in the first
nine months of 1999.
Payroll and employee expenses increased because of the addition of 4 employees
in late 1998 and early 1999, and general payroll increases.
Interest Income. Interest income of $10,028 was about $28,000 lower than in the
first nine months of 1998. As a result of a private equity placement in late
1997 and 1998, we maintained a cash balance significantly higher in 1998 than in
the current year and thus were able to invest more principal in interest bearing
securities.
Interest Expense. During the first nine months of 1999, interest expense of
$3,686 was nearly the same as in the first nine months of 1998.
Depreciation and Amortization Expense. Since no major depreciable assets were
added during the year, depreciation and amortization expense of $164,463 was
nearly the same as in the first nine months of 1998.
Year Ended December 31, 1998 As Compared to Year Ended December 31, 1997
Sales. Sales for the year ended December 31, 1998 decreased by $168,000, or 21%,
to $637,941 from $806,249 for the year ended December 31, 1997. This decrease
was primarily due to reduced sales of approximately $75,000 by one of our
clients who packages and sells a discount multi-health care program that
includes ECI as the vision care provider and the loss of another account which
contributed nearly $104,000 to the company's revenues in 1997.
12
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $2,772,858 were $1,193,895 higher than the $1,578,963
for the year 1997. This rise is mainly due to increases in commission expenses
of $162,000, consulting expenses of $394,000, payroll expenses of $390,000,
employee travel expenses of $79,000 and advertising expenses of $54,000.
Commission expenses rose primarily because of a change of the commission
structure and the mix of sales by agents, and consulting expenses increased
mainly because of the company contracting with corporate and financial
consultants. Payroll and employee travel expenses increased due to the expansion
of the corporate/sales staff and increases in officer salaries. In 1998 we also
increased its advertising expenses by attending more health care and provider
conventions.
Interest Income. Interest income of $51,705 was over $47,000 higher than in
1997. As a result of a private equity placement in late 1997 and 1998, we
maintained a cash balance significantly higher than in the prior year and thus
were able to invest more principal in interest bearing securities.
Interest Expense. Interest expense decreased from $96,627 in 1997 to $5,833 in
1998. In 1996 and early 1997 we received debt funding which was later converted
into equity. As a result of this conversion we eliminated virtually all of our
debt service.
Depreciation and Amortization Expense. In 1996 and 1997 we incurred expenditures
for the purpose of raising operating capital. These expenditures were deferred
and recorded as organizational expenses. In 1998 we started amortizing these
deferred expenditures over a five-year period and recorded a total amortization
expense of $171,745 in 1998.
Other Income. In 1997 we recorded proceeds from lawsuits of $130,000 as other
income. These proceeds generally arose from two suits, one for trademark
infringement, and the other for breach of contract.
Liquidity and Capital Resources
Since inception, our expenses have consistently exceeded revenues. Operations
have primarily been funded from the issuance of debt and equity securities
aggregating approximately $6.8 million. All debt and related interest, except
for $50,000, was converted into equity in 1997.
We used cash from operating activities of approximately $2.4 million
and $1.0 million in 1998 and 1997, respectively.
Item 3. Description of Property.
Our executive offices, which consist of approximately 4,400 square
feet, are located in Tampa, Florida. Our lease expires on July 31, 2003 and
provides for a current annual rental rate of $87,576.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information concerning the beneficial
ownership of our common stock as of September 1, 1999 by (i) each stockholder
known by us to be a beneficial owner of more than five percent of the
outstanding common stock; (ii) each director and executive officer whose
compensation for 1998 was in excess of $100,000; and (iii) all directors and
officers as a group.
13
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percentage of Common Stock
Ownership (1) Beneficially Owned (2)
--------------------------- --------------------------
Class A Class B
Common Common
Name Stock Stock
- ----- -------- ---------
<S> <C> <C> <C>
Clark Marcus (3) 75,000 474,100 6.1%
Eva Katzman (3) - 268,600(4) 3.0%
Sharon Kay Ray (3) 23,000 198,200 2.5%
Richard Abrahamson, MD(3) 72,740 181,800 2.8%
James L. Koenig (3) 24,000 130,000 1.7%
Robert G. Veligdan,DDS(3) 62,500 - *
William Koch (3) - 25,000 *
Steven Handwerger(3) 5,000 - *
All officers and directors 262,240 1,009,100 14.1%
as a group (9 persons)
</TABLE>
- ------------
* Less than 1%
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community
property laws, where applicable. For purposes of this table, a person
or group of persons is deemed to beneficially own any shares that such
person has the right to acquire within 60 days after September 1, 1999.
(2) Calculated as a percentage of the total number of shares of common
stock issued and outstanding without respect to voting power. Each
share of class B common stock is entitled to five votes per share, as
compared to one vote per share of class A common stock. For purposes of
computing the percentage of outstanding shares held by each person or
group of persons named above on September 1, 1999, any shares, which
such person or group of persons has the right to acquire within 60 days
after such date is deemed to be outstanding for the purpose of
computing the percentage ownership of such person. As of September 1,
1999, we had 7,632,604 shares of class A common stock outstanding and
1,377,700 shares of class B common stock outstanding, or a total of
9,010,304 shares of common stock outstanding.
(3) Address is c/o Eye Care International, Inc., 1511 North Westshore
Boulevard, Suite 925, Tampa, Florida 33607.
(4) Includes 193,600 shares of Class B common stock owned personally by
Mrs. Katzman and 75,000 shares of Class B common stock held in trust
the minor children of Jerry Katzman, M.D., formerly an officer and
director. Dr. Katzman disclaims beneficial ownership or control over
all of said shares.
14
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons
The following is a list of our directors, executive officers and key employees:
<TABLE>
<CAPTION>
Name Age Position
- ----- ----- --------
<S> <C> <C>
Clark A. Marcus 57 Chairman, President, Chief Executive
Officer and Director
James L. Koenig 52 Senior Vice President, Chief Financial
Officer, Secretary and Director
Richard Abrahamson, M.D. 38 Director
William Koch, M.D. 59 Director
Robert Veligdan, M.D. 50 Director
Steven Handwerger 57 Director
Sharon Kay Ray 41 Director
- -------------
</TABLE>
Clark A. Marcus, one of our founders, has served as Chairman of the Board and
Chief Executive Officer since September 1993. He also has served as President
since February 1996. Mr. Marcus has been a practicing attorney since 1968 and
was senior partner in the New York law firms of Victor & Marcus and Marcus &
Marcus.
James L. Koenig has been Sr. Vice President, Chief Financial Officer and a
member of our Board of Directors since February 1996. He initially joined us as
an independent sales agent in December 1994. Prior to joining us, he worked in
various accounting/management capacities primarily in the utilities industry.
From 1984 to November 1994, Mr. Koenig was employed by Tampa Electric Company in
various executive capacities ranging from Assistant Controller to Director of
Audit Services and Director of Regulatory Affairs.
Richard Abrahamson, M.D., one of our founders, has been a member of our Board of
Directors since August 1995 . Dr. Abrahamson also serves as a member of our
Medical Screening Committee. Since July 1992, Dr. Abrahamson has operated a
private ophthalmology practice specializing in diseases and surgery of the eye.
Dr. Abrahamson advises us on credentials of ophthalmologists, expansion of our
network and sometimes interacts with network providers.
William H. Koch, M.D., a member of our Board of Directors since February 1996,
has been a psychiatrist and child development specialist since 1974. He is the
Founder and Director of Parent and Child Services, Inc., New York City; The
Parent and Child Consultation Services, New York City; and the "School for
Parents." He is a former member of the faculty of the College of Physicians and
Surgeons, New York City, and Special Consultant to Child Protective Services,
New York City. Dr. Koch also is an author, lecturer and consultant.
Robert Veligdan, D.M.D., a member of our Board of Directors since May 1994, has
been a Professor and Instructor at Columbia University since 1977 and lectures
on numerous topics relative to dentistry. He is also a staff member at Columbia
University Hospital. He has operated a private dentistry practice since 1975.
15
<PAGE>
Dr. Veligdan is a member of numerous professional associations including the
American Dental Association, the staff of Columbia University S.D.O.S., Academy
of Oral Rehabilitation, Academy of General Dentistry and the International
Congress of Oral Implantologists. He advises the Company on general matters
including a possible discount dental program.
Steven Handwerger, a member of our Board of Directors since February 1996, has
been employed by Halmode Apparel (a division of Kellwood) since December 1996,
where he is in charge of merchandising and sales for the Plaza South Division.
From December 1991 through December 1996, he was President of Santa Fe
Enterprises, a dress manufacturer.
Sharon Kay Ray has, since March 1989, served as regional marketing
representative for Novo Nordis Pharmaceuticals, a multi-national pharmaceutical
company and served as a special marketing consultant for a number of public and
non-public corporations. She is a co-founder of the Company and designer of the
Company's initial marketing program. Ms. Ray is a director of the Company and
has served since inception as special consultant to the Company without
compensation.
All our directors hold office until the next annual meeting of
stockholders or until their successors are duly elected and qualified, and all
executive officers hold office at the discretion of the Board of Directors.
Item 6. Executive Compensation
The following table sets forth the compensation paid to, earned by or accrued
for our Chief Executive Officer and each of our other executive officer for whom
more than $100,000 was paid or accrued as compensation for the years ended
December 31, 1998 and 1997 (collectively, the "Named Executive Officers"):
Annual Compensation
<TABLE>
<CAPTION>
Cash
Name and Principal Position Year Compensation Other Compensation
- --------------------------- ---- ------------ ------------------
<S> <C> <C> <C>
Clark Marcus 1998 $213,745 $81,241(1)
Chief Executive Officer and President 1997 $128,933 $89,034(1)
James L. Koenig 1998 $154,341 $20,200(2)
Sr. Vice President, Chief Financial 1997 $113,702
Officer and Secretary
(1) Includes legal retainer fees, auto allowance, life insurance premium and
child care.
(2) Includes auto allowance and life insurance premium.
</TABLE>
Employment Agreements
Clark Marcus serves as our Chief Executive Officer pursuant to an employment
agreement which expires in September 2002. The agreement provides for a salary
of $150,000 per annum, increased by an amount equal to the greater of fifteen
percent (15%) of the prior year's salary or the increase in the consumer price
index for the Tampa, Florida area, plus a bonus beginning at three percent (3%)
of our pre-tax profits in any year that our revenues exceed $1 million and
increasing up to seven percent (7%) of our pre-tax profits in any year that our
16
<PAGE>
revenues exceed $4 million. His salary for the fiscal year ending December 31,
1999 is $241,546. If Mr. Marcus' employment is terminated within 12 months
following a change in control, Mr. Marcus will receive his salary, bonus and
additional compensation for a period equal to the greater of the remainder of
the term of the employment agreement or 3 years.
James L. Koenig serves as our Senior Vice President and Chief Financial
Officer pursuant to an employment agreement which expires in February 2001. The
agreement provides for a salary of $125,000 per annum, increased by an amount
equal to the greater of ten percent (10%) of the prior year's salary or the
increase in the consumer price index for the Tampa, Florida area, plus a bonus
of three percent (3%) of our pre-tax profits in any year that our revenues
exceed $1 million. His salary for the fiscal year ending December 31, 1999 is
$199,650. If Mr. Koenig's employment is terminated within 12 months following a
change in control, Mr. Koenig will receive his salary, bonus and additional
compensation for a period equal to the greater of the remainder of the term of
the employment agreement or 3 years.
Stock Options
No stock options have been granted to Messrs. Marcus or Koenig.
Stock Option Plan
Our Board of Directors has adopted, and in May 1997 our stockholders
approved, the Eye Care International, Inc. 1997 Stock Option Plan. The stock
option plan is to be administered by the Board of Directors or a committee of
the Board. Pursuant to the plan, options to purchase 500,000 shares of class A
common stock may be granted to directors, employees (including officers) and
consultants.
The plan authorizes the issuance of incentive stock options, as defined
in Section 422 (b) of the Internal Revenue Code of 1986, as amended,
non-qualified stock options and stock appreciation rights ("SARs", and together
with ISOs and NQSOS, "Options"). Consultants and directors who are not also
employees are eligible for grants of only non-qualified stock options or
non-qualified stock options in tandem with stock appreciation rights. The
exercise price of each incentive stock option may not be less than 100% of the
fair market value of the class A common stock at the time of grant, except that
in the case of a grant to an employee who owns 10% or more of our outstanding
stock or outstanding stock of a subsidiary or parent of our company, the
exercise price may not be less than 110% of the fair market value on the date of
grant. The aggregate fair market value of the shares covered by incentive stock
options, or incentive stock options in tandem with stock appreciation rights,
granted under the plan that become exercisable by a participant in the plan for
the first time in any calendar year is subject to a $100,000 limitation. The
exercise price of each non-qualified stock option, or non-qualified stock option
in tandem with a stock appreciation right, is determined by the Board of
Directors or committee, in its discretion, but may in no event be less than 85 %
of the fair market value of a share of class A common stock at the time of
grant.
Subject to the provisions of the plan, the Board of Directors, or the
committee, has the authority to determine the individuals to whom the stock
options are to be granted, the number of shares to be covered by each option,
the type of option, the exercise period, the restrictions, if any, on the
exercise of the option, the terms for payment of the exercise price and other
terms and conditions. No option granted under the stock option plan shall have
an expiration date late than 10 years from the date of grant, and if an
incentive stock option, or a stock appreciation right in tandem with an
incentive stock option, is granted to a person owning 10% or more of our
outstanding stock or the outstanding stock of a subsidiary or of our parent,
such incentive stock option shall not be exercisable after the expiration of
five years from the date of grant. A stock appreciation right may be
17
<PAGE>
exercised at any time during the exercise period of the incentive stock option
or non-qualified stock option with which it is granted in tandem and prior to
the exercise of such incentive stock option or non-qualified stock option.
Payments by holders of options upon exercise of any option may be made (as
determined by the Board of Directors or the committee) in cash, by delivery of
shares of common stock or such other form of payment as may be permitted under
the plan.
No options have been granted under the plan.
Item 7. Certain Relationships and Related Transactions
We pay Clark Marcus, our President and Chief Executive Officer, a
retainer of $5,000 per month for legal services.
Item 8. Description of Securities.
Common Stock
We are authorized to issue an aggregate of 30,000,000 shares of common
stock, par value $.001 per share, 20,000,000 of which are designated as class A
common stock and 10,000,000 of which are designated as class B common stock. As
of September 1, 1999, 7,632,604 shares of class A common stock and 1,377,700
shares of class B common stock were outstanding.
Voting. Holders of class A common stock are entitled to one vote per
share on all matters upon which stockholders are entitled to vote, including the
election of directors. Holders of class B common stock are entitled to five (5)
votes per share on all matters upon which stockholders are entitled to vote,
including the election of directors. Holders of the shares of class A common
stock and class B common stock vote together as a single class on all matters.
Class A common stock and class B common stock are otherwise identical in all
other respects. Holders of our common stock do not have subscription, redemption
or preemptive rights.
Dividends. Subject to the rights of holders of preferred stock, holders
of class A common stock and class B common stock are entitled to receive
dividends when, as and if declared by the Board of Directors. We do not expect
to pay dividends on our common stock in the foreseeable future, and intend to
retain earnings, if any, to finance our operations.
Liquidation. Subject to the rights of holders of preferred stock,
holders of common stock are entitled to share ratably in our assets legally
available for distribution to holders of common stock in the event of the
liquidation, dissolution or winding up of the company.
Conversion. Shares of class B common stock will upon transfer by the
initial holder of the class B common stock automatically be converted into one
share of class A common stock.
18
<PAGE>
Warrants
As of September 1, 1999, 482,500 shares of common stock were reserved
for issuance upon exercise of outstanding warrants, at an exercise price of
$1.00, which expire at various dates ranging from January 17, 2001 through April
23, 2002. The warrants were issued in connection with various note offerings.
Preferred Stock
We are authorized to issue up to 10,000,000 shares of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by our Board of Directors. Accordingly, the Board
of Directors is empowered, without further stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
that could decrease the amount of earnings and assets available for distribution
to holders of common stock or adversely affect the voting power or other rights
of the holders of our common stock. In the event of issuance, the preferred
stock could be utilized. under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of our company. No
shares of preferred stock are outstanding, we have no present intention to issue
any shares of preferred stock.
PART II
Item 1. Market Price of And Dividends on The Registrant's Common Equity And
Other Shareholder Matters.
Market Information
Our class A common stock is traded on the OTC Bulletin Board under the
symbol "EYCR". Set forth below are the high and low bid and asked prices for our
class A common stock on the OTC Bulletin Board for each quarter since the
beginning of 1998. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
Bid Price Asked Price
------------------ -----------------------
Quarter Ended High Low High Low
------------- ----- ------ ------ ------
March 31, 1998.............. 5.375 2.25 6.25 3.00
June 30, 1998 .............. 5.00 2.00 5.00 2.00
September 30, 1998.......... 3.375 1.6875 4.1875 1.75
December 31, 1998........... 3.25 1.25 3.25 1.3750
March 31, 1999.............. 2.125 0.75 2.375 0.8125
June 30, 1999 .............. 1.0625 0.50 1.125 0.50
September 30, 1999.......... 0.73 0.25 0.8125 0.40
On October 11, 1999 the closing bid price of one share of our class A
common stock on the OTC Bulletin Board was $0.50.
As of September 30, 1999 there were 177 holders of record of our class
A common stock.
19
<PAGE>
Dividends
The payment of dividends is within the discretion of our Board of
Directors and depends in part upon our earnings, capital requirements and
financial condition. We have never paid any dividends on our class A common
stock and we do not anticipate paying such dividends in the foreseeable future.
We intend to retain earnings, if any, to finance our operations.
Item 2. Litigation
We are not a party any litigation, that if adversely determined, would
have a material adverse effect on our business.
Item 3. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
Item 4. Recent Sales of Unregistered Securities.
Since January 1, 1997, the Registrant has sold an aggregate of
6,065,290 shares of class A common stock for a purchase price of $1.00 per share
to a total of 105 accredited investors, including 2,184,290 shares issued in
payment of the principal amount of, and accrued interest on, outstanding
promissory notes. In November 1999, the Registrant sold 300 shares of series A
convertible preferred stock to an accredited investor for a purchase price of
$1,000 per share. Each share of series A convertible preferred stock is
convertible into 2,000 shares of class A common stock. The issuance of these
shares was exempt from the registration requirements of the Securities Act under
Rule 506 of Regulation D and Section 4(2) of the Securities Act. There were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith. The purchasers of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
certificates for the securities issued in such transactions. All purchasers of
securities in each such transaction had adequate access to information about the
Registrant, and were sophisticated investors.
Item 5. Indemnification of Directors and Officers.
Article VI of the Registrant's by-laws provides that a director or
officer shall be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (provided such settlement is
approved in advance by the Registrant) in connection with certain actions, suits
or proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation - a "derivative action") if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A similar standard of care is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
an action, except that no person who has been adjudged to be liable to the
Registrant shall be entitled to indemnification unless a court determines that
despite such adjudication of liability but in view of all of the circumstances
of the case, the person seeking indemnification is fairly and reasonably
entitled to be indemnified for such expenses as the court deems proper.
Article 6.5 of the Registrant's by-laws further provides that directors
and officers are entitled to be paid by the Registrant the expenses incurred in
defending the proceedings specified above in advance of their final disposition,
provided that such payment will only be made upon delivery to the Registrant by
the indemnified party of an undertaking to repay all amounts so advanced if it
is ultimately determined that the person receiving such payments is not entitled
to be indemnified.
Article 6.4 of the Registrant's by-laws provides that a person
indemnified under Article VI of the by-laws may contest any determination that a
director, officer, employee or agent has not met the applicable standard of
conduct set forth in the by-laws by petitioning a court of competent
jurisdiction.
Article 6.6 of the Registrant's by-laws provides that the right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in the Article will not
20
<PAGE>
be exclusive of any other right which any person may have or acquire under the
by-laws, or any statute or agreement, or otherwise.
Finally, Article 6.7 of the Registrant's by-laws provides that the
Registrant may maintain insurance, at its expense, to reimburse itself and
directors and officers of the Registrant and of its direct and indirect
subsidiaries against any expense, liability or loss, whether or not the
Registrant would have the power to indemnify such persons against such expense,
liability or loss under the provisions of Article VI of the by-laws. The
Registrant has applied for such insurance, and expects to have such insurance in
effect on the date this Registration Statement is declared effective by the
Securities and Exchange Commission.
Article II of the Registrant's certificate of incorporation eliminates
the personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of their fiduciary duties as a
director to the fullest extent provided by Delaware law. Section 102(b) (7) of
the DGCL provides for the elimination off such personal liability, except for
liability, (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived any improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed 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.
<PAGE>
PART F/S
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Reports for the Years
Ended December 31, 1998 and 1997................................................................F - 1
Consolidated Balance Sheet at December 31, 1998..........................................................F - 2
Consolidated Statement of Income and Retained Earnings
for the Years Ended December 31, 1998 and 1997..................................................F - 3
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998 and 1997......................................................................F - 4
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998 and 1997................F - 5
Consolidated Balance Sheet (Unaudited) at September 30, 1999 and 1998....................................F - 8
Consolidated Statement of Income and Retained Earnings (Unaudited) for the
Nine Months and Three Months Ended September 30, 1999 and 1998..................................F - 9
Consolidated Statement of Cash Flows (Unaudited) for the Nine Months and Three Months Ended
September 30, 1999 and 1998.....................................................................F - 10
</TABLE>
<PAGE>
PHILIP J. ELENIDIS & COMPANY CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Eye Care International, Inc.
Tampa, Florida
We have audited the accompanying consolidated balance sheet of Eye
Care International, Inc. and Subsidiary as of December 31, 1998 and 1997 and
the related consolidated statements of income and retained earnings and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Eye Care
International, Inc. and Subsidiary as of December 31, 1998 and December 31,
1997 and the results of its operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note E to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note E. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Yonkers, New York
April 30, 1999
/s/ Philip J. Elenidis & Company
<TABLE>
<S> <C> <C> <C>
984 NORTH BROADWAY YONKERS, NEW YORK 10701 PHONE 914-965-1002 FAX 914-965-8214
</TABLE>
F-1
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
December 31,
1998
----
Current assets
Cash $ 658,742
Accounts receivable 168,481
Miscellaneous receivables and advances 148,301
-----------
975,524
Fixed assets - net of accumulated
depreciation 89,582
Other assets
Organization expense - net of
accumulated amortization 749,433
-----------
Total assets $ 1,814,539
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses and taxes payable $ 24,633
Notes payable 50,000
-----------
74,633
-----------
Stockholders' equity
Capital stock
- 30,000,000 shares of $.01 par
value common stock authorized:
8,503,804 shares issued and
outstanding 85,038
- 10,000,000 shares of $.01 par
value preferred stock authorized:
Paid in capital 5,840,798
Retained earnings (4,185,930)
-----------
1,739,906
-----------
Total liabilities and
stockholders' equity $ 1,814,539
===========
The accompanying auditor's report and notes are an integral part
of these financial statements.
F-2
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
For the years ended December 31,
1998 1997
---- ----
Revenue
Membership fees $ 637,941 $ 806,249
Interest 51,705 4,651
------------- -------------
689,646 810,900
General and administrative expenses 2,772,858 1,578,963
Interest 5,833 96,627
Depreciation and amortization 208,722 17,559
------------- ------------
2,987,413 1,693,149
------------ ----------
Net loss from operations (2,297,767) (882,249)
Other income - proceeds from lawsuit 5,000 130,000
-------------- ------------
Net loss (2,292,767) (752,249)
Retained earnings - January 1, (1,893,163) (1,140,912)
------------- -----------
Retained earnings - December 31, $ (4,185,930) $ (1,893,161)
============= =============
The accompanying auditor's report and notes are an integral part
of these financial statements.
F-3
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
1998 1997
---- ----
Cash flow from operating activities
Net loss $ (2,292,767) $ (752,249)
Adjustment to reconcile net income
to net cash provided by operating activities 208,722 17,559
Changes in operating assets and liabilities
Decrease in accounts receivables 146,737 (315,218)
Increase in miscellaneous receivables
and advances (116,545) 21,714
Decrease in accrued expenses and taxes
payable (115,330) (147,367)
------------- -----------
Net cash provided by operating activities (2,169,183) (1,175,561)
Cash flow from investing activities
Purchase of fixed assets (65,933) (4,832)
Cash flow from financing activities
Decrease in notes payable - - 0 - (1,234,500)
Proceeds from sale of common stock 2,466,599 2,589,838
------------- -----------
Net cash provided by financing activities 2,466,599 1,355,338
------------- -----------
Increase in cash 231,483 174,945
Cash - January 1, 427,259 252,314
------------- -----------
Cash - December 31, $ 658,742 $ 427,259
============= ===========
Supplemental disclosures
Interest paid $ 5,833 $ 93,894
============= ===========
Income taxes paid $ -0- $ -0-
============= ===========
The accompanying auditor's report and notes are an integral part
of these financial statements.
F-4
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Note A - NATURE OF THE ORGANIZATION
Eye Care International, Inc. and Subsidiary (the Company) markets
vision care benefit plans and enhancements to plans provided by others. The
Company's benefit plans and plan enhancements afford its member/subscribers,
and those of its plan sponsors (employers, associations, etc.) and other
licensed organizations, the opportunity to obtain discounted services from its
national network of ophthalmic physicians. Through contractual arrangements
with others, the Company's plans also provide its member/subscribers with
access to providers of eye wear and other benefits on a discounted basis.
The Company's principal operating revenues consist of annual fees
charged to participating physicians and user fees charged either directly to
its member/subscribers, or indirectly through plan sponsors or through
licensing arrangements with providers of other benefit plans in exchange for
access by their member/subscribers to the Company's network of ophthalmologists
on a similarly discounted basis.
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, National Vision Services, Inc. All
significant intercompany transactions and balances have been eliminated in
consolidation.
2. Revenue Recognition
Membership fees are recognized in full at the time of subscription
because the Company's services are substantially completed at that time.
License royalties, however, can neither be determined nor estimated until
reported to the Company by the selling organization and are subject to possible
subsequent audit by the Company at its option under the terms of the related
agreement. Accordingly, depending on the timeliness and accuracy of royalty
reports received (which are presently beyond the Company's control), royalty
income is not recognized in the Company's financial statements until reported
by licensees, which may be in periods later than those in which they were
earned and subject to adjustment in subsequent periods.
F-5
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
3. Fixed Assets and Depreciation
Fixed assets are recorded at cost. Depreciation of fixed assets is
recorded using accelerated and straight line methods over the estimated useful
lives of the related assets.
4. Income Taxes
Income taxes are to be provided for the tax effects of transactions
reported in the financial statements. Provisions will be made for deferred
income taxes, which result from timing differences between expenses and income
as reported for financial statement purposes and their deductibility or
exclusion for income tax purposes, when appropriate.
Note C - INCOME TAXES
Substantially all of the Company's retained earnings deficit will be available
as an operating loss carry forward to reduce future income tax obligations as
may be incurred through the year 2012. However, because of the Company's
relatively short operating history, the potential tax benefit of this loss has
been valued at zero in the financial statements and will remain so until
realized or until the criterion in Financial Accounting Standards Board
Statement No. 109. Accounting for Income Taxes, for recognition of a deferred
tax asset has been met.
Note D - COMMITMENTS AND CONTINGENCIES
The Company leases its present offices under an operating lease
expiring on July 31, 2003 with an option to renew for one year. Rent expense for
the year amounted to $54,416. Future minimum rental commitments at December 31,
1998 are as follows:
1999 $ 87,576
2000 92,048
2001 96,523
2002 100,992
2003 42,855
----------
$ 419,994
==========
F-6
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Note E - GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred
substantial losses from operations. Management believes that the Company will
generate significant new business in the future and also be able to sell shares
of its capital stock to outsiders beginning in January, 1999. Absent an
increase in revenue or the sale of shares of stock, there may be uncertainty
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
F-7
<PAGE>
EYE CARE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
As of September 30,
1999 1998
---- ----
(Unaudited)
Current assets
Cash $ 286,006 $1,267,799
Accounts receivable 128,267 123,301
Miscellaneous receivables
and advances 255,871 146,567
---------- ----------
$ 670,144 $1,537,667
Fixed assets - net of
accumulated depreciation $ 68,111 $ 87,803
Other assets
Organization expense - net of
accumulated amortization 608,914 796,272
---------- ----------
Total assets $1,347,169 $2,421,742
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses and taxes payable $ 271,079 $ 57,672
Notes payable 50,000 50,000
---------- ----------
$ 321,079 $ 107,672
---------- ----------
Stockholders' equity
Capital stock $ 93,501 $ 62,796
Paid in capital 6,654,644 5,801,690
Retained earnings (5,722,055) (3,550,416)
---------- ----------
$1,026,090 $2,314,070
---------- ----------
Total liabilities and stockholders' equity $1,347,169 $2,421,742
========== ==========
F-8
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, For the Three Months Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Revenue
Memberships $ 354,225 $ 390,755 $ 157,867 $ 138,808
Interest 10,028 38,393 3,380 15,553
----------- ----------- ----------- -----------
$ 364,253 $ 429,148 $ 161,247 $ 154,361
General and administrative expenses $ 1,732,229 $ 1,938,095 $ 655,252 $ 669,744
Interest 3,686 4,500 1,019 0
Depreciation and amortization 164,463 163,806 54,704 61,202
----------- ----------- ----------- -----------
$ 1,900,378 $ 2,106,401 $ 710,975 $ 730,946
Net loss from operations ($ 1,536,125) ($ 1,677,253) ($ 549,728) ($ 576,585)
Other income -- proceeds from
lawsuits $ 0 $ 20,000 $ 0 $ 20,000
----------- ----------- ----------- -----------
Net loss from operations ($ 1,536,125) ($ 1,657,253) ($ 549,728) ($ 556,585)
Retained earnings - January 1 ($ 4,185,930) ($ 1,893,161) ($ 5,172,327) ($ 2,993,829)
----------- ----------- ----------- -----------
Retained earnings - September 30, ($ 5,722,055) ($ 3,550,414) ($ 5,722,055) ($ 3,550,414)
=========== =========== =========== ===========
</TABLE>
F-9
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flow from operating activities
Net loss ($1,536,125) ($1,657,253) ($ 549,728) ($ 556,585)
Adjustment to reconcile net income
to net cash provided by operating activities $ 164,462 $ 164,034 $ 54,674 $ 86,320
Changes in operating assets and liabilities
Decrease in accounts receivables $ 40,413 $ 191,917 ($ 103,962) $ 102,603
Increase in miscellaneous receivables (107,570) (114,811) 82,401 (73,405)
Increase/(Decrease) in accrued expenses
and taxes payable $ 246,247 ($ 82,291) $ 215,983 $ 12,875
---------- ---------- ---------- ----------
Net cash provided by operating activities ($1,192,573) ($1,498,404) ($ 300,632) ($ 428,192)
Cash flow from investing activities
Purchases of fixed assets ($ 2,472) ($ 66,305) $ 0 ($ 32,700)
Cash flows from financing activities
Decrease in notes payable $ 0 $ 0 $ 0 $ 0
Proceeds from sale of common
and preferred stock 822,309 2,405,249 379,809 55,831
---------- ---------- ---------- ----------
Net cash provided by financing activities $ 822,309 $2,405,249 $ 379,809 $ 55,831
Increase/(Decrease) in cash ($ 372,736) $ 840,540 $ 79,177 ($ 405,061)
Cash - January 1, $ 658,742 $ 427,259 $ 206,829 $1,672,860
---------- ---------- ---------- ----------
Cash - September 30, $ 286,006 $1,267,799 $ 286,OO6 $1,267,799
========== ========== ========== ==========
Supplemental disclosures
Interest paid $ 3,686 $ 4,500 $ 1,019 $ 0
========== ========== ========== ==========
Income taxes paid $ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
</TABLE>
F-10
<PAGE>
EYE CARE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months and Quarter Ended September 30, 1999 and 1998
Note A - NATURE OF THE ORGANIZATION
Eye Care Intenational, Inc. and its wholly-owned subsidiary (together,
the "Company") market vision care benefit plans and enhancement to plans
marketed by others. The Company's benefit plan and plan enhancements afford its
members/subscribers and those of its plan sponsors (employers, associations
etc.) and other licenses organizations, the opportunity to obtain discounted
services from its national network of ophthalmic physicians, as well as
discounted eyewear products and other benefits from its network providers.
The Company's principal operating revenues consists of annual
membership fees charged either directly to its members/subscribers, or
indirectly through plan sponsors or through licensing arrangements with
providers of other benefit plans in exchange for access by their
members/subscribers to the Company's network of providers.
The Company's unaudited financial statements have been prepared on
substantially the same basis as its audited statements and in management's
opinion include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods presented. The Company's results of operations for
the nine months ended September 30, 1999 are not necessarily indicative of our
results of operations for any future period.
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of Eye
Care International, Inc. and its wholly-owned subsidiary, National Vision
Services, Inc. All significant intercompany transactions and balances have been
eliminated in consolidation.
2. Revenue Recognition
Membership fees are recognized in full at the time of subscription
because the Company's services are substantially completed at that time.
Membership fees can neither be determined nor estimated until reported to the
Company by the selling organization and are subject to possible subsequent audit
by the Company at its option under the terms of the related agreement.
Accordingly, depending upon the timeliness and accuracy of reports received
(which are beyond the Company's control), membership income is not recognized in
the Company's financial statements until reported by licensees, which may be in
periods later than those in which they were earned and subject to adjustment in
subsequent periods.
F-11
<PAGE>
3. Fixed Assets and Depreciation
Fixed assets are recorded at cost and depreciation is recorded using
accelerated and straight-line methods over the estimated useful lives of the
related fixed assets.
4. Income Taxes
Income taxes are to be provided for the tax effects of transactions
reported in the financial statements. Provisions will be made for deferred
income taxes, which result from timing differences between expenses and income
as reported for financial statement purposes and their deductibility or
exclusion for income tax purposes, when appropriate.
Note C - INCOME TAXES
Substantially all of the Company's retained earnings deficit will be
available as an operating loss carryforward to reduce future income tax
obligations as may be incurred in future years. However, because of the
Company's short operating history, the potential tax benefit of this loss
carryforward has been valued at zero in the financial statements and will remain
so until realized or until the criterion for recognition of a deferred tax asset
has been met in accordance with Financial Accounting Standards Board Statement
No. 109, Accounting for Income Taxes.
Note D - COMMITMENTS AND CONTINGENCIES
The Company leases its present offices under an operating lease
expiring on July 31, 2003 with an option to renew for one year. Rent expense for
the first nine months of 1999 amounted to $54,257. Future minimum commitments at
September 30, 1999, are as follows:
1999 (remainder) $ 33,319
2000 $ 92,048
2001 $ 96,523
2002 $ 100,992
2003 $ 42,855
F-12
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit No. Exhibit
3.1 Certificate of Incorporation, as amended.
3.2* By-laws
10.1* 1997 Stock Option Plan
10.2* Employment Agreement with Clark Marcus.
10.3* Employment Agreement with James L. Koenig
21.1* Subsidiaries
- -----------
*Previously filed
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this amendment to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
EYE CARE INTERNATIONAL, INC.
Date: November 29, 1999 By: /s/ Clark Marcus
--------------------------------------
Clark Marcus
Chief Executive Officer and President
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
3.1 Certificate of Incorporation, as amended.
3.2* By-laws
10.1* 1997 Stock Option Plan
10.2* Employment Agreement with Clark Marcus.
10.3* Employment Agreement with James L. Koenig
21.1* Subsidiaries
- -----------
*Previously filed
<PAGE>
State of Delaware
Office of the Secretary of State
"I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "EYE CARE INTERNATIONAL, INC.". FILED IN THIS OFFICE ON THE
THIRTY-FIRST DAY OF MAY, A.D. 1994, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
William T. Quillen, Secretary of State
2406920 8100
944097618
7136443
AUTHENTICATION:
DATE: 6-01-94
<PAGE>
CERTIFICATE OF INCORPORATION
OF
EYE CARE INTERNATIONAL, INC.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of the
laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known,
identified, and referred to as the "General Corporation Law of the State of
Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Eye Care International, Inc.
SECOND: The address, including street, number, city and county of the
registered office of the corporation in the State of Delaware is 32 Lockerman
Square, Suite L-100, City of Dover 19901, County of Kent; and the name of the
registered agent of the corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and the purposes to be conducted and
promoted by the corporation, which shall be in addition to the authority of the
corporation to conduct any lawful business, to promote any lawful purpose and
to engage in any lawful act or activity for which corporations; may be
organized under the General Corporation Law of the State of Delaware, are as
follows:
To purchase, receive, take by grant, gift, devise, bequest, or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use, and
otherwise deal in and with real or personal property, or any interest therein,
wherever situated, and to sell, convey, lease, exchange, transfer, or otherwise
dispose of, or mortgage or pledge, all or any of its property and assets, or
any interest therein, wherever situated.
To apply for, register, obtain, purchase, lease, take licenses in
respect of or otherwise acquire, and to hold, own, use, operate, develop,
enjoy, turn to account, grant licenses and immunities in respect of,
manufacture under and to introduce, sell, assign mortgage, pledge, or otherwise
dispose of, and, in any manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes, and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented processes, copyrights,
designs, and similar rights, trade-marks, trade names, trade symbols, and other
indications of origin and ownership granted by or recognized under the laws of
the United States of America, the District of Columbia, any state or
subdivision thereof, and any commonwealth, territory, possession, dependency,
colony, agency or instrumentality of the United states of America and of any
foreign country, and all rights connected therewith or appertaining thereunto;
1
<PAGE>
(c) franchises, licenses, grants, and concessions.
To guarantee, purchase, take, receive, subscribe for, and otherwise
acquire, own, hold, use, and otherwise employ, sell, lease, exchange, transfer,
and otherwise dispose of, mortgage, lend, pledge, and otherwise deal in and
with, securities (which term, for the purpose of this Article THIRD, includes,
without limitation of the generality thereof, any shares of stock, bonds,
debentures, notes, mortgages, other obligations, and any certificates,
receipts, or other instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or interests therein
or in any property or assets) of any persons, domestic and foreign firms,
associations, and corporations, and of any government or agency or
instrumentality thereof; to make payment therefore in any lawful manner; and,
while owner of any such securities, to exercise any and all rights, powers, and
privileges in respect thereof, including the right to vote.
To make, enter into, perform, and carry out contracts of every kind
and description with any person, firm, association, corporation, or government
or agency or instrumentality thereof.
To acquire by purchase, exchange, or otherwise, all, or any part of,
or any interest in, the properties, assets, business, and good will of any one
or more persons, firm, associations, or corporations heretofore or hereafter
engaged in any business for which a corporation may now or hereafter be
organized under the laws of the State of Delaware; to pay for the same in cash,
property, or its own or other securities; to hold, operate, reorganize,
liquidate, sell, or in any manner dispose of the whole or any part thereof; and
in connection therewith, to assume or guarantee performance of any liabilities,
obligations, or contracts of such persons, firms, associations, or
corporations, and to conduct the whole or any part of any business thus
acquired.
To lend money in furtherance of its corporate purposes and to invest
and reinvest its funds from time to time to such extent, to such persons,
firms, associations, corporations, governments or agencies or instrumentalities
thereof, and an such terms and on such security, if any, as the Board of
Directors of the corporation may determine.
To make contracts of guaranty and suretyship of all kinds and endorse
or guarantee the payment of principal, interest, or dividends upon, and to
guarantee the performance of sinking fund or other obligations of, any
securities, and to guarantee in any way permitted by law the performance of any
of the contracts or other undertakings in which the corporation may otherwise
be or become interested, of any person, firm, association, corporation,
government or agency or instrumentality thereof, or of any other combination,
organization, or entity whatsoever.
To borrow money without limit as to amount and at such rates of
interest as it may determine; from time to time to issue and sell its own
securities, including its shares of stock, notes, bonds, debentures, and other
obligations, in such amounts, on such terms and conditions, for such purposes
and for such prices, now or hereafter permitted by the laws of the State of
Delaware and by this certificate of incorporation, as the Board of Directors of
the corporation may determine; and to secure any of its obligations by
mortgage, pledge, or other encumbrance of all or any of its property,
franchises, and income.
2
<PAGE>
To be a promoter or manager of other corporations of any type or kind;
and to participate with others in any corporation, partnership, limited
partnership, joint venture, or other association of any kind or in any
transaction, undertaking, or arrangement which the corporation would have power
to conduct by itself, whether or not such participation involves sharing or
delegation of control with or to others.
To draw, make, accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures; and other
negotiable or transferable instruments and evidences of indebtedness whether
secured by mortgage or otherwise, as well as to secure the same by mortgage or
otherwise, so far as may be permitted by the laws of the State of Delaware.
To purchase, receive, take, reacquire, or otherwise acquire, own and
hold, sell, lend, exchange, reissue, transfer, or otherwise dispose of, pledge,
use, cancel, and otherwise deal in and with its own shares and its other
securities from time to time to such an extent and in such manner and upon such
terms as the Board of Directors of the corporation shall determine; provided
that the corporation shall not use its funds or property for the purchase of
its own shares of capital stock when its capital is impaired or when such use
would cause any impairment of its capital, except to the extent permitted by
law.
To organize, as an incorporator, or cause to be organized under the
laws of the State of Delaware, or of any other State of the United States of
America, or of the District of Columbia, or of any commonwealth, territory,
dependency, colony, possession, agency, or instrumentality of the United States
of America, or of any foreign country, a corporation or corporations for the
purpose of conducting and promoting any business or purpose for which
corporations may be organized, and to dissolve, wind up, liquidate, merge, or
consolidate any such corporation or corporations or to cause the same to be
dissolved, wound up, liquidated, merged, or consolidated.
To conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within and
without the State of Delaware, in any and all States of the United States of
America, in the District of Columbia, and in any or all commonwealths,
territories, dependencies, colonies, possessions, agencies, or
instrumentalities of the United States of America and of foreign governments.
To promote and exercise all or any part of the foregoing purposes and
powers in any and all parts or the world, and to conduct its business in all or
any of its branches as principal, agent, broker, factor, contractor, and in any
other lawful capacity, either alone or through or in conjunction with any
corporations, associations, partnerships, firms, trustees, syndicates,
individuals, organizations, and other entities in any part of the world, and,
in conducting its business and promoting any of its purposes, to maintain
offices, branches, and agencies in any part of the world, to make and perform
any contracts and to do any acts and things, and to carry on any business, and
to exercise any powers and privileges suitable, convenient, or proper for the
conduct, promotion, and attainment of any of the business and purposes herein
specified or which at any time may be incidental thereto or may appear
conducive to or expedient for the accomplishment of any of such business and
purposes and which might be engaged in or carried on by a corporation
incorporated or organized under the General Corporation Law of the State of
Delaware, and to have
3
<PAGE>
and exercise all of the powers conferred by the laws of the State of Delaware
upon corporations incorporated or organized under the General Corporation Law
of the State of Delaware.
The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers shall not be held to
limit or restrict in any manner the purposes and powers of the corporation, and
the purposes and powers herein specified shall, except when otherwise provided
in this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provision of this or any other Article of this
certificate of incorporation; provided, that the corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within or
without the State of Delaware which, under the laws thereof , the corporation
may not lawfully conduct, promote, or exercise.
FOURTH: The total number of common shares of stock which the
corporation shall have authority to issue is 30 million; 20 million of which is
Common A Stock and 10 million of which is Common B Stock with the par value of
each is .001 dollars. The total number of preferred stock is 10 million with
the par value of .001 dollars.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Ann M. Jones One Biscayne Tower
2 S. Biscayne Blvd., Suite 1810
Miami, Florida 33131
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of S 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of S 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholder or class of stockholders of this corporation as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
4
<PAGE>
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further
provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in the ByLaws. The phrase "whole Board" and the
phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the corporation would have if there
were no vacancies. No election of directors need be by written ballot.
2. After the original or other ByLaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of S 109 of the General Corporation Law of the State of Delaware,
and, after the corporation has received any payment for any of its stock, the
power to adopt, amend, or repeal the ByLaws of the corporation may be exercised
by the Board of Directors of the corporation; provided, however, that any
provision for the classification of directors of the corporation for staggered
terms pursuant to the provision of subsection (d) of S 141 of the General
Corporation Law of the State of Delaware shall be set forth in an initial ByLaw
or in a ByLaw adopted by the stockholders entitled to vote of the corporation
unless provisions for such classification shall be set forth in this
certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any Class of stock which is denied voting power under the
provisions of the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of S 242 of the General Corporation Law of the
State of Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder thereof
to vote upon the increase or decrease in the number of authorized shares of
said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of S 102 of the General Corporation Law of the
state of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of S 145 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by
said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any ByLaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
5
<PAGE>
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on May 31, 1994
Ann M. Jones, Incorporator
6
<PAGE>
State of Delaware
Office of the Secretary of State
"I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "EYE CARE INTERNATIONAL, INC.", FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF DECEMBER, A.D. 1994, AT 9 O'CLOCK A.M.
A CERT1FIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
2406920 9100
Edward J. Freel, Secretary of State
AUTHENTICATION:
7361191
DATE: 01 03 95
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/30/1994
9442GOS13 - 2406920
1
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
EYE CARE INTERNATIONAL, INC.
Eye Care International, Inc., a corporation organized and existing
under the General Corporation Laws of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation by unanimous
written consent in writing, duly adopted resolutions setting forth the proposed
amendments to the Certificate of Incorporation of the Corporation and calling
for the submission of the proposed amendments to a vote of the stockholders of
the Corporation for their approval and adoption. The resolutions setting forth
the proposed amendments are as follows:
"RESOLVED, that the Corporation amend its certificate of incorporation
so that:
"4. (a) The total number of shares which the Corporation is authorized to issue
shall be Forty Million (40, 000, 000) shares of which Twenty Million (20, 000,
000) shares shall be designated as Class A common stock with a par value of one
Tenth of One Cent ($.001) per share, Ten Million (10,000,000) shares shall be
designated as Class B common stock with a par value of One Tenth of One Cent
($.001) per share and the remaining Ten Million (10,000,000) shares shall be
Preferred Stock with a par value of One Cent ($.001) per share.
(b) Each share of Class A common stock shall be entitled to one vote
per share on all matters required by law to be submitted to a vote of the
holders of the common shares, and each share of Class B common stock shall be
entitled to vote at the rate of five (5) votes per share on all matters
required by law to be submitted to a vote of the holders of the common shares.
Holders of the shares of Class A common stock and Class B common stock shall
vote together on all matters except as may otherwise be required under the
Delaware General Corporation Law. The rights of the shares of Class A common
stock and Class B common stock otherwise shall be identical in all respects.
Each share of Class B common stock is convertible into one share of Class A
common stock at any time at the option of the holder thereof. Upon the transfer
of any shares of Class B common stock by the initial holders thereof, each of
said shares, without any action on the part of the holders thereof,
automatically shall be converted into one share of Class A common stock on the
stock record books of the Corporation.
(c) The Corporation is authorized issue the shares of preferred stock
from time to time in one or more series with such designations, relative
rights, preferences, limitations or qualifications as shall be fixed by the
Board of Directors in the resolution or resolutions providing for the issue of
such shares. The Board of Directors is expressly authorized to adopt such
resolution or resolutions providing for the issue of such shares from time to
time as the Board of Directors, in its discretion may deem desirable."
2
<PAGE>
SECOND: That the holders of a majority of the outstanding shares of
common stock of the Corporation did, by a written consent in accordance with
Section 228 of the Delaware General Corporation Law, duly adopt said amendments
proposed by the Board of Directors.
THIRD: These amendments were duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Laws.
IN WITNESS WHEREOF, the undersigned has caused its corporate
seal to be affixed hereto and this Certificate to be executed by its President
and attested by its Assistant Secretary, this 20th day of December, 1994.
Attest: Eye Care International, Inc.
By: /s/ Clark Marcus
--------------------
3
<PAGE>
CORRECTED CERTIFICATE OF AMENDMENT OF
EYE CARE INTERNATIONAL, INC.
EYE CARE INTERNATIONAL., INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
1. A Certificate of Amendment was filed with the Secretary of State of
the State of Delaware on December 30, 1994 which contains an inaccurate record
of the corporate action taken therein, and said Certificate requires correction
as permitted by subsection (f) of Section 103 of the General Corporation Law of
the State of Delaware.
2. This Certificate of Correction is to correct an inconsistency
between the words and immediately following parenthetical numerical expression
of the par value of the Preferred Stock in the last sentence of paragraph (a)
of Article 4. The par value of the Preferred Stock is one tenth of one cent
($.001) per share.
3. The Certificate in corrected form is as follows:
"4. (a) The total number of shares which the Corporation is
authorized to issue shall be Forty Million (40,000,000) shares of which Twenty
Million (20,000,000) shares shall be designated as Class A common stock, with
a par value of One Tenth of One Cent ($.001 ) per share, Ten Million
(10,000,000) shares shall be designated as Class B common stock with a par
value of One Tenth of One Cent ($.001) per share and the remaining Ten Million
(10,000.,000) shares shall be Preferred Stock with a par value of One Tenth of
One Cent ($. 001 ) per share. "
EYE CARE INTERNATIONAL, INC. has caused this Corrected Certificate of
Amendment to be signed by (Clark Marcus, its authorized officer, this
day of June, 1997.
By: /s/ Clark Marcus
----------------------------------
Name: Clark Marcus
Title: Chief Executive Officer and President
<PAGE>
State of Delaware
Office of the Secretary of State
"I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "EYE CARE INTERNATIONAL, INC.", FILED IN THIS OFFICE ON THE
TWELFTH DAY OF NOVEMBER, A.D. 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
2406920 8100
991480955
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
0077323
AUTHENTICATION:
DATE: 11/12/99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/12/1999
991480955 - 2406920
EYE CARE INTERNATIONAL, INC.
Certificate of Designation
Series A Convertible Preferred Stock
Pursuant to Section 151
of the
General Corporation Law of the State of Delaware
Eye Care International, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Corporation"), DOES HEREBY CERTIFY that, at a meeting of the Board of
Directors on November 10, 1999, the following resolution was duly adopted by the
Board of Directors of the Corporation pursuant to Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the Corporation by Article 4 of the Corporation's
certificate of incorporation, as amended (the "Certificate of
Incorporation"), a series of Preferred Stock of the Corporation be, and
it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), to
consist of 1,500 shares, par value $0.001 per share, of which the
preferences and relative and other rights, and the qualifications,
limitations or restrictions thereof, shall be (in addition to those set
forth in the Corporation's Certificate of Incorporation) as follows:
1. Dividend Rights. Holders of shares of Series A Preferred Stock shall
have no right to receive dividends.
2. Liquidation Rights.
2.1 In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary (each of
which is hereinafter referred to as a "Liquidation"), the holders of shares of
Series A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount per share equal to $1,000, before any distribution shall be made to the
holders of Class A or Class B Common Stock or any other stock junior to Series A
Preferred Stock as to the distribution of assets upon Liquidation. (Except as
specifically indicated or unless the context requires otherwise, references
herein to Common Stock include the Class A and Class B Common Stock). If upon
Liquidation the Corporation's assets are not sufficient to pay in full the
amounts so payable to the holders of shares of Series A Preferred Stock and the
holders of any other series of Preferred Stock
1
<PAGE>
ranking on a parity as to the distribution of assets on Liquidation with shares
of Series A Preferred Stock, all shares of Series A Preferred Stock and of such
other series of Preferred Stock shall participate ratably in the distribution of
assets in proportion to the full amounts to which they are respectively
entitled.
2.2 For the purpose of this Paragraph 2, a consolidation or
merger of the Corporation with any other corporation, or the sale, transfer or
lease of all or substantially all of its assets, shall not constitute or be
deemed a Liquidation.
3. Redemption.
3.1 At any time on or after the third anniversary of the date
upon which shares of Series A Preferred Stock are first issued (the "Date of
Initial Issue"), the Corporation shall have the right to redeem, in whole or in
part, all of the outstanding shares of Series A Preferred Stock at a price of
$1,200 per share to the extent the Corporation shall have funds legally
available for such payment.
3.2 Notice or redemption of Series A Preferred Stock shall be
given to the holders of shares of Series A Preferred Stock by mailing to such
holders a notice of such redemption, first class, postage prepaid, not less than
20 nor more than 30 days before the date fixed for redemption, at their last
addresses as they shall appear upon the books of the Corporation. Any notice
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the stockholder receives such notice; and
failure duly to give such notice by mail, or any defect in such notice, to any
stockholder whose shares of Series A Preferred Stock have been designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Series A Preferred Stock. The notice of redemption shall
state the number of outstanding shares of Series A Preferred Stock to be
redeemed from such holder and the date fixed for such redemption, the price at
which such shares are to be redeemed, and where payment of the redemption price
is to be made upon surrender of such shares.
3.3 On and after the date fixed in any such notice of
redemption as the date of redemption (unless default shall be made by the
Corporation in providing moneys for the payment of the redemption price), all
rights as stockholders of the Corporation of the holders of shares of Series A
Preferred Stock to be redeemed, except the right to receive the redemption price
as herein provided, shall cease and terminate. At any time on or after the date
fixed as aforesaid for such redemption, the respective holders of record of
shares of Series A Preferred Stock to be redeemed shall be entitled to receive
the redemption price upon actual delivery to the Corporation of certificates of
the shares to be redeemed, such certificates, if required by the Corporation, to
be properly stamped for transfer and duly endorsed in blank or accompanied by
proper instruments of assignment and transfer thereof duly executed in blank.
3.4 In the event that the Corporation does not have funds
legally available to redeem all of the shares of Series A Preferred Stock at the
time specified in Paragraph 3.3, the
2
<PAGE>
Corporation shall so advise the holder or holders of the shares in writing by
first class registered or certified mail sent to each such holder's address as
it appears on the records of the Corporation, and the obligation of the
Corporation to redeem such shares shall be postponed until such time as the
Corporation shall have funds legally available to permit such redemption. At
such time, the Corporation shall fix a postponed date for the redemption and so
advise the holder or holders of such shares in writing in the manner provided in
Paragraph 3.2.
4. Status of Series A Preferred Stock Reacquired. Shares of Series A
Preferred Stock which have been issued and reacquired in any manner shall (upon
compliance with applicable provisions of the laws of the State of Delaware), be
deemed to be canceled and have the status of authorized and unissued shares of
the class of Preferred Stock issuable in series undesignated as to series and
may be redesignated and reissued.
5. Voting Rights. Except as required by law, no holder of Series A
Preferred Stock will be entitled to vote on matters as to which stockholders
generally are entitled to vote.
6. Conversion Rights.
6.1 Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, into 2,000 shares of Class A
Common Stock (the "Conversion Rate"), subject to adjustment as hereinafter
provided, at any time or from time to time upon the terms and in the manner
hereinafter set forth in this Paragraph 6.
6.1.2 In order to convert shares of Series A Preferred Stock
into Class A Common Stock, the holder thereof shall (i) surrender the
certificate or certificates for such shares of Series A Preferred Stock, duly
endorsed to the Corporation or in blank, to the Corporation at its principal
office or at the office of the agency maintained for such purposes, (ii) give
written notice to the Corporation at such office that such holder elects to
convert such shares of Series A Preferred Stock, and (iii) state in writing
therein the name or names in which such holder wishes the certificate or
certificates for shares of Class A Common Stock to be issued. Each conversion
shall be deemed to have been effected at the close of business on the date on
which the Corporation or such agency shall have received such surrendered Series
A Preferred Stock certificate(s), and the person or persons in whose name or
names any certificate or certificates for shares of Class A Common Stock shall
be issuable upon such conversion shall be deemed to have become the record
holder or holders of the shares represented thereby on such date. As soon as
practicable after such conversion, the Corporation shall issue or deliver at
such office to the holder for whose account such shares of Series A Preferred
Stock were so surrendered, or to such holder's nominee or nominees, certificates
(bearing such legend(s) as may be required under applicable securities laws) for
the number of full shares of Class A Common Stock to which such holder shall be
entitled, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the closing
price per share of the Class A Common Stock on the principal exchange (including
for this purpose, the Nasdaq National Market) on which it is then listed, or if
it is not so listed, the closing bid price per share for such stock, as reported
by Nasdaq, the OTC Bulletin Board, the National Quotation
3
<PAGE>
Bureau, Incorporated or other similar service which regularly reports closing
bid quotations for such stock, in each instance as of the close of business on
the date of such conversion.
6.2 The conversion rate shall be subject to adjustment from
time to time in case the Corporation shall pay a stock dividend on its Class A
Common Stock (other than in shares of the Series A Preferred Stock), or in case
the Corporation shall subdivide or combine the outstanding shares of Class A
Common Stock, the conversion rate shall immediately be proportionately adjusted.
In case of any capital reorganization or any reclassification of the capital
stock of the Corporation or in case of the consolidation or merger of the
Corporation with or into another corporation or the sale of all or substantially
all of the assets of the Corporation as or substantially as an entirety to
another corporation, each share of Series A Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
to which a holder of the number of shares of Class A Common Stock of the
Corporation then deliverable upon conversion of such share of Series A Preferred
Stock would have been entitled upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the shares of Series A Preferred Stock,
to the end that the provisions set forth herein (including provisions with
respect to changes in and other adjustments of the conversion rate) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the shares of Series A Preferred Stock.
6.3 No adjustment in the conversion rate shall be required
unless such adjustment (and any other adjustments which by reason of this
Paragraph 6.3 are not required to be made) would not, if made, entitle the
holders of all then outstanding shares of Series A Preferred Stock upon
conversion thereof to receive additional shares of Class A Common Stock equal in
the aggregate to one percent (1%) or more of the total issued and outstanding
shares of Class A Common Stock. All calculations under this Paragraph 6.3 shall
be made to the nearest one one-hundredth (1/100) of a share.
6.4 Whenever the conversion rate is adjusted as herein
provided, an officer of the Corporation shall compute the adjusted conversion
rate in accordance with the foregoing provisions and shall prepare a written
instrument setting forth such adjusted conversion rate and showing in detail the
facts upon which such adjustment is based, and a copy of such written instrument
shall forthwith be mailed to each holder of record of the Series A Preferred
Stock, and made available for inspection by the stockholders of the Corporation.
6.5 The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued Class
A Common Stock, for the purpose of effecting the conversion of the shares of
Series A Preferred Stock, the full number of shares of Class A Common Stock then
deliverable upon the conversion of all shares of Series A Preferred Stock then
outstanding, and such shares shall be listed, subject to notice of issuance, on
any stock exchange(s) on which outstanding shares of Class A Common Stock may
then be listed.
4
<PAGE>
6.6 The Corporation will pay and all taxes that may be payable
in respect of the issuance or delivery of shares of Class A Common Stock on
conversion of shares of Series A Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of Class
A Common Stock in a name other than that in which the shares of Series A
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax, or has established, to the satisfaction
of the Corporation, that such tax has been paid or is not payable.
6.7 All issued and outstanding shares of Series A Preferred
Stock shall be deemed to have been converted into, and shall (without any action
of the holder thereof) become, that number of fully paid and nonassessable
shares of Class A Common Stock into which such shares of Series A Preferred
Stock are then convertible in accordance with the provisions of this Paragraph 6
immediately upon the consummation of the Corporation's sale of Common Stock in a
bona fide public offering on an underwritten firm commitment basis pursuant to a
registration statement declared effective by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, which public offering results
in aggregate gross cash proceeds to the Corporation of at least $5,000,000.
7. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights other than those
specifically set forth in this resolution and in the Certificate of
Incorporation, as amended.
8. Severability of Provisions. If any right, preference or limitation
of the Series A Preferred set forth in this resolution is invalid, unlawful, or
incapable of being enforced by reason of any rule of law or public policy, all
other rights, preferences and limitations set forth in this resolution which can
be given effect without the invalid, unlawful or unenforceable right, preference
or limitation shall, nevertheless, remain in full force and effect, and no
right, preference or limitation herein set forth shall be deemed dependent upon
any other such right, preference or limitation unless so expressed herein.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
5
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Clark Marcus, its President and
Chief Executive Officer, and attested to by James L. Koenig, its Secretary, this
10th day of November 1999.
/s/ Clark Marcus
------------------------------------
Clark Marcus
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
/s/ James L. Koenig
- ------------------------
James L. Koenig
Secretary
6
