-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F7Tapfn+1SAenBk7v0bS659wDTcCXQ1xotNpOT8mVlX9SRBnrfJNTZRiqVo5IIKG ZoJZBJCAYDqaf6rxkyurVQ== 0000892569-96-000884.txt : 19960607 0000892569-96-000884.hdr.sgml : 19960607 ACCESSION NUMBER: 0000892569-96-000884 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19960606 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISTA LASER CENTERS OF MICHIGAN INC CENTRAL INDEX KEY: 0001006186 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 133847240 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-00448 FILM NUMBER: 96577309 BUSINESS ADDRESS: STREET 1: 2224 WALKER RD STREET 2: SUITE 30 CITY: WINDSOR STATE: A1 ZIP: 10022 BUSINESS PHONE: 2128329292 MAIL ADDRESS: STREET 1: 126 E 56TH ST STREET 2: 2ND FL CITY: NEW YORK STATE: NY ZIP: 10022 SB-2/A 1 AMENDMENT NO. 2 TO FORM SB-2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1996 REGISTRATION NO. 333-448 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ VISTA LASER CENTERS OF MICHIGAN, INC. (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) ------------------------ NEVADA 8093 13-3847240 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
126 E. 56TH STREET, 2ND FLOOR NEW YORK, NEW YORK 10022 (212) 832-9292 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) 2224 WALKER ROAD WINDSOR, ONTARIO, CANADA N8W 3P6 (ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PLACE OF BUSINESS) THEODORE J. MAYER, SECRETARY VISTA LASER CENTERS OF MICHIGAN, INC. 126 E. 56TH STREET, 2ND FLOOR NEW YORK, NEW YORK 10022 (212) 832-9292 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ------------------------ WITH COPIES TO: LAW OFFICE OF WILLIAM M. CURTIS GARRY S. O'RAFFERTY, ESQ. 25241 BUCKSKIN DRIVE TITUS, BRUECKNER & BERRY, P.C. LAGUNA HILLS, CALIFORNIA 92653-5736 7373 NORTH SCOTTSDALE ROAD, SUITE B-252 SCOTTSDALE, ARIZONA 85253
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: as soon as practicable after this Registration Statement shall become effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------- 10% Series A Cumulative Convertible Preferred Stock(2)................ 920,000 shares $5.00 $4,600,000 $ 1,586.21 - ------------------------------------------------------------------------------------------------------------------- 10% Series A Cumulative Convertible Preferred Stock(3)................ 100,000 shares $5.00 $ 500,000 172.41 - ------------------------------------------------------------------------------------------------------------------- Underwriter's Warrants.............. 80,000 warrants $0.001 $ 80 .03 - ------------------------------------------------------------------------------------------------------------------- 10% Series A Cumulative Convertible Preferred Stock issuable upon exercise of Underwriter's Warrants(5)....................... 80,000 shares $6.00 $ 480,000 165.52 - ------------------------------------------------------------------------------------------------------------------- Common stock(4)(5).................. 1,100,000 shares -0- -0- -- - ------------------------------------------------------------------------------------------------------------------- TOTAL $ 1,924.17 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 and based upon the proposed maximum offering price. (2) Includes 120,000 shares subject to the Underwriter's over-allotment option. See "Underwriting." (3) Includes shares registered for the account of a selling stockholder. See "Principal and Selling Stockholders". (4) Includes shares of Common Stock issuable upon conversion of 10% Series A Cumulative Convertible Preferred Stock. (5) Pursuant to Rule 416, there are also being registered hereunder such additional securities as may become issuable upon conversion of 10% Series A Cumulative Convertible Preferred Stock or upon exercise of the Underwriter's Warrants pursuant to anti-dilution provisions. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 VISTA LASER CENTERS OF MICHIGAN, INC. CROSS-REFERENCE SHEET
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS - ------------------------------------------------------- ------------------------------------- 1. Front of Registration Statement and Outside Front Cover Page of Prospectus......................... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus....................................... Inside Front Cover Page; Outside Back Cover Page 3. Summary Information and Risk Factors............. Prospectus Summary; Risk Factors 4. Use of Proceeds.................................. Prospectus Summary; Use of Proceeds 5. Determination of Offering Price.................. Risk Factors; Underwriting 6. Dilution......................................... Dilution 7. Selling Security Holders......................... Principal and Selling Stockholders 8. Plan of Distribution............................. Outside Front Cover Page; Underwriting; Plan of Distribution by Selling Stockholder 9. Legal Proceedings................................ (Not Applicable) 10. Directors, Executive Officers, Promoters and Control Persons.................................. Management; Certain Transactions; Principal and Selling Stockholders 11. Security Ownership of Certain Beneficial Owners and Management................................... Management; Certain Transactions; Principal and Selling Stockholders 12. Description of Securities........................ Outside Front Cover Page; Prospectus Summary; Description of Securities; Federal Income Tax Considerations; Underwriting 13. Interests of Named Experts and Counsel........... (Not Applicable) 14. Disclosure of Commission Position on on Indemnification for Securities Act Liabilities... (Not Applicable) 15. Organization Within Last Five Years.............. Certain Transactions 16. Description of Business.......................... Prospectus Summary; Risk Factors; Use of Proceeds; Capitalization; Selected Financial Data; Management Discussion and Analysis and Plan of Operation; Proposed Business; Certain Transactions; Dividend Policy; Financial Statements 17. Management Discussion and Analysis or Plan of Operation........................................ Management Discussion and Analysis and Plan of Operation 18. Description of Property.......................... Proposed Business 19. Certain Relationships and Related Parties........ Management; Certain Transactions 20. Market for Common Equity and Related Stockholder Matters.......................................... (Not Applicable) 21. Executive Compensation........................... Management 22. Financial Statements............................. Summary Financial Data; Financial Statements 23. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.............. (Not Applicable)
3 EXPLANATORY NOTE This registration statement contains two forms of prospectuses; one to be used in connection with a firm commitment underwriting of up to 920,000 shares of 10% Series A Cumulative Convertible Preferred Stock including an over-allotment option (the "Firm Commitment Prospectus") and one to be used in a concurrent offering of up to 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock for the account of a selling stockholder (the "Selling Stockholder Prospectus"). The Firm Commitment Prospectus and the Selling Stockholder Prospectus are identical except for alternative pages appearing after the end of the Firm Commitment Prospectus. Each of the pages for the Selling Stockholder Prospectus included herein is labeled "Alternative Page". 4 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE 6, 1996 PROSPECTUS VISTA LASER CENTERS OF MICHIGAN, INC. 900,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK Of the 900,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $.01 per share ("Series A Preferred") of Vista Laser Centers of Michigan, Inc., a Nevada corporation (the "Company"), offered hereby, 800,000 shares are being offered pursuant to this Prospectus in a firm commitment underwriting at a price of $5.00 per share and 100,000 shares are being offered from time to time hereafter under a separate prospectus for the account of Refractive Services-800, Inc. (the "Selling Stockholder"). The Company will not receive any proceeds from the offering by the Selling Stockholder. Shares of Series A Preferred are entitled to a $.50 cumulative dividend per annum, payable annually in cash or, if cash dividends may not legally be paid, at the Company's option in Series A Preferred or Common Stock. Commencing 30 days after the date of this Prospectus, each share of Series A Preferred is convertible into one (1) share of the Company's common stock, par value $.01 per share ("Common Stock"), subject to adjustment in certain events to prevent dilution. Series A Preferred may be redeemed at the option of the Company at any time upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. The liquidation preference of Series A Preferred is $5.00 per share and each share is entitled to one vote on all matters on which any stockholders are entitled to vote. See "Description of Securities", "Principal and Selling Stockholders", "Underwriting" and "Plan of Distribution by Selling Stockholder". Prior to this offering, there has been no public market for any securities of the Company and there can be no assurance that an active public market will develop or, if developed, that it will be sustained. The initial offering price of the Series A Preferred stock was determined by negotiations between the Company and Dickinson & Co. (the "Representative"), as representative of the several underwriters, and does not necessarily relate to the Company's book value or other established criteria of value. See "Underwriting". The Company has applied for listing of the Series A Preferred Stock on the Nasdaq Small Cap Market under the trading symbol "IIMIP" and on the Boston Stock Exchange, but there can be no assurance that either of such applications will be approved. Even if approved for listing, the Company will be required to maintain certain minimum criteria to maintain such listings, as to which there can be no assurance. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY ANY PERSON WHO CANNOT AFFORD RISK OF LOSS OF THE INVESTMENT. SEE "RISK FACTORS" AT PAGE 7 OF THIS PROSPECTUS. THE COMPANY IS IN THE DEVELOPMENT STAGE AND CURRENTLY HAS NO OPERATIONS PRIOR TO THIS OFFERING. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PUBLIC AND COMMISSIONS(1) COMPANY(2) - ----------------------------------------------------------------------------------------------------- Per Share........................... $5.00 $.50 $4.50 Total(3)............................ $4,000,000 $400,000 $3,600,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) In addition, the Company has agreed to pay to the Representative a 3% nonaccountable expense allowance and to sell to the Representative warrants ("Underwriter's Warrants") exercisable at $6.00 per share to purchase 80,000 shares of Series A Preferred stock. The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting expenses of the offering, including the nonaccountable expense allowance in the amount of $120,000 ($138,000 if the Underwriters' over-allotment option is exercised in full), payable by the Company estimated at $200,000. (3) The Company has granted the Underwriters an option exercisable within 45 days after the date of this Prospectus, to purchase up to 120,000 additional shares of Series A Preferred for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $4,600,000, $460,000 and $4,140,000, respectively. See "Underwriting." The shares offered hereby are offered by the several Underwriters subject to prior sale, when, as and if delivered to and accepted by them, including the right of the Underwriters to withdraw, cancel or reject orders in whole or in part and subject to certain other conditions. It is expected that the delivery of certificates representing the shares will be made against payment on or about , 1996 at the offices of the Representative. DICKINSON & CO. The date of this Prospectus is , 1996. 5 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A PREFERRED STOCK AND THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The registration statement of which this Prospectus is a part also covers 100,000 outstanding shares of Series A Preferred stock offered under a separate prospectus for the account of Refractive Services-800, Inc. (the "Selling Stockholder"), a founder of the Company (see "Certain Transactions"). The Company will not receive any proceeds from the offering of securities by the Selling Stockholder. The Selling Stockholder has agreed that it will not sell any of such shares or Common Stock issuable upon conversion of such shares at any time during the 12 month period after the date of this Prospectus without the prior consent of the Representative of the Underwriters. Sales of such securities by the Selling Stockholder, or the potential of such sales, may have an adverse effect on the market price of the securities offered hereby. See "Risk Factors", "Principal and Selling Stockholders", "Underwriting" and "Plan of Distribution by Selling Stockholder". ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission ("Commission") a Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities covered by this Prospectus. For the purposes hereof, the term "Registration Statement" means the original Registration Statement and any and all amendments thereto, including the schedules and exhibits to such original Registration Statement or any such amendment. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, to which reference is hereby made. Each statement made in this Prospectus concerning a document filed as an exhibit to the Registration Statement is qualified in its entirety by reference to such exhibit for a complete statement of its provisions. Any interested party may inspect the Registration Statement, without charge, at the public reference facilities of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices in Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661) and in New York (Seven World Trade Center, Suite 1300, New York, New York 10048). Any interested party may obtain copies of all or any portion of the Registration Statement at prescribed rates from the Public Reference Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. U.S. DOLLAR PRESENTATION The Company publishes its consolidated financial statements in U.S. dollars. The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of its revenues and expenses may be collected and paid in Canadian dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. Except as otherwise stated herein, in this Prospectus all references to "$" are to United States currency and all monetary amounts are presented in U.S. dollars. The Company intends to furnish its stockholders each year with annual reports containing audited financial statements and a report thereon expressed by independent public accountants and such other reports as the Company deems appropriate or as may be required by law. 2 6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. An investment in the securities offered hereby involves a high degree of risk and the securities should not be purchased except by those able to afford the loss of their investment. See "Risk Factors." Unless otherwise indicated, all per share data and information in this Prospectus relating to the number of shares assumes that the Underwriter's over-allotment option to purchase an additional 120,000 shares of Series A Preferred stock is not exercised and that the Underwriter's Warrants to purchase 80,000 shares of Series A Preferred stock are not exercised. A glossary of certain medical and other terms used in this Prospectus is set forth under the caption "Glossary" at the end of this Prospectus. THE COMPANY Vista Laser Centers of Michigan, Inc. (the "Company") is a development stage enterprise recently organized on June 30, 1995 to acquire advanced laser medical equipment and to manage and administer laser vision correction ("LVC") support services ("LVC Services") under contracts with independent ophthalmologists ("MDs") and optometrists ("ODs"). The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, and negotiating agreements to acquire equipment and provide support services to vision care professionals in Ontario and Michigan. The Company will enter into nonexclusive service agreements with independent MDs and ODs who desire to contract for use of the Company's equipment and LVC Services. The Company will earn its fees for the fair market value of the Company's LVC Services by billing health care professionals at the time of use, with such fees typically based upon a negotiated percentage of the gross procedure fees charged to patients by the professional; payment normally will be received when the professional collects its gross procedure fee from the patient. The gross procedure fee is established by the professional, except that the Company's consent will be required for gross procedures fees at less than $1,200 per eye. Generally speaking, gross procedure fees charged by professionals for LVC treatment in most markets currently ranges from approximately $1,500 to $2,000 per eye, although there can be no assurance these levels will be maintained for the long term. Support services offered by the Company will include, among others, access to the Company's equipment, supplies and support personnel; administration of accounting, billing, collection and other information processing functions; training and education in advanced LVC procedures; and marketing support. There can be no assurance that MDs and ODs will require and contract for the Company's LVC Services, and professionals that do contract with the Company cannot be required to use exclusively the Company's services for their LVC practice. Advanced equipment planned to be acquired by the Company in the United States. and Canada include excimer lasers for photorefractive keratectomy ("PRK") procedures recently approved for use in the U.S. and, in Canada, other forms of laser procedures which are not yet approved for use in the U.S., such as laser assisted in situ keratomileusis ("LASIK"). PRK laser treatment is useful in correcting the vast majority of nearsighted (myopia) refractive disorders as an alternative to eyeglasses, contact lens or surgical incision procedures such as radial keratotomy ("RK"). LASIK, although a more delicate procedure than PRK, offers advantages of quicker healing and may also be used to treat farsightness (hyperopia), astigmatism and more extreme cases of myopia. PRK, LASIK and other LVC procedures performed with excimer and holmium laser systems improve visual acuity by removing submicron layers of tissue from the surface of the cornea to reshape the eye. LVC procedures are administered on an outpatient basis by the independent health care professional, typically requiring from 15 to 30 minutes for the actual procedure in addition to pre-operative diagnosis and subsequent post-operative care. A key part of the Company's strategy is to offer professionals the benefit of training, consulting and advisory services of certain ophthalmologists experienced in a variety of LVC treatments, procedures and post-operative care. In order to obtain access to this expertise, the Company has entered into consulting agreements 3 7 with Dr. Donald G. Johnson of British Columbia and Dr. J. Charles Casebeer of Arizona, who are directors and stockholders of the Company. Dr. Casebeer's professional corporation will receive compensation for his services as Chairman of the Board and for assisting in management of the Company's training program for MDs and ODs. To date, Dr. Johnson has successfully treated over 7,000 eyes using LVC procedures and has developed an advanced proprietary method called the Johnson transepilthelial multi-zone, multi-pass PRK procedure ("TMM PRK") currently approved for use in Canada and covered by a patent application owned by Dr. Johnson. Dr. Casebeer's experience includes more than 6,000 keratorefractive procedures (surgical incisions of the cornea), over 100 PRK cases for treatment of myopia and approximately 40 LASIK procedures in the U.S. under protocols established by the U.S. Food and Drug Administration ("FDA"), as well as approximately 150 LASIK cases in France, Saudi Arabia and the Far East. Dr. Casebeer has served as a course director for refractive surgical techniques and developments at numerous courses and symposiums throughout the world. See "Management" and "Certain Transactions". To date, the Company has assumed a lease to acquire a Summit Technology holmium laser system for intended use in Michigan and has contracted upon completion of this offering to purchase from Dr. Fouad Tayfour of Windsor, Ontario, a Summit excimer laser system, a Sunrise Technologies LTK holmium laser system and related equipment for use at facilities in Windsor, Ontario to be subleased by the Company from an affiliate of Dr. Tayfour. The Company has entered into other agreements with Dr. Tayfour for him to render consulting services to the Company, to train other MDs and ODs, and to define terms for use by Dr. Tayfour of equipment and LVC Services to be offered by the Company upon completion of this offering. Dr. Tayfour also has the right of designating the Company's Chief Executive Officer and three of six members of its board of directors. Since 1991, Dr. Tayfour has performed more than 2,000 LVC procedures in Canada, principally by use of the LASIK technique. Vista Technologies Inc. ("Vista Technologies") and Refractive Services-800, Inc. are the founders and principal stockholders of the Company. The Company has entered into agreements with Vista Technologies and Refractive Services 800 Corp. ("RS-800"), a wholly-owned subsidiary of Refractive Services-800, Inc. Vista Technologies currently operates five PRK surgical centers in Europe and will provide certain consulting services to the Company for a fee equal to 5% of the Company's revenues attributable to LVC Services less a credit of $5,000 per month. RS-800 has agreed to license, at the Company's option, use of certain 800 and 900 area code telephone numbers as part of the Company's marketing and public education programs for a fee equal to 2 1/2% of LVC Services revenues directly attributable to use of those numbers, if any. Vista Technologies and Refractive Services-800, Inc. have formed, and intend to form and sponsor in the future, additional LVC Service companies using the Vista Laser Centers name in other North American geographic markets. Dr. Johnson is Chairman of the Board of Vista Technologies and Drs. Johnson and Casebeer were elected directors of Vista Technologies on February 16, 1996; it is anticipated they will act as consultants for Vista Technologies in these other enterprises. Jac. J. Lam, a director of the Company, also serves as a director of Vista Technologies. Investors in this offering will not acquire an interest in other companies formed and sponsored by Vista Technologies and Refractive Services-800, Inc. The Company's principal executive offices are temporarily located at 126 E. 56th Street, 2nd Floor, New York, New York 10022, telephone number (212) 832-9292. After completion of this offering, the Company's principal place of business will be relocated to its first LVC equipment site in Canada, which will be located at 2224 Walker Road, Windsor, Ontario N8W 3P6. It is anticipated that the Company's Canadian operations will be conducted through a recently-formed, wholly-owned Ontario subsidiary that has not previously engaged in any business activities. All references in this Prospectus to the Company includes both the Company and its subsidiaries unless otherwise indicated by the context. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". 4 8 THE OFFERING Securities Offered: 900,000 shares of Series A Preferred stock, of which 800,000 shares are being offered pursuant to this Prospectus in a firm commitment underwriting at a price of $5.00 per share and 100,000 shares are being offered from time to time hereafter under a separate prospectus for the account of the Selling Stockholder. See "Description of Securities", "Underwriting" and "Plan of Distribution by the Selling Stockholder". Securities to be outstanding after this 900,000 shares of Series A Preferred stock, 200,000 shares of offering(1): Series B Preferred stock and 30,000 shares of Common Stock. Summary terms of Series A Preferred: Dividends 10% ($.50 per share) cumulative dividend per annum, payable annually commencing one year after this offering. Dividends will be payable in cash or, if cash dividends may not legally be paid, at the Company's option may be paid in Series A Preferred or Common Stock subject to the prior registration of such dividend shares under the Securities Act of 1933. Conversion Rights Each share will be convertible into one (1) share of Common Stock at any time commencing 30 days after the date of this Prospectus until the second business day prior to redemption of Series A Preferred, if called for redemption. Optional Redemption Each share will be redeemable at the option of the Company upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. There are no sinking fund or other mandatory redemption provisions. Voting One vote per share on all matters on which stockholders are entitled to vote or consent. Liquidation Preference $5.00 per share. Use of Proceeds: Proceeds will be applied to equipment purchases and hiring personnel to provide LVC Services and related working capital requirements. At least $500,000 of such proceeds used for equipment purchases will be paid to an affiliate of Dr. Fouad Tayfour, who has entered into certain agreements with the Company effective upon completion of this offering, and at least $155,000 of proceeds will be applied to the payment of compensation to officers and directors within 12 months after the date of this Prospectus. An affiliate of Dr. Tayfour will also receive a $500,000 10% note payable due on the second anniversary of the date of this Prospectus. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". Risk Factors: The securities offered hereby are speculative, involve a high degree of risk, and should not be purchased by investors who cannot afford the loss of their investment. Investors should review and carefully consider the information set forth under "Risk Factors" and "Dilution".
- --------------- (1) Does not include the Underwriter's over-allotment option, shares of Series A Preferred stock reserved for issuance upon exercise of the Underwriter's Warrants, shares of Common Stock reserved for conversion of Series A Preferred and Series B Preferred stock or shares reserved for issuance upon exercise of outstanding Class A Warrants and stock options. See "Management -- 1995 Stock Option Plan", "Description of Securities" and "Underwriting". 5 9 SUMMARY FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
PERIOD FROM INCEPTION (JUNE 30, 1995) THROUGH MARCH 31, 1996 ----------------------- Interest income......................................... $ 557 Net (loss) adjusted for dividends in arrears............ $ (50,689) Net (loss) per common and common equivalent share....... $ (0.22) Weighted average common and common equivalent shares outstanding........................................... 226,269 Dividends in arrears.................................... $ 16,042
CONSOLIDATED BALANCE SHEET DATA:
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- Current assets..................................... $ 39,648 $2,322,353 Total assets....................................... $652,987 $5,138,545 Long-term debt..................................... -- $ 916,192 Stockholders' equity............................... $481,853 $4,109,353
- --------------- (1) Gives effect to (i) the sale of 800,000 shares of Series A Preferred stock offered on a firm commitment basis by the Underwriters, (ii) the anticipated application of estimated net proceeds therefrom (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with such offering), including cash outlays for equipment purchases totaling $550,000 and a $500,000 10% note payable due on the second anniversary of the date of this Prospectus to Dr. Fouad Tayfour and certain other cash payments to unaffiliated third parties for equipment totalling $700,000 and an investment in a proposed joint venture totaling $150,000, and (iii) the assumed exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding stock options. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Management -- 1995 Stock Option Plan", "Certain Transactions", "Description of Securities" and "Underwriting". 6 10 RISK FACTORS An investment in the securities offered hereby involves a high degree of risk and should not be purchased by persons who cannot afford the loss of their entire investment. The following factors, in addition to those discussed elsewhere in this Prospectus, should be considered carefully in connection with an investment in the securities of the Company offered hereby. LIMITED OPERATING HISTORY AND DEVELOPMENT STAGE; ACCUMULATED DEFICIT. The Company was organized on June 30, 1995 and is in the development stage. Since its inception, the Company's activities have been devoted to development of its plan of operations, negotiating agreements to acquire equipment and advisory services for planned business activities that will commence immediately upon completion of this offering, and raising capital to fund initial development activities and the expenses of this public offering. Accordingly, the Company has not generated any revenues and has no operating history from which to forecast its future business and operations. As of March 31, 1996, the Company has an accumulated deficit from operations since its inception of $34,647 and deferred costs of this offering of $113,339. The Company will be subject to numerous risks incident to the creation of new businesses with no prior history of operations. Prospective investors should consider the frequency with which newly developed businesses encounter unforeseen expenses, difficulties, complications and delays, and other factors such as the possibility of competition with larger companies. As examples, the Company may experience unanticipated delays in the development of its LVC Services, there can be no prediction as to the amount of revenues it will generate and whether such revenues will be sufficient to provide positive cash flows, and it may be difficult or impossible to obtain additional financing if required for the Company's business. There can be no assurance that the Company will achieve profitability in the future or that profitability, if achieved, will be sustained. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business" and "Certain Transactions". RISK OF GOING CONCERN QUALIFICATION IN AUDITOR'S REPORT. The report of the Company's independent certified public accountants contains an explanatory paragraph as to the Company's ability to continue as a going concern. Among other factors cited by the accountants as raising substantial doubt as to the Company's ability to continue as a going concern is that the Company is dependent upon raising additional financing through a public or private offering to meet its obligations and commitments. See the Consolidated Financial Statements elsewhere in this Prospectus. DEPENDENCE ON MEDICAL PROFESSIONALS. Applicable laws in Canada and the United States prevent a corporation (other than a professional medical corporation) from providing medical and health care services to patients. The Company will conduct its business by offering LVC equipment for use by licensed professionals and providing billing, accounting, administrative, marketing and management services to independent health care professionals who provide refractive eye care. The Company's ability to realize revenues from independent professionals, therefore, will be significantly dependent upon its ability to attract the use of its equipment and LVC Services by ophthalmologists ("MDs") and optometrists ("ODs") and on the performance of those professionals. In addition, the amount of revenues to be received by the Company will be dependent upon the amount of the gross procedure fee charged by professionals to their patients, and the amount of such fees are established by the professionals and not by the Company. To date the Company has entered into only one services agreement with a licensed professional, Dr. Fouad Tayfour, although others are in negotiation. There can be no assurance that professionals will require and contract for the Company's LVC Services, and even those professionals that do contract with the Company cannot be required to use the Company's services for their LVC practice on an exclusive or any other basis. See "Proposed Business". NO ASSURANCE OF MARKET ACCEPTANCE. The Company's proposed business of offering LVC Services to support advanced laser procedures such as PRK, TMM PRK and LASIK, involves recently developed technology and procedures and is a field subject to technological innovation and governmental regulation. There can be no assurance that health care professionals will require and contract for the Company's LVC Services. The Company believes that its profitability and growth will depend on broad market acceptance of LVC procedures in the United States and Canada by health care professionals in the ophthalmic community and the general public. Market acceptance of new methodology requires substantial time and effort and is 7 11 subject to various risks. The acceptance of LVC care may be adversely affected by its cost, concerns relating to safety and efficacy, general resistance to surgery, the effectiveness of alternative methods of correcting refractive vision disorders, the lack of long-term follow-up data, the possibility of unknown side effects and the lack of third-party reimbursement for the procedures. Many consumers may choose not to have LVC due to the availability of conventional nonsurgical and manually surgical methods of vision correction. Any future reported adverse effects or other unfavorable publicity involving patient outcomes from LVC could also adversely affect the Company's proposed business. Market acceptance could also be affected by the ability of the Company's consultants and other participants in the LVC market to train a broad population of MDs in LVC procedures. There can be no assurance there will be significant public acceptance of LVC technologies, and demand for the Company's equipment and LVC Services would be adversely affected if broad market acceptance of such procedures is not attained. COMPETITION. The refractive eye care business generally, and the market for corrective LVC procedures for which the Company intends to provide equipment and support services, are characterized by intense competition and technological innovation. Most of the companies engaged in these businesses have substantially greater financial resources, personnel, marketing experience and other capabilities than are currently available to the Company or will be available to the Company upon the completion of this offering. With recent PMA approval or conditional approval of PRK laser equipment systems by the FDA in late 1995, the Company believes that competition for PRK service facilities within the United States has and will continue to rapidly intensify. In addition, there are manual surgical alternatives to LVC procedures for vision correction, such as radial keratotomy ("RK"), that are generally less expensive than LVC procedures; notwithstanding certain limitations, manual refractive surgical procedures as well as eyeglasses and contact lenses are expected to remain competitive in the market for refractive eye care due to cost considerations. See "Business -- Competition". DEPENDENCE ON MANAGEMENT. The success of the Company will be substantially dependent on the services of its officers, directors and professional consultants who have experience in the refractive eye care business and, specifically, the management of surgical outpatient facilities. The Company is dependent in particular upon the services of Ghassan Barazi, its President, who has prior experience in managing a high volume ophthalmology outpatient clinic specializing in refractive surgery. The Company has, or intends to, engage the services of additional professional consultants and management personnel upon completion of this offering. The Company's operations therefore will be dependent upon a limited number of key employees and consultants. Loss of the services of these or other key personnel could have a material adverse effect upon the Company. The Company does not maintain key man insurance on the lives of its executive officers and key professional consultants, although it may elect to apply for such insurance after this offering has been completed. See "Management". RISK OF LACK OF FUNDS TO PAY CASH DIVIDENDS ON SERIES A PREFERRED. Nevada law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will be $4,750,000 ($5,350,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. The Company at its option, however, has the right to pay accrued dividends in either Series A Preferred or Common Stock if it would be legally prohibited from the payment of cash dividends on its Preferred Stock, subject to prior registration of such dividend shares under the Securities Act of 1933. Prospective investors should consider the risk that the Company may be unable to pay cash dividends on Series A Preferred as such dividends accrue. PROCEEDS BENEFITTING OFFICERS, DIRECTORS AND AFFILIATES AND PROSPECTIVE BENEFIT TO FOUNDER FROM SELLING STOCKHOLDER OFFERING. A portion of net proceeds from this offering by the Company will be used immediately to pay the $500,000 cash portion of approximately $1,050,000 in consideration to purchase an existing laser system and related equipment, which approximates its fair market value, from a corporation affiliated with Dr. Fouad Tayfour; the purchase price balance of approximately $500,000 will be financed by a two-year 10% 8 12 note. The Company also will enter into an agreement to sublease certain facilities from Dr. Tayfour's corporation at a rental of approximately $2,921 (Canadian currency) per month and Dr. Tayfour has agreed to enter into a Consulting Agreement and a Facilities Agreement with the Company effective upon the completion of this offering. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business" and "Certain Transactions". In addition, a minimum of $155,000 of the Company's proceeds from this offering will be applied to payment of compensation to its executive officers for the first 12 months of operations. The Company has agreed to engage the advisory services of certain ophthalmologists upon completion of this offering, two of whom (Drs. J. Charles Casebeer and Donald G. Johnson) are directors and stockholders of the Company. The Consulting Agreement with Dr. Casebeer, Chairman of the Board and a director, provides his professional corporation with compensation at the rate of $60,000 per annum (of which $60,000 for the first year will be paid upon completion of this offering) plus additional compensation of $2,500 for management of training and credentialing each professional that enters a credentialing program to be implemented by the Company. Ghassan Barazi, President and a director, will receive an annual base salary of $75,000 under his employment agreement (increasing to $100,000 per annum commencing with the first month after the Company has attained a consolidated net profit for the three immediately preceding months), a life insurance policy for his benefit in the face amount of approximately $375,000, other employee benefits plus a one-time hiring bonus of $20,000 (payable upon completion of this offering). In the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during its initial five year term or is not renewed for at least one additional year at the end of its initial five year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment under certain circumstances. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Management" and "Certain Transactions". The Company has entered into agreements to license the use of 800 and 900 telephone numbers from Refractive Services 800 Corp. ("RS-800"), a wholly-owned subsidiary of Refractive Services-800, Inc., at the option of the Company and for certain consulting services to be provided by Vista Technologies Inc. ("Vista Technologies") over a period of ten years, including advice as to LVC developments in Europe, corporate financing, facility leases, equipment financing, coordinating activities of mutual interest with other LVC Services companies sponsored by Vista Technologies, investor relations and certain accounting and legal compliance matters. Vista Technologies and Refractive Services-800, Inc. are founders and principal stockholders of the Company. Under the Consulting Services Agreement with Vista Technologies, Vista Technologies will receive 5% of the Company's revenues attributable to use of facilities and support services, less a credit to the Company of $5,000 per month. If the Company elects to use one or more of the telephone numbers licensed by RS-800, this corporate affiliate of Refractive Services-800, Inc. will receive 2 1/2% of revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. See "Proposed Business" and "Certain Transactions". Refractive Services-800, Inc., a founder of the Company, is the Selling Stockholder and from time to time hereafter intends to offer for sale up to 100,000 shares of Series A Preferred and/or Common Stock issuable upon conversion of such shares purchased in July 1995 at a cost of $100,000, which represents 20% of the per share price at which Series A Preferred is being offered to the public by the Company hereunder. The Company will not receive any proceeds from the sale of shares by the Selling Stockholder. The Selling Stockholder has agreed that it will not sell any of such shares at any time during the 12 month period after the date of this Prospectus without the prior consent of the Representative of the Underwriters. Prospective investors should consider that the securities to be so offered by the Selling Stockholder represent all of its security holdings in the Company. See "Certain Transactions", "Principal and Selling Stockholders" and "Underwriting". POSSIBLE NEED FOR ADDITIONAL FINANCING. Due to the risks associated with its business and lack of an operating history, the Company may require additional financing at a future date to maintain or expand its business operations. In addition to proceeds of this offering, the Company plans to rely upon equipment leasing or other forms of installment purchase obligations to finance a part of its equipment requirements, although no commitments for such financing has been yet applied for or obtained except with respect to its first location in Windsor. No assurance can be given that additional financing would be available on reasonable terms or on 9 13 any terms. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation" and "Proposed Business". CONFLICTS OF INTEREST AND POSSIBLE COMPETITION WITH FOUNDERS AND CERTAIN AFFILIATES. Refractive Services-800, Inc. and Vista Technologies Inc. ("Vista Technologies") are founders and principal stockholders of the Company. Vista Technologies has filed trademark applications for U.S. and Canadian service mark registration of the name "Vista Laser Centers", and both Refractive Services-800, Inc. and Vista Technologies have advised the Company that they intend to organize and sponsor additional corporations in the near future to acquire, manage and administer LVC equipment and LVC Services under the Vista Laser Centers name in various geographic areas of North America outside of Southern Ontario and Michigan. It is also anticipated that one or more of the health care professionals serving as part-time consultants to, or directors of, the Company (including Drs. Casebeer and Johnson) will be solicited to act as consultants to, or directors and/or officers in, one or more of these other enterprises. Dr. Casebeer, Dr. Johnson and Jac. J. Lam, directors of the Company, also are each directors of Vista Technologies and may also serve as directors and/or officers for other enterprises organized by Vista Technologies. Investors in this offering will not acquire an interest in other companies formed and sponsored by Vista Technologies and Refractive Services-800, Inc. Although such other enterprises formed and sponsored by Vista Technologies and Refractive Services-800, Inc. will not operate from locations in Southern Ontario or Michigan, such other enterprises nevertheless may compete with LVC Services to be offered by the Company. In addition, persons serving as part-time consultants to, or directors of, the Company who agree to serve as consultants, directors and/or officers for such other enterprises may have a conflict of interest in that their time and resources may be devoted to activities other than the business of the Company or because the compensation payable to them from, or equity interests in, other business activities may be greater than their compensation from and equity interests in the Company. See "Management" and "Certain Transactions". OTHER CONFLICTS OF INTEREST ARISING FROM TRANSACTIONS WITH AFFILIATES. Refractive Services-800, Inc. invested $100,000 in the Company in July 1995, for which it received 100,000 shares of Series A Preferred stock at $1.00 per share, which is the same class of securities offered hereby at $5.00 per share. Vista Technologies has received 200,000 shares of the Company's Series B Preferred stock in exchange for the Company's acquisition of 200,000 shares of Vista Technologies common stock in November 1995, and the Company has granted Vista Technologies' Board of Directors an irrevocable proxy to vote such Vista Technologies shares for a term of five years after this offering. Vista Technologies has agreed to cause its shares in the Company to be voted in favor of electing up to three nominees of Dr. Tayfour to the Company's Board of Directors. See "Certain Transactions". Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Drs. Casebeer and Johnson and Jac. J. Lam, directors of the Company, serve as directors of Vista Technologies. Thomas A. Schultz, President and a director of Vista Technologies, is a director of the parent of the Representative of the Underwriters. See "Management", "Certain Transactions", "Description of Securities" and "Underwriting". As summarized above under the heading "Proceeds Benefitting Officers, Directors and Affiliates and Prospective Benefit to Founder from Selling Stockholder Offering," the Company has entered in other agreements with its founders, officers, directors and affiliate. The Company may enter into other related party transactions in the future. All such transactions in the past have been approved or ratified by all of the Company's directors and in the future will be approved by not less than a majority of the directors who do not have an interest in the proposed transaction. However, these transactions involve inherent conflicts of interest between the interests of the Company and the interests of such stockholders or other related parties. See "Certain Transactions". IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS. Purchasers of securities offered hereunder will experience immediate and substantial dilution of the net tangible book value of Common Stock into which their Series A Preferred shares are convertible. The immediate dilution to new investors in this offering, assuming the conversion of all Preferred Stock into Common Stock and the exercise of outstanding Class A Warrants, would be equal to $2.17 per share as of March 31, 1996. In the event the Company elects to pay 10 14 Preferred Stock dividends in Common Stock if cash dividends are prohibited by law, additional dilution to holders of Common Stock may result. See "Dilution", "Capitalization" and "Description of Securities". LIABILITY FOR PERSONAL INJURY AND INADEQUACY OF INSURANCE. Use of the Company's equipment and facilities for LVC eye care may give rise to claims against the Company by persons alleging injury as a result of the procedures performed. The Company will endeavor, whenever possible, to seek recovery from manufacturers of refractive laser systems for claims based on alleged defects in the laser systems utilized by the Company. There can be no assurance that such manufacturers will carry liability insurance adequate to protect against such claims or that the Company would prevail if it were required to assert such claims. The Company believes that health care providers using the Company's equipment to perform refractive or other procedures will be covered by medical malpractice or liability insurance and the Company's policy will be to require that professionals contracting for the Company's LVC Services maintain such insurance. The Company also intends to apply for liability insurance covering these risks for its own account. However, there can be no assurance that the Company would be successful in seeking recovery from third parties and there can be no assurance that the Company will be able to obtain insurance at reasonable rates against the risks of use of its LVC equipment and support services. To the extent the Company becomes exposed to liability claims, if any, the Company may be adversely affected. See "Proposed Business". RISKS OF FAILURE TO COMPLY WITH OR CHANGE IN GOVERNMENTAL REGULATION. The Company and its operations will be subject to extensive regulation, both in Canada and in the United States at the federal, provincial, state and local level, affecting the health care industry and the delivery of health care. These regulations include laws and regulations prohibiting the practice of medicine and optometry by persons not licensed to practice medicine or optometry, prohibiting the unlawful rebate or unlawful division of fees and limiting the manner in which prospective patients may be solicited. Other regulatory requirements, such as regulations concerning the use of excimer laser systems, will also apply to the Company's business and plan of operation. In addition, there can be no assurance that future changes in laws and regulations or the interpretation thereof will not adversely affect the Company's operations. See "Proposed Business -- Governmental Regulation". ABSENCE OF GOVERNMENTAL APPROVAL IN THE UNITED STATES FOR USE OF CERTAIN LVC EQUIPMENT. The Company is uncertain whether certain LVC procedures for which it will purchase equipment in Canada may ever be utilized commercially in the United States. In the United States, the Company's plan is to acquire equipment that has recently received pre-market approval from the U.S. Food and Drug Administration ("FDA") for commercial use of PRK procedures applicable to the vast majority of myopia cases. Equipment for certain other LVC procedures, such as LASIK or TMM PRK procedures to treat hyperopia, astigmatism or extreme myopia, have not received FDA pre-market approval nor has the FDA established standards for clinical testing of equipment for many of these other LVC procedures. For these reasons, the Company will first offer its LVC Services in Canada, where LASIK and TMM PRK procedures may be performed in accordance with applicable regulations and in close proximity to the U.S. Midwestern market. There can be no assurance that the use of excimer lasers to perform LVC procedures other than PRK will ultimately be found to be effective or safe by the FDA or that the FDA will not modify or withdraw its pre-market approval of PRK equipment, in which event the Company's targeted markets in the United States may be adversely affected. See "Proposed Business". RISK OF FAILURE TO COMPLY WITH SAFE HARBORS AS TO MEDICAL SERVICES FRAUD AND ABUSE LEGISLATION. Certain states in the United States and provinces in Canada have adopted medical services fraud and abuse statutes, commonly referred to as anti-kickback or anti-referral legislation, similar to U.S. federal Medicare/Medicaid legislation that prohibits certain activities intended to kickback, bribe or rebate fees received for referring an individual to a person for medical treatment. Although existing U.S. federal legislation does not cover the Company's planned activities since its physician clients will not be seeking Medicare, Medicaid or other governmental reimbursement for LVC procedures, there can be no assurance that federal, state or provincial regulatory programs will not in the future place impediments upon the Company's plan of operation. Many state fraud and abuse laws are interpreted by reference to corresponding federal regulations establishing safe harbors for certain activities otherwise subject to such fraud and abuse laws. Among other requirements to qualify for certain safe harbor provisions under federal law, no more than 40% of the entity may be 11 15 controlled by investors who are in a position to control the flow of business to the entity and no more than 40% of the entity's business can come from investors. The Company does not believe that more than 40% of the Company's capital stock initially will be held by persons in a position to refer business to the Company. The application and interpretation of state laws and safe harbor exemptions may involve significant uncertainty. The Company believes that its planned operations are designed to comply with applicable state regulations. NEVERTHELESS, POTENTIAL INVESTORS CONCERNED WITH SAFE HARBOR REGULATIONS SHOULD SEEK ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING. See "Proposed Business -- Governmental Regulation". POSSIBLE FUTURE CONCERNS AS TO SAFETY AND EFFICACY OF LVC TREATMENT. Concerns with respect to the safety and efficacy of recently developed refractive laser procedures such as PRK, LASIK and LTK include predictability and stability of results and potential complications or side effects, such as post-operative pain, corneal haze during healing, decreased contrast sensitivity, unintended undercorrection or overcorrection, refractive corneal scars or reversion or regression of effect. There can be no assurance that additional complications will not be identified in the future that may materially and adversely affect the safety and efficacy of these LVC procedures for performing refractive surgery, and which would negatively affect market acceptance of such procedures and/or lead to product liability or other claims against the Company. See "Proposed Business". RELIANCE ON SUPPLIERS OF LASER EQUIPMENT. The Company is not involved in the research, development or manufacture of laser equipment and will be dependent upon unrelated third-party manufacturers or distributors for supply and service of LVC equipment required for its LVC Services. The Company believes there are four companies in the U.S. that have conducted or are conducting clinical trials with excimer lasers for refractive eye surgery. The Company believes two of those companies, Summit and VISX, account for approximately 70% of the excimer lasers for refractive surgery that have been installed to date mostly in various countries outside of the U.S. At present, at least one of these suppliers has indicated it plans to enter the market for providing excimer laser service facilities and may compete with the Company, either directly or indirectly. Such suppliers are also expected to seek license, royalty or other fees for the purchase of excimer laser systems that could place the Company at a competitive disadvantage. If the Company is unable to obtain agreements on acceptable terms for the supply and/or service of laser systems, the Company could incur delays and its planned business operations may be adversely affected. The Company has not yet obtained commitments to acquire equipment for additional locations proposed in addition to its first site at Windsor, and the Company's ability to offer LVC Services at one or more additional locations and the timing thereof will be dependent upon the availability of equipment from suppliers and the availability, if any, of financing programs to acquire equipment on a lease or installment purchase basis. See "Use of Proceeds" and "Proposed Business". RISK OF FUTURE TECHNOLOGICAL CHANGE. Development of LVC procedures has undergone and is expected to continue to experience technological change. There can be no assurance that future technological innovations and developments will not render the Company's equipment uneconomical or obsolete or that the Company will not be adversely affected by competition or future technological developments. See "Proposed Business -- Competition". NO THIRD-PARTY REIMBURSEMENT. At present, third party insurance reimbursement through health insurance or other third-party reimbursement programs generally is not available for PRK, LASIK and other LVC refractive surgical procedures. The Company does not anticipate that third-party reimbursement for LVC procedures will be available in the foreseeable future, and this factor may restrict the market for LVC Services. LACK OF A PUBLIC MARKET AND ARBITRARY DETERMINATION OF OFFERING PRICE. Prior to this offering by the Company, there has been no public market for the securities of the Company, and there can be no assurance that a public market will develop following this offering or, if developed, that a public market will be sustained. The offering price of the Series A Preferred stock offered by the Company was arbitrarily determined by negotiation between the Company and the Underwriters without regard to generally recognized criteria of value such as historical earnings, assets, working capital, book value, financial condition or an active public 12 16 market for the Common Stock. Such offering price was determined in part upon the Company's and the Underwriters' perception as to the price that purchasers of Series A Preferred stock would be willing to pay considering the nature of the Company and the terms of the Series A Preferred stock. Accordingly, the offering price should not be considered an indication of the actual value of the Company or its securities. See "Underwriting" and the Consolidated Financial Statements. DILUTIVE EFFECT OF WARRANTS AND OPTIONS. For the life of the Underwriter's Warrants, outstanding Class A Warrants and any options granted under the Company's Stock Option Plan, the holders are given, at nominal cost, the opportunity to profit from a rise in the market price for the Common Stock of the Company without assuming the risk of ownership, with a resulting dilution in the interest of other security holders. As long as the warrants and options remain unexercised, the terms under which the Company could obtain additional capital may be adversely affected. Moreover, the holders of the warrants and options might be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain needed capital by a new offering of its securities on terms more favorable than those provided by the warrants and options. See "Management -- Stock Option Plan", "Description of Securities" and "Underwriting". SUBSTANTIAL MANAGEMENT DISCLOSURE AS TO APPLICATION OF OFFERING PROCEEDS. The Company has entered into contractual commitments to establish an LVC Services site in Windsor, Ontario, immediately upon conclusion of this offering by the Company and is currently negotiating to acquire a 50% interest in a subsidiary to establish a second LVC Services site in Detroit, Michigan. Due to various uncertainties, such as the extent of equipment financing which may be available and the amount of future revenues that will affect operating results and cash flow requirements, the Company is currently uncertain if it can establish one or more additional sites offering LVC Services in either Michigan or Southern Ontario. As a result of these uncertainties, the actual amount expended to finance any category of expense may be increased or decreased by the Company's Board of Directors, at its discretion, if a reapportionment or redirection of funds is deemed to be in the best interests of the Company. See "Use of Proceeds" and "Management's Discussion and Analysis and Plan of Operation". UNDETERMINED EFFECT OF ADDITIONAL AUTHORIZED COMMON STOCK AND BLANK CHECK PREFERRED STOCK. The Company's articles of incorporation authorize up to 20,000,000 shares of Common Stock and up to 5,000,000 shares of "blank check" Preferred Stock with such rights, preferences, privileges and limitations as may be determined from time to time by the Board of Directors of the Company. The Board of Directors has the power without prior stockholder approval to issue additional shares of previously authorized and unissued Common Stock and one or more series of Preferred Stock with such rates of dividends, redemption provisions, liquidation preferences, voting rights, conversion privileges and any other characteristics as the Board may deem necessary. This power includes the right to issue Preferred Stock following completion of this offering with rights to receive dividends, liquidating distributions and other benefits which may be superior to the rights of Series A Preferred stockholders. If any subsequent issuance of Preferred Stock is approved, such blank check Preferred Stock could adversely affect the holders of outstanding Series A Preferred stock and/or Common Stock. In addition, the authority to issue additional shares of Common Stock and blank check Preferred Stock could discourage, delay or prevent a takeover of the Company. The Company currently has no intention to issue any additional shares of Preferred Stock upon the completion of this offering. However, even the existence of authorized and unissued Common Stock and Preferred Stock with the potential of discouraging or preventing a takeover of the Company could have a depressive effect on the market price for the Company's securities. See "Description of Securities". POSSIBLE ADVERSE EFFECT ON MARKET PRICE OF FUTURE SALES OF COMMON STOCK. All of the 30,000 shares of outstanding Common Stock and up to 470,000 shares of Common Stock issuable upon conversion of Series B Preferred stock and exercise of Class A Warrants outstanding prior to this offering will be "restricted securities" as that term is defined in Rule 144 under the Securities Act, and under certain circumstances may be sold without registration pursuant to that Rule. In addition to the securities offered hereby, this Prospectus also covers the sale of up to 100,000 shares of the Company's Series A Preferred shares for the account of Refractive Services-800, Inc., the Selling Stockholder, from time to time in open market or other transactions. The Company is unable to predict the effect that sales made under Rule 144, or otherwise, will have on the then prevailing market price of the Company's securities. Any substantial sale of restricted securities pursuant 13 17 to Rule 144 or other sales of shares covered by this Prospectus may have an adverse effect on the market price of the Company's securities. See "Principal and Selling Stockholders", "Shares Eligible for Future Sale" and "Underwriting". UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of the shares of Series A Preferred stock to be sold in this offering may be sold to customers of the Underwriters. Such customers subsequently may engage in transactions for the sale or purchase of the Company's securities through or with the Underwriters. Although the Underwriters have no legal obligation to do so, an Underwriter from time to time may become a market maker or otherwise effect transactions in the Company's securities. Should an Underwriter participate as a market maker, it may become a dominating influence in the market for the Company's securities. Therefore, the price and liquidity for the Company's securities may be significantly affected by the degree, if any, of an Underwriter's participation in the market. Such market making activities, if commenced, may be discontinued at any time or from time to time by that Underwriter. See "Underwriting." MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS. In 1993, the Securities and Exchange Commission ("SEC") approved rules imposing more stringent criteria for the listing of securities on Nasdaq, including new standards for maintenance of such listing. If the Company is unable to satisfy Nasdaq's maintenance criteria in the future, its securities will be subject to being delisted, and trading, if any, would thereafter be conducted on the Boston Stock Exchange or in the over-the-counter market in the so-called "pink sheets" or the "Electronic Bulletin Board" of the National Association of Securities Dealers, Inc. ("NASD"). As a consequence of such delisting, an investor could find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for "penny stocks" as defined. SEC regulations generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on Nasdaq and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three (3) years; (ii) net tangible assets of at least $5,000,000 if such issuer has been in continuous operation for less than three (3) years; or (iii) average annual revenue of at least $6,000,000 if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith. In addition, if the Company's securities are not quoted on Nasdaq or the Company does not have $2,000,000 in net tangible assets, trading in the Common Stock would be covered by Rule 15c2-6 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") for non-Nasdaq and non-exchange listed securities. Under such rule, broker/dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive each purchaser's written agreement to a transaction prior to sale. Securities also are exempt from this rule if the market price is at least $5.00 per share. As of the date of this Prospectus, it is expected that the Company's Series A Preferred stock will be outside the definitional scope of penny stock, as it has an initial public offering price of at least $5.00 per share. In the event the Common Stock were subsequently to become characterized as a penny stock, the market liquidity for the Company's securities could be severely affected. In such an event, the regulation of penny stocks could limit the ability of broker/dealers to sell the Company's securities in the secondary market. VOLATILITY OF SECURITIES PRICES. The market for equity securities, particularly for securities of companies engaged in providing LVC equipment and/or services, has been volatile. The price of the Company's securities in the future may be subject to wide fluctuations in response to quarterly variations in operating results, news, trading volume, general market trends and other factors beyond the control of the Company. FOREIGN CURRENCY FLUCTUATIONS. The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of the Company's revenues and expenses may be collected and paid in Canadian dollars. The Company publishes its consolidated financial statements in U.S. dollars after 14 18 translating transactions in Canadian currency to U.S. dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. In periods when the U.S. dollar depreciates against the Canadian dollar, reported earnings attributable to transactions in Canadian dollars may be materially enhanced. In periods when the U.S. dollar appreciates against the Canadian dollar, however, reported earnings attributable to transactions in Canadian dollars may be materially reduced. Fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar may also affect the book value of the Company's assets and the amount of its stockholders' equity. Except as otherwise stated herein, all monetary amounts in this Prospectus have been presented in U.S. dollars. NO DIVIDENDS ON COMMON STOCK. The Company has not paid any cash dividends on its Common Stock and does not expect to do so in the foreseeable future. See "Dividend Policy." DILUTION This discussion and the table below assumes (i) the sale of all shares of Series A Preferred stock offered by the Company hereunder (but does not assume exercise of the Underwriter's over-allotment option or the exercise of the Underwriter's Warrants) and full conversion of such shares of Series A Preferred into 800,000 shares of Common Stock, (ii) the conversion of currently outstanding shares of Series A Preferred (100,000 shares) and Series B Preferred (200,000 shares) into 300,000 shares of Common Stock, (iii) the exercise at $1.00 per share of 270,000 outstanding Class A Warrants and the receipt of proceeds therefrom, and (iv) the exercise at $1.00 per share of 50,000 outstanding options granted under the Company's stock option plan. Based on these assumptions, the 650,000 shares of Common Stock that would be outstanding prior to this offering and the 800,000 shares of Common Stock that would be outstanding if all Series A Preferred offered hereby were converted are referred to below as "common and common equivalent shares". As of March 31, 1996, the Company had a net tangible book value of $368,514. Assuming the exercise of outstanding Class A Warrants and stock options for $320,000 in proceeds, the receipt of $27,500 in subscriptions receivable paid in April 1996 and conversion of currently outstanding Series A Preferred and Series B Preferred, the Company's pro forma net tangible book value at March 31, 1996 would have been $716,014, or $1.10 per common and common equivalent share based on a total of 650,000 shares. Net tangible book value per common and common equivalent share represents the amount of the Company's tangible assets, less the amount of its liabilities, divided by the number of shares of common and common equivalent shares outstanding. Assuming the sale of 800,000 shares of Series A Preferred stock offered by the Company hereunder at the offering price of $5.00 per share, the Company's receipt of net proceeds therefrom and the conversion of all such shares of Series A Preferred stock into Common Stock, the pro forma net tangible book value of the Company as so adjusted at March 31, 1996 would be $4,109,353, or $2.83 per common and common equivalent share, representing an immediate increase in net tangible book value of $1.73 per common and common equivalent share to present holders of the Company's capital stock and an immediate dilution of $2.17 per common and common equivalent share to new investors. 15 19 The following table illustrates such per share dilution: Offering Price per common and common equivalent share................ $5.00 Actual net tangible book value per common and common equivalent share at March 31, 1996......................................... $1.12 Receipt of subscriptions receivable as of March 31, 1996........... .08 Dilution attributable to assumed exercise of Class A Warrants and stock options outstanding at March 31, 1996..................... (.10) ----- Subtotal: Pro forma net tangible book value per common and common equivalent share at March 31, 1996.............................. $1.10 Increase per share attributable to 800,000 additional common equivalent shares represented by sale of Series A Preferred stock by the Company............................................ 1.73 ----- Pro forma net tangible book value per common and common equivalent share.............................................................. 2.83 ----- Dilution per common and common equivalent share to new investors purchasing Series A Preferred (1).................................. $2.17 =====
- --------------- (1) "Dilution" means the difference between the offering price per share and the pro forma net tangible book value per common and common equivalent share after giving effect to the assumed sale of all 800,000 shares of Series A Preferred stock offered by the Company. The increase in the net tangible book value of common and common equivalent shares held by present stockholders would be solely attributable to the cash paid by new investors upon their purchase of Series A Preferred offered by the Company. Based on the above assumptions, the following table summarizes the number of common and common equivalent shares purchased from the Company, the total consideration and the average price per share to the Company by existing stockholders and to be paid by purchasers in this offering (assuming in each case the full conversion of all outstanding shares of Preferred Stock into Common Stock and the exercise of 270,000 Class A Warrants and 50,000 outstanding stock options):
COMMON AND COMMON EQUIVALENT SHARES TOTAL PURCHASED CONSIDERATION PAID ------------------------ ------------------------- AVERAGE PRICE NUMBER % OF TOTAL AMOUNT % OF TOTAL PER SHARE --------- ---------- ---------- ---------- ------------- Existing Stockholders.... 650,000 44.8% $ 694,597(a) 14.8% $1.07 New Investors............ 800,000 55.2% $4,000,000 85.2% $5.00 --------- ------ ---------- ------ Total.......... 1,450,000 100.0% $4,694,597 100.0% $3.24 ========= ====== ========== ======
- --------------- (a) Assumes $374,597 for outstanding securities, of which $157,000 has been paid in cash and $217,597 has been recorded as the value of the Company's investment in 200,000 shares of Vista Technologies common stock, plus $320,000 from the assumed exercise of outstanding Class A Warrants and stock options. See "Management -- 1995 Stock Option Plan" and "Certain Transactions". In the event the Company elects to pay Preferred Stock dividends in Series A Preferred or Common Stock if cash dividends are prohibited by law, additional dilution to holders of Common Stock may result. See "Description of Securities". 16 20 USE OF PROCEEDS The net proceeds to the Company from the sale of 800,000 shares of Series A Preferred stock offered hereby will be approximately $3,280,000 ($3,982,000 if the Underwriter's over-allotment option is exercised in full) after deducting the underwriting discounts and the Underwriter's non-accountable expense allowance and after other offering expenses payable by the Company estimated at approximately $200,000. The Company intends to use the net proceeds to purchase laser vision correction equipment and to support working capital requirements for operating and administering LVC Services. Of the net proceeds, $500,000 will be immediately used to pay the cash portion of consideration to purchase an existing laser system and related equipment from a corporation affiliated with Dr. Fouad Tayfour. An agreement to sublease certain facilities from that corporation is expected to enable the Company to commence operations immediately after this offering. Management estimates that additional equipment, leasehold improvements and supplies for its first site in Windsor initially will range from $25,000 to $50,000. Monthly cash requirements for operating expenses at the Windsor location are projected to range from approximately $90,000 to $110,000, depending in part upon the amount management elects to commit to marketing, advertising and training programs, before receipt of revenues under service agreements with professionals. Although the Company anticipates that it will generate revenues under its service agreement with Dr. Tayfour upon completion of this offering, Dr. Tayfour is under no legal obligation to use the Company's LVC Services on an exclusive basis or on any basis, and there can be no assurance as to the revenues the Company will generate. See "Management Discussion and Analysis and Plan of Operation" and "Proposed Business". The Company has conducted market research through extensive discussions with MDs and ODs in Michigan and is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newly-organized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this offering, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan shortly after the first Windsor location has become operational. The location and number of additional sites with LVC equipment developed by the Company thereafter, if any, will be determined by management depending upon a variety of factors, some of which are uncertain at present, including the amount of capital equipment costs that the Company may be able to finance through equipment leases or other installment purchase obligations, potential competition and results of operations and working capital requirements for LVC Service sites previously established by the Company. The Company estimates the capital investment to establish an LVC Service site to range from $300,000 to $700,000 depending upon the equipment required (i.e., whether the site will include full service equipment or will be a satellite location supported by another site) and the extent of equipment lease or installment purchase financing, if any, available to the Company. Based on and subject to the above factors, management currently estimates that the net proceeds of this offering will be applied generally as follows: Cash deposit for purchase of laser system and related equipment to establish LVC Services in Windsor, Ontario............................. $ 550,000(1) Investment or repayment of loan to acquire a 50% interest in a newly-formed company to establish a second site in Michigan............ 150,000 Cash requirements for equipment and leasehold improvements to establish a second LVC Services site in Michigan................................... 700,000(2) Estimated working capital requirements for first 12 months of operations............................................................. 500,000(3) Available for general working capital and expansion for additional LVC Services sites......................................................... 1,380,000 ---------- Total estimated net proceeds of this offering.................. $3,280,000 ==========
17 21 - --------------- (1) The $500,000 balance of this equipment purchase will be financed by the Company's issuance of a 10% promissory note, interest only accruing from the date of this offering and payable monthly commencing 90 days thereafter, with all principal due on the second anniversary of the date of this Prospectus and collateralized by all equipment at the Company's Windsor location. (2) Assumes that the Company is unable to obtain additional equipment financing for this location. If equipment lease or installment purchase financing is available on terms acceptable to the Company, the initial cash deposit required for the equipment cost would be reduced. (3) Includes a minimum of $155,000 in estimated compensation payments to executive officers of the Company for the first 12 months of operations. Of such minimum amount, $60,000 will be paid to an affiliate of Dr. J. Charles Casebeer at the completion of this offering in consideration of base consulting compensation for his services during the first 12 months of operations and $20,000 will be paid to Mr. Ghassan Barazi upon completion of this offering as a one-time hiring bonus for his services as the Company's President and Chief Executive Officer. See "Management -- Employment Agreement" and "Certain Transactions". The allocation of the net proceeds of this offering set forth above represents the Company's best estimates based upon its present plans and certain assumptions regarding estimated costs and the Company's future revenues and expenses. The actual amount expended to finance any category of expense may be increased or decreased by the Company's Board of Directors, at its discretion, if a reapportionment or redirection of funds is deemed to be in the best interests of the Company. Any proceeds not applied to a purpose described above will be added to the Company's working capital and used for general corporate purposes. Pending the application of proceeds from this offering, the net proceeds of this offering will be temporarily invested in interest-bearing savings accounts, bank certificates of deposit, money market accounts, government obligations or other forms of liquid short-term interest-bearing investments. The Company does not plan to pay dividends on its Common Stock (see "Dividend Policy"). The estimated annual dividend requirements on its Preferred Stock will be $450,000 for Series A Preferred ($510,000 if the Underwriters' over-allotment option is exercised and $550,000 if the Underwriters' over- allotment option and the Underwriter's Warrants are exercised) and $25,000 for Series B Preferred shares. As of March 31, 1996, dividends in arrears on Series A Preferred and Series B Preferred shares issued prior to this offering were $6,667 and $9,375, respectively. The Company does not intend to apply any of the proceeds from the sale of Series A Preferred stock offered hereby to the payment of dividends on its Preferred Stock. Prospective investors should note that the Nevada General Corporation Law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, (1) the Company would be unable to pay its debts as they come due in the ordinary course, or (2) the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock were the Company to be dissolved at the time of such distribution. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will be $4,750,000 ($5,350,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. The Company at its option, however, has the right to pay accrued dividends in Series A Preferred or Common Stock (subject to the prior registration of such shares under the Securities Act of 1933) if it would be legally prohibited from the payment of cash dividends on its Preferred Stock. 18 22 CAPITALIZATION The following table sets forth the capitalization of the Company at March 31, 1996, and as adjusted to give effect to the sale by the Company of the shares of Series A Preferred stock offered hereby, and the application of the net proceeds and the purchase of certain equipment for the Windsor equipment location as described under "Use of Proceeds" and "Certain Transactions". This information should be read in conjunction with the Company's consolidated financial statements and the notes thereto and "Management Discussion and Analysis and Plan of Operations" presented elsewhere in this Prospectus.
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- Long-term obligations.............................................. $ -0- $ 916,192(2)(3) -------- ---------- Stockholders' equity: Preferred stock, par value $0.01: Authorized -- 5,000,000 shares; 1,100,000 shares designated 10% Series A(4) Cumulative Convertible Preferred; Issued and outstanding shares -- 100,000 actual and 900,000 pro forma.................................................... 1,000 9,000 200,000 shares designated 5% Series B Cumulative Convertible Preferred; Issued and outstanding shares -- 200,000 actual and pro forma........................................................ 2,000(5) 2,000(5) Common stock, par value $0.01: Authorized -- 20,000,000 shares; Issued and outstanding shares -- 30,000 actual and 350,000 pro forma........................................................ 300 3,500 Additional paid-in capital....................................... 371,297 3,960,097 Subscriptions receivable......................................... (27,500) -- Accumulated (deficit)............................................ (34,647) (34,647) Unrealized holding gain on marketable equity securities.......... 169,403 169,403 -------- ---------- Total stockholders' equity....................................... 481,853 4,109,353 -------- ---------- Total capitalization..................................... $652,987 $5,138,545 ======== ==========
- --------------- (1) Assumes sale of 800,000 shares of Series A Preferred offered hereunder by the Company at $5.00 per share, the exercise of 270,000 outstanding Class A Warrants, the exercise of 50,000 outstanding options granted under the Company's stock option plan, the payment of $27,500 in stock and warrant subscription receivables received in April 1996 and the anticipated application of estimated net proceeds therefrom (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with this offering). (2) Concurrent with the completion of this offering, the Company will purchase certain equipment for its first site in Windsor, Ontario at a cost of $1,050,000, of which $500,000 will be paid in cash from proceeds of this offering and $500,000 will be financed by the Company's issuance of a 10% promissory note due on the second anniversary of the date of this Prospectus. Such payments will be made to an affiliate of Dr. Fouad Tayfour, who has the right to designate up to three members of the Company's Board of Directors. See "Certain Transactions". (3) In April of 1996, the Company entered into a commitment to lease a Summit holmium laser system. The Company will record this lease as a capital lease and the related obligation totals $416,192. See Note 7 of the Notes to the Consolidated Financial Statements. (4) The authorized number of Series A Preferred shares includes 120,000 shares reserved for the Underwriters' over-allotment option and 80,000 shares reserved for exercise of the Underwriter's Warrants. See "Underwriting". (5) $217,597 has been recorded in the Company's financial statements for 200,000 shares of Vista Technologies common stock received in exchange for shares of the Company's Series B Preferred stock, of which $2,000 has been allocated to the par value of the Series B Preferred and the balance was allocated to additional paid in capital. See Note 3 of the Notes to the Consolidated Financial Statements. 19 23 SELECTED FINANCIAL DATA The following table presents selected financial data with respect to the Company as of and for the period June 30, 1995 (date of inception) through March 31, 1996. The selected financial data as of the end of March 31, 1996 has been derived from the consolidated financial statements of the Company audited by KPMG Peat Marwick LLP. The information set forth below should be read in conjunction with "Management Discussion and Analysis and Plan of Operation", the consolidated financial statements and related notes thereto and independent auditors' report appearing elsewhere in this Prospectus.
FOR THE PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 ------------------ ACTUAL ------------------ CONSOLIDATED STATEMENT OF OPERATIONS DATA: Interest income.......................................... $ 557 Net (loss) adjusted for dividends in arrears............. $(50,689) Net (loss) per common and common equivalent share........ $ (0.22) Weighted average shares outstanding...................... 226,269 Dividends in arrears..................................... $ 16,042
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- CONSOLIDATED BALANCE SHEET DATA: Current assets..................................... $ 39,648 $2,322,353 Current liabilities................................ 58,134 -- -------- ---------- Working capital.................................. $(18,486) $2,322,353 Total assets....................................... $652,987 $5,738,545 Long-term debt..................................... -- $ 916,192 Stockholders' equity............................... $481,853 $4,109,353
- --------------- (1) As adjusted to reflect the receipt and application of net proceeds to the Company (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with this offering) from the sale of securities offered hereby, the exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding stock options and receipt in April 1996 of $27,500 from the payment of stock and warrant subscription receivables. See "Use of Proceeds". The Company has not paid any dividends since its inception; preferred dividends in arrears total $6,667 for the Series A Preferred stock and $9,375 for the Series B Preferred stock at March 31, 1996. 20 24 MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION The Company has received cash proceeds from the sale of securities in the amount of $129,500 during the period from inception on June 30, 1995 through March 31, 1996. An additional $27,500 in subscription receivables were collected in April 1996. Since its inception, the Company's activities have been devoted to development of its plan of operations, negotiating agreements to acquire equipment and advisory services for planned business activities that will commence immediately upon completion of this offering, and raising capital to fund initial development activities and the expenses of this public offering. Accordingly, the Company has not generated any revenues and has no operating history from which to forecast its future business and operations. As of March 31, 1996, it had incurred $113,339 for deferred costs of this offering. Of the cash investments received to date, $100,000 was paid by Refractive Services-800, Inc. at the Company's inception, and prior to the Company's entering into any agreements with health care professionals, in exchange for 100,000 shares of the Company's Series A Preferred stock. Substantially all of those funds were intended for, and have been allocated by the Company to, payment of costs and expenses for the organization of the Company, negotiation of agreements to date, and deferred costs of this initial public offering of Series A Preferred stock by the Company. In November 1995, the Company issued 200,000 shares of its Series B Preferred stock to Vista Technologies in exchange for 200,000 shares of Vista Technologies common stock. Although there was no quoted market for Vista Technologies' common stock at the time of that transaction, primarily as a result of Vista Technologies' then delinquency in filing periodic reports with the Securities and Exchange Commission (the "Commission"), Vista Technologies represented it would take such steps as were necessary to become current in required filings with the Commission and seek to obtain an actively quoted market for its common shares. The organization of the Company was sponsored and promoted by Vista Technologies as a founder, and the Company's Board of Directors believed the experience of Vista Technologies in management of PRK businesses in Europe and services Vista Technologies proposed to make available under its ten-year Consulting Services Agreement with the Company (see "Certain Transactions") would be of valuable assistance to the Company's negotiation of agreements prior to the date of this Prospectus and its planned future operations. Due to Vista Technologies' shortage of cash resources, Vista Technologies proposed that its investment in the Company would be in the form of 200,000 shares of Vista Technologies common stock in exchange for 200,000 shares of the Company's Series B Preferred stock. In view of Vista Technologies' status as a founder of the Company and its representation on the Company's Board of Directors, such transaction should not be considered as having been negotiated at arms-length. Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Public market quotations for Vista Technologies common stock became available in March 1996 following Vista's filings of previously delinquent reports with the Commission, and such quotations in March 1996 and to date in June 1996 have range from approximately $2.00 to $4.00 per share of Vista Technologies common stock. The Company intends to hold shares of Vista Technologies common stock for investment, which will enable the Company to have an indirect economic interest in other LVC activities in which Vista Technologies has an interest. Subject to the ability of the Company under Rule 144 of the Securities Act of 1933 to sell shares of Vista Technologies common stock upon satisfaction of holding period requirements under that rule (see "Shares Eligible for Future Sale"), management of the Company reserves the right to sell shares of Vista Technologies from time to time if required for the Company's working capital purposes or if management believes then market price of Vista Technologies common stock are attractive in light of market conditions, the status of Vista Technologies' operations, and other relevant factors. There can be no assurances of the sale prices the Company will be able to obtain should it elect to sell all or part of its investment in Vista Technologies in the future. The report of the Company's independent certified public accountants contains an explanatory paragraph as to the Company's ability to continue as a going concern. Among other factors cited by the accountants as raising substantial doubt as to the Company's ability to continue as a going concern is that the 21 25 Company is dependent upon raising additional financing through a public or private offering to meet its obligations and commitments. See the Consolidated Financial Statements elsewhere in this Prospectus. The Company's plan of operation for the next twelve months will involve the development, management and operation of from two to four sites offering LVC Services. LVC equipment will be offered for use by licensed ophthalmologists ("MDs") primarily for advanced refractive surgery, and other support services will also be available for licensed MDs and optometrists ("ODs") for diagnostic, pre-operative and postoperative refractive eye care. In addition to providing equipment and qualified support personnel, the Company will make available a variety of services to licensed and credentialed eye care professionals, including training and education in advanced LVC procedures; marketing and advertising support; billing, collection and accounting services; administrative and management services; and development and maintenance of information systems. The Company will earn fees for equipment use and other support services rendered to licensed MDs and ODs that elect to use the Company's services and enter into service agreements with the Company. See "Proposed Business". The Company will initially apply proceeds from this offering to purchase equipment and establish its first location in Windsor, Ontario at an estimated cost of $1,050,000 (see "Use of Proceeds"), which approximates its fair market value, of which $500,000 will be financed by a two-year note (see "Certain Transactions"). Additional proceeds of the offering will be applied for operating requirements during the first twelve months of operations including, among other expenses, hiring and training staff, training and marketing programs for health care professionals, and for working capital requirements as the Company's LVC Services are developed. Monthly cash requirements for operating expenses at the Windsor location are projected to range from approximately $90,000 to $110,000, depending in part upon the amount management elects to commit to marketing, advertising and training programs, before receipt of revenues under service agreements with professionals. The Company has selected a location for its Windsor site in a portion of premises to be subleased from an affiliate of Dr. Tayfour upon completion of this offering for a term expiring on March 30, 2004 at a rental rate of approximately $2,921 (Canadian currency) per month subject to an increase of approximately 10% in April 1999. The Company has entered into a Facilities Agreement with Dr. Fouad Tayfour for the use of the Company's equipment and supports services at the Windsor site. Under the terms of the Facilities Agreement, effective upon completion of this offering the Company will receive approximately 50% of the Gross Procedure Fee (as defined in the agreement) charged to patients by Dr. Tayfour as compensation for use of the Company's Windsor equipment and providing support services to Dr. Tayfour. In general, the Gross Procedure Fee includes all charges to the patient by Dr. Tayfour for professional services and use of LVC facilities and equipment and will be established from time to by Dr. Tayfour. The Company and Dr. Tayfour have agreed that the Gross Procedure Fee will be not less than $1,200 (U.S. funds) per procedure for each eye treated at the Windsor location unless the parties agreed to a lower minimum fee. In view of the difficulty in projecting the number of procedures to be performed and the total cost of the Company's support services, the Company has agreed that its compensation from Dr. Tayfour is subject to possible reduction during a 24 month period, commencing after the end of the third month following the date of this Prospectus, in the event less than an average of 150 LVC procedures per month are performed at the Windsor site by Dr. Tayfour. The Facilities Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. and expects to enter into similar arrangements with other local MDs and ODs. Although the Company anticipates that it will generate revenues under its Facilities Agreement with Dr. Tayfour upon completion of this offering, Dr. Tayfour is under no legal obligation to use the Company's LVC Services on an exclusive basis or on any basis, and there can be no assurance as to the revenues the Company will generate. The Company has also entered into a Consulting Agreement for Dr. Tayfour to act as a professional consultant to the Company (see "Proposed Business" and "Certain Transactions"). Compensation payable to Dr. Tayfour under the Consulting Agreement will include a percentage of the Company's fees, after deduction of certain operating expenses, attributable to the first 20 LVC procedures performed in each month at its Windsor location by credentialed MDs other than Dr. Tayfour. The percentage will equal 100% of the Company's compensation, after deduction of direct operating expenses and overhead costs, for the first 10 22 26 such procedures in each month and 50% for the next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newlyorganized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this Prospectus, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly after the first Windsor location has become operational. A portion of the proceeds of this offering by the Company is planned to be utilized for that purpose, and management expects that part of the equipment requirements may be financed by equipment lease or installment purchase obligations. However, at present no such financing commitments have been obtained. Due to the status of FDA pre-market approvals of LVC equipment at the present time, LVC equipment for the first site in Michigan will be limited to PRK procedures to treat nearsightedness, LS (laser sclerostomy) procedures to treat the symptoms of glaucoma and possibly PTK (phototherapeutic keratectomy) procedures to treat certain corneal pathologies. See "Proposed Business". The Company anticipates, however, that U.S. patients who may request other forms of LVC procedures not commercially available in the U.S. may be referred by professionals to MDs associated with the Company's Canadian operations. In March 1996, the Company received an assignment of, and assumed the obligations under, a lease for a Summit holmium laser system from one of the MDs with which it is currently negotiating to associate in Detroit, Michigan. Under the terms of that lease assignment and assumption, this equipment will be subleased by the Company, upon terms to be negotiated, to a newly-organized company being formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. The Company's obligations under the lease assignment and assumption are to make all equipment lease payments remaining due of $10,850 per month until December 1999 (at which point the Company will purchase the equipment for a nominal payment) plus an obligation in the aggregate amount of $230,000, payable at the rate of $250 each time the equipment is used by an MD, which amount will be deducted from sublease obligations of the newly formed company. If equipment financing can be obtained and adequate funds remain available from the proceeds of this offering, the Company intends thereafter to develop one or more additional site offering LVC Services in either Michigan or Southern Ontario. In selecting the location of additional sites, management will take into account the availability of equipment from prospective suppliers, the LVC equipment to be made available at the location, and relevant market potential factors such as the location of competitive facilities and regional demographics. The Company's management reserves the right to evaluate progress at its Windsor location and its proposed association with a group of Michigan professionals before making commitments at other equipment sites to insure that net proceeds of this offering by the Company will be sufficient for its planned operations for at least 12 months following completion of this offering. No commitments for additional financing have been obtained by the Company and there is no assurance that it will be able to obtain any such commitments should additional financing be required. See "Use of Proceeds", "Proposed Business" and "Certain Transactions". 23 27 PROPOSED BUSINESS GENERAL The Company is a development stage enterprise organized as a Nevada corporation on June 30, 1995. The Company's planned business activity is to provide ophthalmic and optometric professionals with use of equipment and support services ("LVC Services") by managing and administering fully equipped outpatient services and advanced equipment to perform refractive laser corrective eye surgery ("laser vision correction" or "LVC") in southern Ontario and Michigan. The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary for establishing its first LVC Services location in Windsor, Ontario, and negotiating agreements to provide facilities use and management services to eye care professionals. The Company plans to earn revenues from fees for equipment use and support services rendered to licensed ophthalmologists ("MDs") and optometrists ("ODs"). SOURCE OF REVENUES AND SERVICE AGREEMENTS WITH PROFESSIONALS The Company expects to enter into nonexclusive service agreements with independent MDs, ODs and professional group practices upon completion of this offering who elect to contract for use of the Company's equipment and LVC Services. The terms of these agreements may vary, depending upon the extent of LVC Services and equipment provided by the Company, skills and experience of the particular professional, negotiated terms in individual instances and market conditions. The Company will earn its fees for the fair market value of the Company's LVC Services by billing health care professionals at the time of use, with such fees typically based upon a negotiated percentage of the gross procedure fees charged to patients by the professional; payment normally will be received when the professional collects its gross procedure fee from the patient. For this purpose, the gross procedure fee is generally defined to include all charges to the patient for services of one or more professionals to perform an LVC procedure for one eye, which typically includes professional services for the procedure, post-operative care and re-operative procedures, if required, plus all charges to the patient for equipment use, medical supplies, support staff and other administrative functions. The Company believes that in most instances, it will seek to charge up to approximately 60% of the gross procedure fee as a fair allocation for the market value of its LVC Services. The gross procedure fee is required by law to be established by the professional; however, the Company will require prior consent for gross procedures fees using its LVC Services at less than $1,200 per eye in an effort to recover at least the Company's estimated costs of operations. Since a substantial portion of the Company's operating expenses are expected to be fixed expenses for depreciation of equipment, facilities expense, support staff and general and administrative expenses, the Company's prospects for profitability will be dependent in large part upon the volume of LVC procedures performed by use of its LVC Services in addition to the amount of the gross procedure fees charged by professionals. Generally speaking, gross procedure fees charged by professionals for LVC treatment in most markets currently range from approximately $1,500 to $2,000 per eye, although there can be no assurance these levels will be maintained for the long term. Support services offered by the Company will include, among others, access to the Company's equipment, supplies and support personnel; administration of accounting, billing, collection and other information processing functions; training and education in advanced LVC procedures; and marketing support. There can be no assurance that MDs and ODs will require and contract for the Company's LVC Services, and professionals that do contract with the Company cannot be required to use exclusively the Company's services for their LVC practice. TARGETED GEOGRAPHIC MARKETS The Company's LVC Services are planned to be offered at locations in southern Ontario, Canada and/or Michigan, focusing on laser vision correction of common refractive disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. Depending upon the extent of equipment lease or other installment purchase financing that may available for its capital equipment requirements, the Company 24 28 anticipates that proceeds of this offering will enable it to establish from two to four locations providing LVC Services in its targeted geographic markets of Southern Ontario and Michigan servicing Central Canada and the Midwestern United States. In addition, the Company intends to implement a comprehensive consumer marketing program to explain and promote LVC generally to the public as well as sponsoring training seminars and educational programs for MDs and ODs. Since advanced laser-based procedures have been permitted in Canada for several years while a pre-market approval ("PMA") process, described below, has been pending with the U.S. Food and Drug Administration ("FDA"), the Company's strategy has been to engage the consulting services of, and promote advisory associations with, certain ophthalmologists who are experienced in a variety of LVC treatments, procedures and post-operative care. These professionals have been engaged by the Company to establish high medical and operational standards for its LVC Services, to train other ophthalmologists in advanced LVC procedures, and to establish a Board of Advisors consisting of credentialed and prominent MDs and ODs with similar skills and experience. To attract these professionals and encourage MDs and ODs to use Company facilities and services, each Company site will be fully equipped with advanced equipment for laser-based LVC procedures as well as providing equipment for diagnostic, pre-operative and post-operative care and offering comprehensive support services. BACKGROUND -- VISION DISORDERS The human eye is a complex organ that functions much like a camera, with a lens in front and a light sensitive screen, the retina, in the rear. Images enter the human eye through the cornea, a transparent domed window at the front of the eye. In a properly functioning eye, the cornea bends (refracts) incoming images, causing the images to focus on the retina. The inability of the cornea to properly refract incoming images results in blurred vision and is called a refractive disorder. Myopia (nearsightedness), hyperopia (farsightedness) and astigmatism are three of the most common refractive disorders. In a nearsighted (or myopic) eye, images are focused in front of the retina. In a farsighted (or hyperopic) eye, images are focused behind the retina. In an astigmatic eye, images are not focused at any one single point. Conventional methods of correcting refractive disorders are by prescription of eyeglasses and contact lenses. Over the last 15 years, refractive vision disorders have also been treated by several surgical techniques, such as radial keratotomy in which small incisions approximately 400 to 450 microns deep in a radial configuration are made around the periphery of the cornea. Corneal pathologies, which include certain diseases, injuries and conditions of the cornea, also can result in impaired vision, discomfort or blindness. Such pathologies include corneal opacities, irregular corneal surfaces and abnormal tissue growths on the cornea. Another pathological condition of the eye is glaucoma, a disease characterized by a sustained elevation of intraocular pressure which, if untreated, may result in blindness. LASER VISION CORRECTION ("LVC") SYSTEMS To assist health care professionals in delivering refractive care to persons with vision disorders, the Company intends to take advantage of continuous technological advances developed in recent years in the field of ophthalmic laser systems. LASER TECHNOLOGY OVERVIEW Lasers have been used routinely for a variety of medical purposes since the 1960s. Lasers emit photons of light into a highly intense beam of energy that is delivered to targeted tissue by means of optical mirrors or fiber optics. The degree of absorption by the tissue varies with the choice of wavelength and is an important variable in the application of laser technology in treating various tissues. Surgical lasers emit light in a continuous stream or in a series of very short duration "pulses", thus interacting with tissue through heat or shock waves, respectively. Several factors, including the wavelength of the laser and the frequency and duration of the exposure or pulse, determine the amount of energy which interacts with the targeted tissue and, thus, the amount of damage to the tissue. 25 29 Laser technology has been accepted in the ophthalmic community for the treatment of certain eye disorders. In general, ophthalmic lasers are used to coagulate, cut or ablate (remove) targeted tissue. As examples, the argon laser is used for treatment of leaking blood vessels on the retina and retinal detachments. Nd:YAG (Neodymium: Yttrium Alminum Garnet) pulsed lasers are used to clear clouded posterior capsules and, to a lesser extent, for relief of elevated pressure in the eye. EXCIMER LVC SYSTEMS More recently developed excimer (argon fluoride) lasers are incorporated in a fully integrated ophthalmic surgical laser workstation for use by ophthalmologists to perform procedures to treat refractive and other ophthalmic disorders. The excimer laser system delivers pulses of ultraviolet laser light to an eye to ablate submicron layers of tissue from the surface of the cornea in a computer-assisted, predetermined pattern to reshape the cornea. Most of the laser light generated by the excimer system is absorbed by the removed corneal tissue during a procedure. As a result, the laser light does not penetrate interior portions of the eye and does not create substantial amounts of heat in the surrounding tissue. These attributes make the excimer laser system well suited to corneal surgery. PRK. Photorefractive keratectomy ("PRK") is procedure performed with a excimer laser system to treat primarily nearsightedness, and also farsightedness and astigmatism. When performing PRK with the excimer laser, the ophthalmologist determines the exact correction required (which is measured by the same type of examination used to prescribe eyeglasses or contact lenses) and programs the correction into the system's computer. The ophthalmologist removes the thin surface layer of the cornea (the epithelium) and positions the patient for the laser procedure. The average PRK procedure consists of approximately 150 laser pulses, each of which lasts several billionths of a second over a period ranging for 15 to 40 seconds. Cumulative exposure to the laser light is less than one second. The entire procedure, including patient preparation and post-operative dressing, generally lasts no more than thirty minutes. The goal of PRK is to eliminate or to reduce a person's reliance on corrective eyewear. Following the PRK procedure, the ophthalmologist may prescribe topical pharmaceuticals to promote corneal healing and to alleviate discomfort. A series of patient follow up visits is scheduled with the ophthalmologist (MD) or an optometrist (OD) to monitor the corneal healing process, to verify that there are no complications and to test the correction achieved by the PRK procedure. Patients undergoing PRK generally experience discomfort for approximately 24 hours, and blurred vision for approximately 48 to 72 hours after the procedure. Although most patients experience improvement in uncorrected vision within a few days of the procedure, it generally takes from two to six months for the correction to stabilize and for the full benefit of the procedure to be realized. An individual typically has one eye treated in a session, with the second eye treated three to six months thereafter. In the Company's Windsor location, however, it anticipates that a significant percentage of patients may be eligible for bilateral treatment in which both eyes are treated simultaneously based upon procedures that consultants to the Company have developed. Although a patient usually experiences a substantial improvement in clarity of vision within a few days following the PRK procedure, it generally takes from two to six months for the full benefit of the procedure to occur. The PRK procedure is used today primarily to correct the vision of patients with myopia (or nearsightedness) ranging from -1.5 to up to -7.00 diopters, although the PRK procedure has also been performed in foreign countries on higher diopter nearsighted and, occasionally, farsighted and astigmatic patients. Approximately 90% of all myopic patients are nearsighted up to -6.00 diopters and use of the PRK procedure to correct the vision of nearsighted patients of up to -6.00 diopters therefore has received the greatest degree of testing. Prior to PMA approval of Summit's excimer laser system in the U.S. at the end of October 1995, PRK procedures to correct myopia have been performed in approximately 35 countries outside the U.S., including Canada, the United Kingdom, Italy and Sweden. LASIK. Laser assisted in situ keratomileusis ("LASIK") is a procedure performed with an excimer laser system to treat extreme cases of myopia. LASIK, although a more unusual and delicate surgical procedure than PRK, offers advantages in that the epithelium is not touched by the laser and therefore promotes quicker healing. Glare and central islands are practically non-existent after LASIK since ablation 26 30 occurs in the stroma layer (under the epithelium); by the creation of a corneal flap, subsequent retouches are facilitated with minimal recovery time. To date, the FDA has not established standards for clinical testing of LASIK systems, and the Company is uncertain whether LASIK procedures can be utilized commercially in the United States. Summit, however, has reported it is engaged in FDA clinical trials seeking approval to sell its excimer system perform LASIK. PTK. Phototherapeutic keratectomy ("PTK") is a procedure performed with the excimer system to treat corneal pathologies. In this procedure, submicron layers of tissue are ablated from the surface of the cornea in order to remove diseased, scarred or sight-inhibiting tissue. The goal of PTK is not necessarily to cure the corneal pathology, but rather to alleviate the symptoms associated with the pathology. The FDA in February 1995 granted PMA to an excimer laser system developed by Summit Technology Inc. to perform PTK procedures and on October 2, 1995, the FDA granted PMA to two excimer laser systems manufactured by VISX Incorporated for PTK procedures, the VISX 20/20B and "Star" excimer lasers. OTHER. Excimer lasers may also be used to treat glaucoma. The procedure pursuant to which glaucoma is treated is known as Partial Excimer Traheculectomy ("PET"). The PET procedure involves the use of the excimer laser to create a penetrating filter through the scleral tissue (the tough, fibrous tissue covering all of the eye except the cornea), which causes the permeation of fluids from within the eye, thus reducing pressure levels. HOLMIUM LVC SYSTEMS LTK. Another recently developed LVC technology is the holmium laser system. The holmium system delivers high intensity pulses of infrared light to an eye by means of a fiber optic cable and a single-use, hand-held probe that directly contacts the eye at the exact spots chosen by the ophthalmologist. The Company is aware of two manufacturers that have developed holmium laser systems. Summit has reported it is engaged in FDA clinical trials seeking approval to sell its holmium system to perform laser thermal keratoplasty ("LTK"), a refractive procedure performed to treat farsightedness and astigmatism in which peripheral corneal tissue is thermally shrunk, causing the central portion of the cornea to steepen. LS. Laser Sclerostomy ("LS") is a surgical procedure performed with the holmium system to treat the symptoms of glaucoma by making an opening in the front chamber of the eye. Summit Technology, Inc. has received FDA pre-market clearance to sell its holmium system in the U.S. for treatment of glaucoma. Other LVC Systems. The Company is aware of three companies that have reportedly developed solid state lasers, ophthalmic laser surgical systems that apply a beam of high intensity light to remove tissue from the inside, as opposed to the surface of, the cornea. These solid state lasers are designed to ablate tissue inside the cornea without violating the cornea's surface by computer guiding the laser beam to the inner corneal tissue and vaporizing the targeted tissue. BUSINESS STRATEGY OVERVIEW The Company's long-term business goal is to pursue a leadership position in the potential market for LVC Services directed to refractive eye care in the Midwestern United States and Central Canada. However, there can be no assurance the Company will be successful in achieving this goal or that it will attain profitable operations. To date, its activities have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary to establish its first location for LVC Services in Windsor, Ontario, and negotiating agreements to provide equipment use and support services to eye care professionals. The Company's LVC Services are planned to be offered at locations in southern Ontario, Canada and/or Michigan, focusing in particular on laser vision correction of common refractive disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. Depending upon the extent of equipment lease or other installment purchase financing that may available for its capital equipment requirements, the Company anticipates that proceeds of this offering will enable it to 27 31 establish from two to four LVC Service sites in its targeted geographic markets of Southern Ontario and Michigan servicing Central Canada and the Midwestern United States. The first facility to be subleased and established by the Company immediately upon completion of this offering will be located in Windsor, Ontario, directly adjacent to Detroit, Michigan. The Company believes that certain ophthalmologists in Canada have become technology leaders in employing LVC equipment and techniques, including PRK procedures for treatment of nearsightedness that have only recently become available for commercial use in the U.S., as well as other laser procedures not commercially available in the U.S. for treatment of hyperopia, astigmatism and extreme myopia cases. Due to regulatory constraints in the U.S., the Company expects that some U.S. patients, as well as Canadians, will seek treatment in Canada when the preferred method of treatment requires an LVC procedure not commercially available in the U.S., such as LASIK, LTK or bilateral procedures (concurrent treatment of both eyes). The Company anticipates that LASIK and an advanced proprietary method of PRK developed by Dr. Donald G. Johnson called the Johnson transepilthelial multi-zone, multi-pass PRK procedure ("TMM PRK") will be the most significant procedures performed at its first location in Windsor. The Company also plans to offer LVC Services at one or more strategically positioned locations in Michigan where licensed MDs and ODs who are expected to become parties to facilities use and LVC Services agreements with the Company bring their patients for LVC diagnosis, PRK laser procedures and post-operative care. Based upon 1990 census data, Michigan has a population of approximately 9.3 million persons. Data compiled by the Michigan Optometric Licensing Board indicates there are approximately 475 MDs and approximately 2,360 ODs in Michigan. RELATIONSHIPS AND AGREEMENTS WITH HEALTH CARE PROFESSIONALS Dr. Fouad Tayfour Dr. Fouad Tayfour has agreed to act as a consultant and to enter into a Facilities Agreement with the Company effective upon the completion of this offering. He has extensive experience in the use of LASIK procedures and recently adapted the TMM PRK procedure to Summit equipment. Dr. Tayfour has performed approximately 2,000 LASIK procedures through 1995 in Ontario. Under the terms of a Facilities Agreement with Dr. Tayfour, effective upon completion of this offering the Company will receive approximately 50% of the gross procedure fee (as defined in the agreement) charged to patients by Dr. Tayfour as compensation for use of the Company's facilities and for providing support services to Dr. Tayfour. In general, the gross procedure fee includes all charges to the patient by Dr. Tayfour for professional services and use of LVC facilities, equipment, supplies and other administrative expenses and will be established from time to by Dr. Tayfour. The Facilities Agreement provides that the gross procedure fee related to Dr. Tayfour's use of the Company's LVC Services will be not less than $1,200 (U.S. funds) per procedure for each eye treated at the Windsor location unless both the Company and Dr. Tayfour mutually agree that Dr. Tayfour may charge a lower minimum fee. In view of the difficulty in projecting the number of procedures to be performed and the total cost of the Company's support services, the Company has agreed that its compensation from Dr. Tayfour is subject to possible reduction during a 24 month period, commencing after the end of the third month following the date of this Prospectus, in the event less than an average of 150 LVC procedures per month are performed at the Windsor site by Dr. Tayfour. In such event, fees payable to the Company by Dr. Tayfour will be reduced by any amount necessary to result in additional compensation to Dr. Tayfour of not less than (i) 150 minus the actual number of procedures performed by him in such month multiplied by (ii) the professional fees realized by Dr. Tayfour for such period, net of the Company's fee, divided by the actual number of procedures he performed in such month. The Facilities Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is obligated under its Facilities Agreement with Dr. Tayfour to provide equipment at facilities in Windsor meeting all ethical and professional standards prescribed by the Company's Medical Advisory Board and equipped with state-of-the-art equipment appropriate for LVC care, including equipment to be acquired by the Company pursuant to an Agreement of Purchase of Assets with Windsor Excimer 28 32 Corporation, an affiliate of Dr. Tayfour (see "Certain Transactions"). The Company's Windsor equipment and operations will be located in a portion of facilities to be subleased from Windsor Excimer Corporation upon completion of this offering (see "Company LVC Service Sites" below and "Certain Transactions"). The Company has also entered into a Consulting Agreement with Dr. Tayfour effective upon the completion of this offering. Under that agreement, Dr. Tayfour will act as a professional consultant to the Company concerning the establishment of ethical standards and procedures for LVC Services and care at Company locations, will periodically conduct training and education seminars sponsored by the Company, and Dr. Tayfour will agree to serve as an Executive Committee member of the Company's Medical Advisory Board. Compensation payable to Dr. Tayfour under the Consulting Agreement will include a percentage of the Company's fees, after deduction of certain operating expenses, attributable to the first 20 LVC procedures performed in each month at its Windsor location by credentialed MDs other than Dr. Tayfour. The percentage will equal 100% of the Company's compensation, after deduction of direct operating expenses and overhead costs, for the first 10 such procedures in each month and 50% for the next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company has also committed to Dr. Tayfour that it will establish and maintain billing, collection and accounting procedures for the collection of fees generated for the account of Dr. Tayfour and other licensed and credentialed health care providers designated by him, and to establish and maintain a public education and marketing program to promote LVC care to the public in the geographic markets of Ontario and the Midwestern United States by means of telemarketing, advertising and/or other programs conforming to ethical and professional standards established by the Company's Board of Directors with the advice and consent of the Company's Medical Advisory Group. In addition, the Company has agreed to train and maintain an adequate support staff for the management, administration and operation of its LVC Services and equipment, and to promote general awareness of LVC care within the professional community by sponsoring educational and training seminars for health care professionals. Under the Consulting Agreement and Facilities Agreement with Dr. Tayfour, the Company agreed to elect Ghassan Barazi as its President and Chief Executive Officer and to cause Mr. Barazi and up to two other professionals to be designated by Dr. Tayfour to be elected directors of the Company. Mr. Barazi has acted as Administrative Director and Business Manager for the Windsor Laser Eye Institute founded by Dr. Tayfour in 1991 (see "Management"). To date, Dr. Tayfour has not nominated two other individuals for election to the Company's Board of Directors, and he has advised the Company that he does not anticipate such persons will be identified or designated until after the completion of this offering. Dr. Donald G. Johnson The TMM PRK procedure was developed by Dr. Donald G. Johnson of Vancouver, British Columbia, an experienced PRK surgeon. Dr. Johnson is a director and stockholder of the Company (see "Management" and "Certain Transactions") and has agreed to render part-time consulting services to the Company. Dr. Johnson developed TMM PRK procedures with VISX equipment and as of December 31, 1995 has successfully treated approximately 7,400 eyes with excimer laser procedures. TMM PRK provides for a much smoother ablation zone, thus substantially reducing glare and central islands, which are side effects sometimes encountered in standard PRK procedures. The epithelium (a layer of cells comprising the outer surface of the cornea) is removed in the TMM PRK procedure by use of the laser, thus avoiding direct contact with the eye by the physician or instruments. The Company's believes that the TMM PRK method promotes faster post-operation regrowth during the period when risk of pain and infection risk is highest. Dr. Johnson's consulting agreement provides he will advise the Company concerning the establishment of ethical standards and procedures for LVC procedures in general and the TMM PRK procedure in particular at the Company's facilities so long as such services do not conflict with Dr. Johnson's professional service obligations to his patients or other professional commitments. There is no requirement under this agreement for continuing compensation payments to Dr. Johnson. 29 33 Dr. J. Charles Casebeer Dr. J. Charles Casebeer, Chairman of the Board, is a director and stockholder of the Company (see "Management" and "Certain Transactions") and is an educator and trainer in the LASIK procedure and has previously served other companies as a consultant in the LASIK field. Dr. Casebeer also has conducted studies on the TMM PRK method developed by Dr. Johnson. See also "Management". Dr. Casebeer has entered into a Consulting Agreement with the Company. He is expected to continue his efforts in LASIK procedures and to assist the Company and Dr. Tayfour in managing the Company's program for training MDs and ODs in the use and performance of LVC procedures and in recommending standards to establish a program of credentialing and training MDs and ODs in various aspects relating to LVC procedures and patient treatment. In consideration of his services, Dr. Casebeer's professional corporation will receive from the Company compensation at the rate of $60,000 per annum plus additional compensation of $2,500 for each MD and OD that enters the credentialing program (see "Certain Transactions"). The $60,000 annual payment to Dr. Casebeer's professional corporation will be paid upon completion of this offering by the Company for the first year of his consulting services and thereafter at the rate of $5,000 per month. Compensation for each MD and OD that enters the credentialing program will be payable at the rate of $500 per month over a period of five months commencing in the first month following the date on which each such MD and OD has started his or her accreditation program. Dr. Casebeer is expected in the future to promote advanced LVC methods for both the Company and for other Vista Laser Centers companies that may be formed in the future by the Company's founders, Vista Technologies Inc. and Refractive Services-800, Inc., to service other North American geographic markets. (The Company and investors in this offering will not acquire an interest in other companies formed by Vista Technologies Inc. and Refractive Services-800, Inc.) Other Planned Relationships with Professionals The Company intends to appoint a Medical Advisory Board of MDs and ODs, including, among others, members of the local medical community, to make recommendations concerning facilities and equipment, technological advances, and medical, professional and ethical practices and standards at its LVC Service locations and to monitor such practices. The Company's Medical Advisory Board is expected to consist of up to approximately 20 MDs and up to approximately 40 ODs. An Executive Committee of the Medical Advisory Board will consist of approximately five MDs and approximately five ODs who meet credential requirements established by the Executive Committee. The Executive Committee will establish credential requirements for MD and OD members of the Medical Advisory Board, administer the Medical Advisory Board and provide consulting services to the Company relating to its business, equipment and service standards. The initial members of the Medical Advisory Board will be appointed by joint decision of Dr. Tayfour and Ghassan Barazi, the Company's President, and Medical Advisory Board members will be compensated for their services in accordance with policies to be established from time to time by the Company's Board of Directors. Such policies have yet to be determined and are expected to be dependent in part upon the level of future revenues available to the Company, its profitability and cash requirements for working capital and expansion. The Company believes that both regional support of its LVC Services and its ability to attract use of its LVC equipment and services will be enhanced by the establishment of its Medical Advisory Board, and also as a result of the reputation, experience and skills of MDs and ODs acting as consultants to the Company. The Company plans to offer selected MDs and ODs the opportunity to receive stock option grants under the Company's Stock Option Plan at exercise prices equal to fair market value of its Common Stock on the date of grant to provide MDs and ODs with an equity incentive in the Company's operations. The Company's management believes that this program will encourage MDs and ODs to take an active role in advising the Company and in recommending consideration of its LVC Services to other MDs and ODs that are interested in evaluating available alternatives when prescribing LVC treatment for their patients. The Company does not plan to directly employ health care professionals. Upon the completion of this offering, the Company will solicit additional MDs and ODs to enter into services agreements with the 30 34 Company and/or to serve as members of its Medical Advisory Board. The terms of services agreements with professionals may vary, depending upon the extent of LVC Services and equipment provided by the Company, skills and experience of the particular professional, negotiated terms in individual instances and market conditions. The Company believes that in most instances, it will seek to charge up to approximately 60% of the gross procedure fee as a fair allocation for the market value of its LVC Services. The Company believes that two important factors relating to the utilization of its LVC Services and equipment by MDs will be the number and quality of qualified physicians providing patient care at Company locations and the quality of its equipment and facilities. Other factors expected to impact utilization of its LVC Services include public acceptance of LVC procedures, competition, and demographic factors in its targeted market areas. AGREEMENTS WITH RS-800 AND VISTA TECHNOLOGIES The Company has entered into agreements to license the use of 800 and 900 telephone numbers from Refractive Services 800 Corp. ("RS-800"), a wholly-owned subsidiary of Refractive Services-800, Inc., and for certain consulting services to be provided by Vista Technologies Inc. ("Vista Technologies"). Vista Technologies and Refractive Services800, Inc. are founders and principal stockholders of the Company. Vista Technologies currently operates five PRK surgical centers in Europe. See "Certain Transactions". Under a Consulting Services Agreement, Vista Technologies will provide certain consulting services to the Company relating to LVC developments in Europe, location of additional sites for Company equipment, financing, accounting and legal requirements and investor relations. In exchange for such services, Vista Technologies will receive 5% of the Company's revenues attributable to charges for the use of its equipment and other LVC Services, less a credit to the Company against such fees of $5,000 per month. In the event any of such revenues are attributable to a subsidiary of the Company that is not wholly-owned by the Company, Vista Technologies' 5% will be reduced in proportion to the Company's percentage ownership in the subsidiary, but to not less than 2 1/2% of such revenues. Rights to the service mark "Vista Laser Centers" are owned by Vista Technologies and have been licensed to the Company in perpetuity by Vista Technologies on a non-exclusive basis. RS-800 has granted the Company the right to use certain 800 and 900 area code telephone numbers, including among others 800-WE-DO-PRK, for its marketing and public education programs. If the Company elects to use those telephone numbers, RS-800 will receive 2 1/2% of the Company's revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. In such event, the determination of revenues generated as a direct result of responses by use of the licensed telephone numbers will be based upon responses from new patients using those numbers to be maintained by the Company for MDs and ODs who are parties to service agreements with the Company. The Company has not yet determined whether it intends to use the 800 and 900 telephone numbers licensed by RS-800. COMPANY LVC SERVICE SITES The Company plans to select strategically located sites to be equipped with state-of-the art laser equipment systems permitted for commercial use in the country in which the equipment is located, as well as accommodating diagnostic, pre-operative and post-operative facilities. The Company will own or lease and maintain the LVC equipment at each site, and will offer MDs and ODs billing, accounting, administrative, marketing and management services, as well as access to a trained support staff and necessary LVC equipment and supplies, so that health care professionals may concentrate their efforts on patient care. The Company believes that physician groups and individual practices will typically lack the capital (approximately $500,000 or more per laser system) to acquire LVC equipment and can benefit from accounting, administrative, marketing and management services where the Company's cost is spread over a larger base than would be available to small or individual practices. The Company's first LVC Services site will be established in Windsor, Ontario, directly adjoining the United States border at Detroit, Michigan. The Company has selected a location for its facility at 2224 Walker Road, Windsor, Ontario N8W 3P6 where it will sublease from an affiliate of Dr. Tayfour a portion of 31 35 premises currently used by Dr. Tayfour. These facilities include approximately 2,228 square feet to be subleased upon completion of this offering for a term expiring on March 30, 2004 and approximately 400 square feet to be subleased for a term expiring on December 30, 1996. The monthly rental rate for these facilities will be approximately $2,921 (Canadian currency) per month subject to an increase of approximately 10% in April 1999. The Company has also entered into agreements effective upon completion of this offering to purchase certain laser and related equipment from an affiliate of Dr. Tayfour at a purchase price of $1,000,000, which approximates its fair market value, to immediately establish its Windsor LVC Service operations. Of such purchase price for equipment, $500,000 will be paid from proceeds of this offering by this Company and the balance will be financed by the Company's issuance of a 10% promissory note, interest only accruing from the date of this offering and payable monthly commencing 90 days thereafter, with all principal due on the second anniversary of the date of this Prospectus and collateralized by all equipment at the Company's Windsor location. The equipment to be purchased for the Windsor location will include a Summit OmniMed UV 200 excimer laser, a Sunrise Technologies LTK holmium laser, a corneal automatic mapping system and other medical and office equipment. See "Certain Transactions". The Summit equipment is covered by an service maintenance agreement with Summit at a cost of $35,500 per annum effective through December 15, 1996 or 600,000 laser pulses, whichever first occurs. The Company is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newlyorganized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this Prospectus, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly after the first Windsor location has become operational. In March 1996, the Company received an assignment of, and assumed the obligations under, a lease for a Summit holmium laser system from one of the MDs with which it is currently negotiating to associate in Detroit, Michigan. Under the terms of that lease assignment and assumption, this equipment will be subleased by the Company, upon terms to be negotiated, to a newly-organized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. The Company's obligations under the lease assignment and assumption are to make all equipment lease payments remaining due of $10,850 per month until December 1999 (at which point the Company has the right to purchase the equipment for a nominal payment of $1) plus an obligation in the aggregate amount of $230,000, payable at the rate of $250 each time the equipment is used by an MD, which amount will be deducted from sublease obligations of the newly formed company. The Company currently is negotiating to enter into a modified lease for this equipment directly with the original equipment lessor on substantially the same economic terms provided by the lease assignment. The location and equipment selected for additional LVC Service sites will be determined in the future with reference to the status of regulatory approvals for commercial use of LVC equipment in the United States, the proximity of the site to a full-service Company equipment location, and other relevant factors such as potential competition and market demographics. Due to the status of FDA pre-market approvals of LVC equipment at the present time, LVC equipment for the first site in Michigan will be limited to PRK procedures to treat nearsightedness, LS (laser sclerostomy) procedures to treat the symptoms of glaucoma and possibly PTK (phototherapeutic keratectomy) procedures to treat certain corneal pathologies. The Company anticipates, however, that U.S. patients who may request other forms of LVC procedures not commercially available in the U.S., such as LASIK or TMM PRK, may be referred by professionals to MDs associated with the Company's Ontario operations. Each location administered by the Company will be fully equipped to offer high quality service for LVC procedures to primarily correct myopia as well as hyperopia and astigmatism. The Company's Windsor site 32 36 will act as the flagship facility for the Company's LVC Services. The Windsor facilities are designed for high quality performance of laser-based vision correction, training and education of medical professionals, and to conduct both professional and patient seminars. The Company has completed a preliminary design concept for the Windsor site and is in the process of designing a program for training MDs and ODs in PRK, LASIK, TMM PRK and other alternative refractive care procedures at this location. MARKETING STRATEGY The Company is developing marketing materials for health care providers to assist them in educating potential patients as to PRK, LASIK and other LVC procedures. The Company's marketing strategy may vary, depending upon the particular geographic area, the current level of local knowledge about LVC procedures, the acceptability of particular means of advertising and the type of customer. The Company intends to promote marketing programs to health care providers that will utilize newspaper, radio, television, magazine and other media advertising, direct mail promotions and telemarketing to potential LVC patients, brochures describing LVC for distribution by MDs and ODs, and video cassettes discussing LVC procedures with professional health care provider and patient testimonials. The Company's marketing program will be intended to comply with ethical guidelines of the American Academy of Ophthalmology and other applicable laws and regulations. The Company is not involved in the research, development or manufacture of refractive laser systems, and will be dependent on unrelated manufacturers for its supply of refractive lasers. The Company believes that there are four U.S. companies that have conducted or are conducting clinical trials with excimer lasers for refractive surgery: Summit Technology, Inc, VISX Incorporated, Chiron Corp. ("Chiron") and LaserSight Incorporated ("LaserSight"). As described below, Summit and VISX have recently received PMA approval to commercially sell excimer lasers for PRK procedures in the United States. FDA REGULATORY APPROVAL PROCESS IN THE UNITED STATES BACKGROUND AS TO THE PMA PROCESS Excimer laser systems and related disposables are regulated as medical devices by the United States Food and Drug Administration ("FDA") and require pre-market clearance or pre-market approval (referred to as a "PMA") by the FDA prior to commercial sale and use in the U.S. Medical devices in the U.S. are classified into one of three classes on the basis of the controls deemed necessary by the FDA to reasonably ensure safety and effectiveness. Class I devices are subject to general controls such as labeling, premarket notification to the FDA and adherence to good manufacturing practices; Class II devices are subject to general and special controls such as performance standards, postmarket surveillance, patient registries and FDA guidelines. Class III devices generally are those which must receive PMA by the FDA to ensure their safety and effectiveness and include, among other devices, new devices which have been found not to be "substantially equivalent" to existing legally marketed devices. Before a new device can be introduced to the market, the manufacturer generally must obtain FDA clearance through either a 510(k) pre-market notification or approval of a PMA. A 510(k) clearance will be granted if the submitted information establishes that the proposed device is "substantially equivalent" to a legally marketed Class I or Class II medical device, or to a Class III medical device for which the FDA has not called for PMAs. The FDA has recently been requiring a more rigorous demonstration of substantial equivalence than in the past. It generally takes from four to 12 months from submission to obtain 510(k) pre-market clearance, but may take longer in certain cases. The FDA may determine that a proposed device is not substantially equivalent to a legally marketed device, or that additional information is needed before a substantial equivalence determination can be made. A PMA application must be filed if a proposed device is not substantially equivalent to an existing legally marketed Class I or Class II device, or if it is a Class III device for which the FDA has called for PMAs. A PMA application must be supported by valid scientific evidence which typically includes extensive preclinical and clinical trial data to demonstrate the safety and effectiveness of the device. If human clinical trials of a device are required, and the device presents a "significant risk," the sponsor of the trial (usually the 33 37 manufacturer or distributor of the device) will have to file an Investigational Device Exemption ("IDE") application prior to commencing human clinical trials. The IDE application must be supported by data, typically including results of animal and laboratory testing. If the IDE application is approved, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. A PMA application must contain the results of clinical trials, the results of all relevant bench tests, laboratory and animal studies, a complete description of the device and its components, a detailed description of methods, facilities and controls used to manufacture the device and certain other information. Upon receipt of a PMA application, the FDA makes a threshold determination as to whether the application is sufficiently complete to permit a substantive review. If the FDA determines that the PMA application is sufficiently complete to permit a substantive review, the FDA will accept the application for filing. FDA review of a PMA generally takes one to two years from the date the PMA is accepted for filing, but may take significantly longer. The review time is often significantly extended by the FDA asking for more information, including additional clinical trials for clarification of information provided in the submission. There are devices for which FDA approval has been sought which have never been approved for marketing in the U.S. If the FDA's evaluation of both the PMA application and manufacturer's facilities are favorable, the FDA will either issue an approval letter or an Approvable Letter, which usually contains a number of conditions which must be met in order to obtain final approval of the PMA. When conditions have been fulfilled to the satisfaction of the FDA, it will issue a PMA approval letter, authorizing commercial distribution of the device for certain applications. If the FDA's evaluation is not favorable, the FDA will deny approval of the PMA application or issue a "not approvable letter". The FDA may approve a device for some procedures but not others, or for certain classes of patients and not others. Modifications to a device that is an approved PMA also may require approval by the FDA of PMA supplements or new PMAs. PMA STATUS OF LVC SYSTEMS In late October 1995, Summit received PMA from the FDA for use of Summit's excimer laser system to treat nearsightedness using PRK. The Company has been advised that this PMA specifies a six millimeter ablation zone for myopic corrections between -1.5 and -7.0 diopters. Summit has further indicated that its PMA requires the initiation of postmarket studies and surveillance. Data generated by the postmarket studies will be reviewed by the FDA in determining whether future restrictions on device labeling or use are warranted. On March 28, 1996, VISX announced it had received PMA from the FDA for use of VISX's excimer laser system to treat nearsightedness using PRK. The Company has been advised that this PMA specified a six millimeter ablation zone for myopic corrections up to -6.0 diopters. The Company believes that the FDA has not published guidelines for clinical trials of excimer laser systems to perform procedures other than PRK and PTK, and both Summit and VISX have indicated they are working with the FDA to design appropriate trials for such procedures on a case by case basis. Because the FDA has not published guidelines with respect clinical trials for other PRK procedures, it is not known whether or to what extent the FDA may require further clinical trials of TMM PRK or LASIK procedures or whether the use of TMM PRK or LASIK will be permitted in the United States. TMM PRK and LASIK are currently permitted in Canada and are expected to account for a majority of the procedures performed at the first Windsor location to be established by the Company. SAFETY AND EFFICACY The first PRK procedure for the treatment of nearsightedness using an excimer laser system was performed in 1989, and the first PTK procedure for the treatment of a corneal pathology using an excimer system was performed in 1988. A large majority of PRK and PTK procedures to date have been performed only since 1990. Concerns with respect to the safety and efficacy of the excimer laser system to perform procedures include predictability and stability of results and potential complications, such as modest decreases in best corrected vision and side effects from PRK, PTK, LASIK and LTK. Other possible effects include 34 38 postoperative pain; corneal haze during healing (an increase in the light scattering properties of the cornea); glare/halos (undesirable visual sensations produced by bright lights); decrease in contrast sensitivity (diminished vision in low light); temporary increases in intraocular pressure in reaction to post procedure medication; modest fluctuations in astigmatism and modest decreases in best corrected vision (i.e., with eyeglasses); unintended over or under corrections; instability, reversal or regression of effect; corneal scars (blemishing marks left on the cornea); corneal ulcers (inflammatory lesions resulting in loss of corneal tissue); and corneal healing disorders (compromised or weakened immune system or connective tissue disease which causes poor healing). Summit has reported that two year follow-up data accumulated by Summit during its Phase III PRK clinical trials indicate all of the individuals undergoing PRK experienced an improvement in visual acuity without corrective eyewear. Prior to PRK, 95% of the eyes in this group were 20/200 or worse. Of the eyes treated, approximately 91% improved to 20/40 or better, the legal requirement to obtain a driver's license in most states without corrective eyewear, while the remaining 9% experienced improved vision without corrective eyewear, but still required corrective eyewear to achieve 20/40 vision or better. (Summit is not affiliated with the Company.) In addition, it was reported in 1991 by the Steering Committee of the Summit International Laser User Group (composed of academies and ophthalmic physicians from approximately 27 countries) that, based on procedures performed on over 6,150 nearsighted eyes of up to -6.00 diopters, the PRK procedure was found to be safe and effective, with more than 90% of treated eyes being within 1.00 diopter of 20/20 vision in the first year following the procedure. PRK to correct myopia is currently being performed in at least 35 countries outside the U.S. MARKET POTENTIAL FOR THE COMPANY'S LVC SERVICES It is estimated that in excess of 100 million people in the U.S., and a much larger number worldwide, use eyeglasses or contact lenses to correct common vision disorders, with over 60 million of these individuals suffering from nearsightedness. U.S. consumers spent an estimated $13.8 billion in eyeglass and contact lens purchases in 1993. While excimer laser procedures can treat people who are farsighted or are astigmatic, both the existing technology and application for regulatory approvals for those uses are in an earlier stage than for use of excimer lasers for treatment for nearsightedness. Refractive disorders generally are corrected with conventional methods such as eyeglasses and contact lenses. Today there exist alternative treatments for permanently reshaping the cornea to relieve nearsightedness, farsightedness and astigmatism. One technique for corneal reshaping involves manual scalpel incisions on the surface of the cornea, known as radial keratotomy or "RK". RK is used today primarily to correct nearsightedness, but is known to have potential limitations. RK is known to (i) weaken the cornea, (ii) present the potential for infection and (iii) produce inconsistent visual correction results. However, RK procedures are generally substantially less expensive than LVC procedures. The Company believes that the market potential for alternative refractive care utilizing excimer laser systems is commercially significant. Many eyeglass or contact lens wearers are potential candidates for laser refractive surgery. Generally speaking, the Company believes that younger persons are more apt to elect refractive surgery than older people who have become accustomed to eyeglasses or contact lenses over an extended period. GOVERNMENTAL REGULATION The Company and its operations will be subject to extensive rules and regulations, both in Canada and in the United States at the federal, provincial, state and local level, affecting the health care industry and the delivery of health care. These regulations in both the United States and Canada include laws and regulations prohibiting the practice of medicine and optometry by persons not licensed to practice medicine or optometry, prohibiting the unlawful rebate or unlawful division of fees and limiting the manner in which prospective patients may be solicited. Other regulatory requirements, such as regulations concerning the use of excimer laser systems, may also apply to the Company's business and plan of operation. The Company believes its plan of operation will not violate regulatory constraints on prohibitions against the corporate practice of medicine. None of the Company's employees will provide medical diagnosis, advice 35 39 or treatment. All professional services rendered to patients, and use of the Company's equipment to perform PRK, LASIK or other LVC procedures, will be provided and performed only by health care professionals who have entered into LVC service agreements with the Company. Such service agreements will be nonexclusive, leaving the professional free to recommend and use equipment and services available from other sources. Gross procedure fees will be determined exclusively by the professional (except that the Company's consent will be required for gross procedures fees at less than $1,200 per eye), and such fees will be billed for the account of the professional. Fees earned by the Company for use of its equipment and support services will be paid only by the professional; to the extent such fees are based upon a negotiated percentage of the gross procedure fee, the Company believes that such fees will represent no more than the fair market value of the Company's LVC Services. The Company will neither pay nor receive fees attributable to the referral of patients by one professional to another professional, and it will not receive or pay rebates or other compensation based upon such referrals. Numerous state and provincial laws and regulations presently affect the manner in which the Company may establish or administer the use of its equipment and other LVC Services, which vary significantly from state to state in the U.S. and from province to province in Canada. In some instances these laws and regulations are ambiguous, and sometimes regulators fail to provide adequate guidelines. The Company believes that its plan of operation will enable the Company to offer and administer its LVC Services in compliance with all applicable regulatory requirements. However, federal, state and provincial regulatory attention may continue to be directed to the practice of medicine, and any changes in applicable law or regulations, or in governmental agency and judicial interpretations of such laws and regulations, could cause one of the Company's strategies now in compliance with applicable laws to cease to comply. Additionally, while U.S. and Canadian laws and regulations do not now clearly affect the Company's planned LVC Services, there can be no assurance that the regulatory scheme will not in the future place impediments upon the Company's plan of operation. Current state and provincial regulatory requirements and restrictions that relate to corporate entities such as the Company involved in the ownership and operation of health care facilities include prohibitions against: the corporate practice of medicine except by an entity owned by health care professionals and/or wherein the professionals exercise control over medical judgments; patient referrals by health care professionals (including ophthalmologists and optometrists) to a facility owned or compensated by such referring professional (either generally, or sometimes by defining such payments as "kick backs"); and "fee splitting" between health care professionals and corporate entities. Other laws in both the United States and Canada specifically regulate the nature and compensation provisions of employment or management relationships that health care professionals may have with a corporate-owned facility, affect the form of business entity to be utilized, limit payments either to the entity or to health care professionals to the "fair market value" of their contributions, or affect the manner of marketing the service performed at the health care facility. Additional regulations in some states and provinces also now affect, or in the future may affect, the administration and use of LVC Services, including requirements for certificates of need and/or other licensing and registration of medical equipment. The Company believes that it has developed strategies for use in Michigan and Ontario to offer and administer its LVC Services in compliance with applicable law. In order to accommodate local regulations, it is possible that the business terms and organizational structure of the Company's activities in Michigan may vary from those in Ontario. There can be no assurance that future changes in laws and regulations will not adversely affect the Company's operations. The use of excimer lasers and other medical equipment is also subject to numerous government laws and regulations relating to such matters as safe working conditions, environmental protection, fire hazard control and disposal of potentially hazardous substances. There can be no assurance that the Company will not be required to incur significant costs to comply with such laws and regulations in the future. ANTI-KICKBACK MEDICAL FRAUD AND ABUSE STATUTES. Certain states in the United States have adopted medical services fraud and abuse statutes that incorporate by reference U.S. federal anti-fraud and abuse legislation. Although existing federal legislation does not cover the Company's activities since its physician clients will not be seeking Medicare or Medicaid reimbursement for LVC procedures, such legislation is briefly discussed below to illustrate the potential reach 36 40 of applicable state regulation. In 1977, Congress adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977, which prohibit certain activities and which impose a criminal penalty on anyone who "knowingly and willfully solicits or receives any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for referring an individual to a person for the purpose of arranging for the furnishing of any item or service for which payment may be made in whole or in part under" the Medicare or Medicaid programs. This provision is commonly referred to as the anti-kickback or anti-referral provision. This anti-referral provision is extremely broad and, in several court cases, its scope has been upheld. State statutes incorporating this provision may provide separate criminal penalties, can apply regardless of whether third party reimbursement is sought, and are enforceable at the discretion of the enacting state rather than the federal Office of the Inspector General ("OIG") or the applicable U.S. District Attorney. Regulations establishing safe harbors for certain activities which would otherwise be subject to the Medicare/Medicaid fraud and abuse statute (the "Safe Harbor Regulations") have been promulgated by the OIG. Because many state anti-referral laws have been interpreted by reference to corresponding federal statutes and regulations, the Company has reviewed its expected activities in light of the federal Safe Harbor Regulations. The Safe Harbor that most closely covers investment in the Company is known as the Small Investment Safe Harbor. In order to qualify for this exception to the fraud and abuse prohibitions, the following conditions must be met: 1. No more than 40% of the entity may be controlled by investors who are in a position to control the flow of business to the entity. 2. No more than 40% of the entity's business can come from investors. 3. The terms on which the investment interest is offered, such as the price and quantity of shares, must be the same for an investor who is in a position to generate business for the entity and one who is not. 4. The terms of the investment interest must not be related to the previous or expected volume of referrals generated by an investor. 5. An investor cannot be required to make referrals to the entity as a condition for remaining an investor. 6. The way the services are marketed and furnished cannot favor investors. 7. The entity must not loan funds to or guarantee a loan for an investor who is in a position to generate business for the entity if any part of the loan is used to obtain the investment interest. 8. The amount of dividends must be directly related to the capital contributed. The Company does not believe that more than 40% of the Company's stock initially will be held by persons in a position to refer business to the Company. However, in view of the Company's plan to grant additional stock options or warrants exercisable at fair market value of the date of grant to health care professionals, it is possible that persons in a position to refer business to the Company could acquire more than 40% of the Company's stock at a future date. In such event, it is possible that regulatory authorities could interpret the referral structure expected to be utilized by the Company as resulting in a more than 40% of the Company's business coming from investors in a position to generate business. The Safe Harbor Regulations are extremely narrow in scope. Because of the broad scope of the Medicare/Medicaid fraud and abuse statute and the narrow scope of the Safe Harbor Regulations, many transactions involving physicians will not fall within the Safe Harbor Regulations. Similarly, the Company's activities are not expected to fall squarely within any of the existing Safe Harbors. However, in the preamble to the Safe Harbor Regulations, the OIG noted that activities which do not satisfy the Safe Harbor provisions are not necessarily subject to prosecution. Failure to qualify for Safe Harbor protection does not deem a payment arrangement per se illegal; instead, the arrangement could be subject to increased scrutiny. The degree of risk of prosecution for any activity which does not comply with the Safe Harbor Regulations or with applicable state law will depend on an evaluation of the many factors related to the specific business arrangement. Such decisions will be within the prosecutorial discretion of the applicable state attorney. POTENTIAL INVESTORS CONCERNED WITH THE SAFE HARBOR REGULATIONS SHOULD SEEK ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING. 37 41 INSURANCE AND INDEMNIFICATION Use of laser systems by health care professionals using the Company's laser equipment and other LVC Services may give rise to claims against the Company by persons alleging injury. The Company currently has no insurance since it has not yet actively administered LVC Services. The Company may not be able to purchase medical malpractice insurance and may not be able to purchase other insurance at reasonable rates to protect it against claims arising from the medical practice of health care providers using the Company's equipment and services. The Company believes that claims alleging defects in the laser systems will be covered by the manufacturer's warranties and the manufacturer's product liability insurance, and that the Company could take advantage of such insurance by adding such suppliers to potential lawsuits against the Company. There can be no assurance that the Company's laser suppliers will carry product liability insurance or that any such insurance will be adequate to protect the Company. The Company anticipates that its policy will be to require that ophthalmologists who perform laser procedures by use of the Company's LVC equipment maintain their own professional liability insurance. Upon completion of this offering, the Company intends to explore the availability and cost of obtaining umbrella coverage with respect to any malpractice claims relating to procedures performed by use of its equipment and LVC Services and of obtaining errors and omissions coverage with respect to the Company's staff. There can be no assurance that the Company will be able to retain adequate liability insurance at reasonable rates, or that insurance or indemnification provided by health care providers will be adequate to cover claims asserted against the Company, in which event the Company's business may be materially adversely affected. PROPRIETARY RIGHTS The Company has no licenses, patents, registered trademarks or registered copyrights except for its license with RS-800 to use certain 800 and 900 telephone numbers in its targeted markets of Southern Ontario and Michigan. Rights to the service mark "Vista Laser Centers" are owned by Vista Technologies and have been licensed to the Company by Vista Technologies on a non-exclusive basis for the term of Vista Technologies' ten-year Consulting Services Agreement with the Company and any extensions of that agreement. COMPETITION The vision care industry is extremely competitive and includes numerous companies that are substantially larger than the Company and have greater financial, marketing and technical resources. Competitive factors which may affect market acceptance or revenues include regulatory requirements, performance, pricing, convenience and ease of use, success relative to alternative treatments and patient and general market acceptance. The Company's LVC Services will compete with other surgical and non surgical forms of treatments for refractive disorders, including eyeglasses, contact lenses, manual refractive surgery (such as RK), corneal transplants and possibly new technologies under development. Eyeglass and contact lens use is expected to continue to be the most popular methods of treating refractive vision disorders for the foreseeable future due to low immediate cost and the avoidance of surgery. Notwithstanding certain limitations and possible disadvantages, RK surgical procedures are generally less expensive than LVC procedures and may remain competitive as an alternative to eyeglasses and contact lenses as a result of cost considerations. The Company will also compete with other businesses formed since 1990 offering LVC facilities and support services in Canada and/or have prepared for providing LVC care facilities in the U.S. These businesses are pursuing a variety of strategies such as marketing directly to consumers through optical chains or affiliating their LVC services with hospitals and physician group practices. The Company is also likely to compete with hospitals, hospital affiliated group entities, group practices and private ophthalmologists that may elect to purchase refractive laser systems. Manufacturers of excimer lasers may be primary competitors, either directly through marketing subsidiaries or indirectly through strategic partnerships with third parties. Summit is reportedly engaged in 38 42 developing a network of refractive laser surgery clinics through a marketing subsidiary named Refractive Centers International, Inc. Other companies that have announced an intent to compete in the U.S. market for laser vision correction include, among others, Laser Vision Centers, Inc., the Beacon Eye Institute Inc. (a subsidiary of Siddeley Canada Inc.), Vision International, Inc., LaserSight Centers, Inc. and Sight Resource Corporation. Laser Vision Centers, Inc. operates PRK clinics in Canada and Europe, has reported alliances with certain hospitals, and has announced a franchising plan. Vision International operates PRK clinics in Mexico, Finland and Argentina. LaserSight Centers, Inc. has announced it has entered into service contracts with ophthalmologists to provide refractive laser service. Other companies currently offering PRK services in Europe and other foreign countries could also elect to entry the U.S. market. EMPLOYEES At the completion of this offering, the Company intends to hire personnel it believes will be required for the Company's activities. See "Use of Proceeds". Such personnel initially will include the Company's Chief Executive Officer, Ghassan Barazi, one employee in charge of equipment maintenance and from three to five employees for technical, administrative and clerical functions. The success of the Company's future operations depends in large part on the Company's ability to recruit, train and retain qualified personnel. There can be no assurance, however, that the Company will be successful in retaining or recruiting key personnel. LITIGATION The Company is not a party to any litigation. 39 43 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The Company's directors and executive officers are as follows:
NAME AGE POSITIONS - --------------------------- --- ----------------------------------------- Ghassan Barazi 32 President and Chief Executive Officer; Treasurer and Chief Financial Officer; Director Theodore J. Mayer 62 Secretary J. Charles Casebeer, M.D. 57 Chairman of the Board; Director Donald G. Johnson, M.D. 56 Director Jac. J. Lam 47 Director
The following summarizes the principal employment history and relevant professional experience of the Company's directors and executive officers: GHASSAN BARAZI was elected President, Treasurer and a director of the Company effective as of September 1, 1995. Mr. Barazi, a citizen of Canada, founded CAD Venture Limited in 1989. CAD Venture Limited services manufacturing industries by providing CAD/CAM solutions training and support for the automotive industry. During the last five years since early 1991, Mr. Barazi has acted on a part-time basis as Administrative Director and Business Manager for the Windsor Laser Eye Institute in Windsor, Ontario. The Windsor Laser Eye Institute was founded in 1991 by Dr. Fouad Tayfour to perform laser refractive surgical procedures. Mr. Barazi participated in the selection and installation of excimer laser equipment at Windsor Laser Eye Institute, developed marketing programs, and assisted in the preparation of ophthalmologist conferences as part of his duties as the Institute's Administrative Director and Business Manager. He has attended courses in mechanical engineering at the Ryerson Polytechnical Institute in Toronto, Ontario. Mr. Barazi will be employed on a full-time basis by the Company effective upon the completion of this offering. See "Employment Agreement" below. THEODORE J. MAYER has served as Secretary of the Company since June 30, 1995. During the period from February 1991 to the present, he has been self-employed providing accounting consulting services to several United States and foreign manufacturing and service corporations and investor relations services to various service companies. Prior thereto, Mr. Mayer was employed as the Financial Operations Principal of Mayer Securities, Inc. from October 1987 to January 1991. He received his certified public accountant license from the State of New Jersey in 1960 and an M.B.A. degree from New York University Graduate School of Business Administration. Mr. Mayer served as the acting Treasurer of Vista Technologies from June 1995 to February 16, 1996. Mr. Mayer's services to the Company are rendered on a part-time basis and he is expected to be replaced as the Company's Secretary when a full-time administrative or chief financial officer is engaged after the completion of this offering. DR. J. CHARLES CASEBEER was elected a director of the Company and its Chairman of the Board on October 16, 1995. He has served as a director of Vista Technologies, a publicly-traded company, since February 16, 1996. Dr. Casebeer is an experienced ophthalmologist in the United States. He received his B.A. degree from Harvard University, his Doctor of Medicine degree from the University of Southern California School of Medicine, served his internship at the Medical College of Virginia, his residency in ophthalmology at Stanford University Medical Center, and currently holds professional licenses in the States of Arizona, California and Utah. He received his Ophthalmology Board Certification from the American Board of Ophthalmology in 1972 and was certified for cataract/implant surgery by the American Board of Eye Surgery in 1990. He has been engaged in private practice from 1971 to the present time, including associations with the Northern Arizona Eye Clinic, Ltd. Outpatient Surgery Center, Flagstaff, Arizona from 1971 to July 1994, where he served as President and Medical Director; Northern Arizona Eye Clinic, Ltd., Scottsdale, Arizona from 1992 to May 1994; the J. Charles Casebeer Laser/Refractive Surgery Center Ltd., Scottsdale, Arizona from May 1994 to August 1994; and Casebeer Eye Centers, Ltd., Scottsdale, Arizona from August 1994 to the present. Dr. Casebeer's experience in keratorefractive surgery dates from 1983 to the present, and includes more than 6,000 cases. From 1987 to the present, Dr. Casebeer has served as a Course Director in RK 40 44 technique and practice development and in automated lamellar keratoplasty ("ALK") at numerous courses and symposiums throughout the United States, Europe, Africa, South America, Australia and Asia. Since 1992, he has been a Clinical Professor for the University of Utah Department of Ophthalmology. Dr. Casebeer has lectured extensively throughout the United States and the world since 1989 at over 150 seminars, courses and symposiums on various refractive surgery topics including, among others, RK, ALK and LASIK procedures. He has authored four books or book chapters on refractive surgery, has 16 articles published in peer-reviewed medical journals, and since July 1993 has authored a monthly ocular surgery news column entitled "The Comprehensive Refractive Surgeon" in Ocular Surgery News. DR. DONALD G. JOHNSON, a citizen of Canada, was elected a director of the Company on October 16, 1995. He has served as Chairman of the Board and a director of Vista Technologies, a publicly-traded company, since February 16, 1996. Dr. Johnson received his M.D. degree from the University of Western Ontario, served his internship at Toronto Western Hospital, his general surgery residency at Shaughnessy Hospital, Vancouver, British Columbia, and his ophthalmology residency at the University of British Columbia. His post graduate accomplishments include certifications in the United States for radial keratotomy (1984), epikeratophakia (1986), advanced corneal transplantation (1987), small incision cataract and advanced phacoemulsification (1990) and excimer laser PRK and PTK (1990) and certification in Germany for non freeze B.S.K. method of lamellar keratoplasty (1988). Dr. Johnson has practiced in New Westminster, British Columbia continuously since 1969, first participating in a group practice for general ophthalmology from 1969 to 1981, then as a solo practitioner from 1981 to 1985. He established the London Place Eye Centre in New Westminster as an outpatient medical and surgical eye center in November 1985 where he still practices. From 1970 to the present, he has served as Director and Chief Consultant of Ophthalmology Clinics for the Yukon Territory. He has published 16 articles and conducted 11 clinical investigation studies in the field of ophthalmology, including clinical investigations of the VISX 20/20 and Nidek EC-5000 excimer lasers and the Sunrise holmium laser. On more than 80 occasions, Dr. Johnson has appeared as a guest speaker on radio and television or at hospitals and professional conventions, including presentations at seminars, most of which have occurred since 1991 on subjects relating to excimer lasers. Dr. Johnson has been affiliated with St. Mary's Hospital, Royal Columbian Hospital and Surrey Memorial Hospital since 1969 and Whitehorse General Hospital since 1970. JAC. J. LAM was elected a director of the Company on October 16, 1995. He has served as a director of Vista Technologies, a publicly-traded company, since June 1995 and served as acting President of Vista Technologies from June 1995 to February 16, 1996. Mr. Lam, a resident and citizen of The Netherlands, has served since 1979 as President and the Managing Director of Multibreen B.V., a company founded and owned by Mr. Lam. Multibreen B.V. specializes in temporary assignments providing services in the fields of interim management, mergers and acquisitions, international tax advice, and financial and corporate services. It also manages portfolio investments for a wide range of clients. Mr. Lam is a chartered accountant and a member of the Association of Chartered Accountants, whose career in professional advisory services includes tax, audit, financial advisory and administration services. Prior to founding Multibreen B.V. in 1979, he served as a senior auditor with the accounting firm of Dijker & Doornbos in 1969 and 1970 and with Price Waterhouse from 1971 to 1973. In 1975, he co-founded Scheffers Boulnois & Partners B.V., a firm specializing in international auditing, accounting and tax consulting services, which grew from three partners to a staff of 65 employees at the time Mr. Lam sold his interest in 1979. Mr. Lam is fluent in four languages and has written several papers and is a frequent speaker for the English Business Club in the Netherlands. There is no family relationship between any of the Company's directors and executive officers. All directors hold office until the next annual meeting of stockholders and until their successors are elected and qualify. Officers serve at the discretion of the Board of Directors. Mr. Barazi was nominated to serve as the Company's President and a director by Dr. Fouad Tayfour, who is entitled to designate two additional directors to the Board after the conclusion of this offering (see "Certain Transactions"). There are no other arrangements or understandings between any other director and any other person pursuant to which any person was elected or nominated as a director except that Dr. Casebeer, Dr. Johnson and Mr. Lam were each nominated for election as directors by Vista Technologies. At present there are no committees of the Board of Directors. 41 45 The Company has agreed, for a period of five years from the date of this Prospectus, if so requested by the Representative of the Underwriters, to nominate and use its best efforts to appoint a designee of the Representative as a non-voting advisor to the Company's Board of Directors. See "Underwriting". The compensation arrangements of all officers are subject to review and adjustment from time to time by the Board of Directors. The Company entered into an employment agreement with Ghassan Barazi described below under "Employment Agreement". Directors currently do not receive remuneration for their services as directors, but may be reimbursed for expenses such as their cost of travel to Board meetings. The Company has a consulting agreement with Dr. Casebeer, Chairman and a director of the Company, which requires compensation for his services as Chairman and training and consulting services. See "Certain Transactions". The Company's Bylaws permit compensation of directors, and the Company reserves the right to change its policies as to director compensation from time to time based upon factors such as the Company's performance and the amount of time required for participation by individual directors. EXECUTIVE COMPENSATION None of the Company's executive officers has previously received cash compensation from the Company. No executive office or director of the Company is currently to be compensated at a base rate in excess of $100,000 per annum during the first 12 months of the Company's operations. The Company has entered into an employment agreement with its President, Ghassan Barazi, requiring a $20,000 one-time hiring bonus payable from proceeds of this offering by the Company and a minimum base salary of $75,000 per annum plus an annual bonus equal to 5% of the Company's pre-tax income (see "Employment Agreement" below) and agreements with two of its directors for consulting services, Dr. J. Charles Casebeer and Dr. Donald G. Johnson, which provide that Dr. Casebeer's professional corporation will receive annual compensation in the amount of $60,000, of which the first year's compensation is payable in advance upon completion of this offering by the Company, plus $2,500 for each MD and OD that enters a credentialing program to be established by the Company (see "Proposed Business" and "Certain Transactions"). These agreements will become effective only upon the completion of this offering. The Company has also issued and sold securities to Mr. Barazi, Dr. Johnson and Dr. Casebeer. Pursuant to a contractual commitment made as of September 1, 1995, on November 28, 1995 the Company issued and sold 20,000 shares of Common Stock to Mr. Barazi at a cash price of $1.00 per share ($20,000 total). Under that commitment, the Company also reserved and sold 180,000 Class A Warrants to Ghassan Barazi at a cash price of $0.10 per warrant ($18,000) which was paid on April 29, 1996. Class A Warrants are exercisable at $1.00 per share until the fourth anniversary of the date of this Prospectus. See "Description of Securities". Concurrent with that commitment, Mr. Barazi was elected a director and President of the Company on September 1, 1995. On December 1, 1995, the Company issued and sold to Dr. Johnson 5,000 shares of Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A Warrants at a cash price of $0.10 per warrant ($4,500) pursuant to a Dr. Johnson's Consulting Agreement dated November 15, 1995. Dr. Johnson was elected a director of the Company on October 16, 1995. Pursuant to a Dr. Casebeer's Consulting Agreement dated November 15, 1995, the Company reserved and sold to Dr. J. Charles Casebeer's professional corporation 5,000 shares of Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500). Payment for these securities was received by the Company on April 17, 1996. Dr. Casebeer was elected a director and Chairman of the Board of the Company on October 16, 1995. For further additional information as to transactions with Mr. Barazi, Dr. Casebeer and Dr. Johnson, see "Proposed Business", "Certain Transactions" and "Description of Securities". EMPLOYMENT AGREEMENT The Company has a written employment agreement with its President and Chief Executive Officer, Ghassan Barazi. The employment agreement with Mr. Barazi provides that he will serve as the Company's 42 46 President and Chief Executive Officer. Commencing upon the completion of this offering, the employment agreement provides for a one-time hiring bonus of $20,000 payable upon completion of this offering by the Company and an annual base salary of $75,000 (in U.S. or equivalent Canadian currency), use of an automobile, group health insurance and a life insurance policy for Mr. Barazi's benefit in the face amount of approximately $375,000. Mr. Barazi's base salary will increase to $100,000 per annum commencing with the first month after the Company has attained a consolidated net profit for the three immediately preceding months. In addition, he is entitled to an annual bonus equal to 5% of the Company's pre-tax income. It is expected that Mr. Barazi will devote substantially all of his business time to the activities of the Company commencing upon the completion of this offering. The employment agreement with Mr. Barazi is for a term of five years commencing on the date of this Prospectus, except that the Company may terminate the agreement without cause prior to the expiration of its initial term upon 60 days' prior notice and payment of an amount equal to Mr. Barazi's annual compensation and value of benefits for one year. For this purpose, termination of employment without cause includes any termination other than his voluntary resignation or termination as a result of disability for a continuous period of six months (or for noncontinuous periods aggregating six months in any period of one year), conviction of a criminal offense or commission of an act of bankruptcy. In addition, in the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during the initial five year term or is not renewed for at least one additional year at the end of its initial five year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment if he has not exercised any portion of his stock option covering 50,000 shares of Common Stock at an option exercise price of $1.00 per share (see "1995 Stock Option Plan" below). However, should such termination be the result of Mr. Barazi's voluntary resignation, the Company has to right to issue 180,000 shares of Common Stock to Mr. Barazi in lieu of the $200,000 cash payment and Mr. Barazi's rights to exercise his stock options and his 180,000 Class A Warrants (see "Certain Transaction") will terminate unexercised in such event. Vista Technologies has granted Mr. Barazi an irrevocable proxy, so long as he remains employed by the Company and expiring in any event after the initial five year term of his employment agreement, to vote 200,000 shares of the Company's Series B Preferred stock on any matter on which stockholders are entitled to vote. This proxy is subject to an agreement with Dr. Tayfour that the Series B Preferred shares owned by Vista Technologies will be voted in favor of the election of three nominees of Dr. Tayfour to the Company's Board of Directors for a term of five years after the date of this Prospectus, one of whom will be Mr. Barazi's so long as he is employed as the Company's Chief Executive Officer. 1995 STOCK OPTION PLAN On September 1, 1995, the Board of Directors and stockholders of the Company adopted a 1995 Stock Option Plan (the "Option Plan"). The Option Plan is structured to allow the Board of Directors and a future Stock Option Committee of the Board discretion in creating equity incentives to management, key employees and professional consultants for the purpose of assisting the Company in motivating and retaining appropriate talent. The Option Plan covers up to a maximum of 200,000 shares of the Company's Common Stock. To date, options covering 50,000 shares of Common Stock have been granted under the Option Plan to one executive officer of the Company on January 12, 1996. The Option Plan provides for the granting of stock options which, at the discretion of the Board or its Stock Option Committee, may be either "incentive stock options" within the meaning of Section 422A of the U.S. Internal Revenue Code or non-qualified stock options which do not qualify as incentive stock options. The Option Plan provides that both incentive stock options and non-qualified options under the Option Plan must be granted at an option price which is not less than the fair market value of the Common Stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option under the Option Plan to such a participant must be not less than 110% of fair market value on the date of grant. Options under the Option Plan may be granted to officers, directors, key employees of, and professional consultants to, the Company and its subsidiaries. Under the terms of the Option Plan, the aggregate fair market value 43 47 (determined at the time an option is granted, which will normally be equal to the option exercise price per share) of Common Stock exercisable under an incentive stock option for the first time in any calendar year may not exceed $100,000. Under the Option Plan, the number of shares available for options and subject to option, and the option exercise price of outstanding options, is to be adjusted upward or downward, as the case may be, in the event of any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's Common Stock. If any option granted under the Option Plan terminates or expires without having been exercised in full, the shares not purchased under such option will again be available for purposes of the Option Plan. The Option Plan will be administered by a Stock Option Committee (the "Committee") of two or more members of the Board of Directors of the Company composed of only "disinterested directors" of the Company as defined in Rule 16-3(c)(2) promulgated under the Securities Exchange Act of 1934 ("Exchange Act"). Disinterested directors are persons who have not, during their period of service on the Committee and during the period of 12 months prior to service on the Committee, received an option to acquire or purchase equity securities of the Company or any of its affiliates under the Option Plan or under any other stock option or stock incentive plan of the Company and its affiliates except for participation in a plan expressly permitted under the provisions of subsection (i) of Rule 16-3(c)(2) under the Exchange Act. The Committee will determine the persons to receive options under the Option Plan in the future, the terms of options granted, including the exercise price, the number of shares subject to the option and the terms and conditions of exercise. The maximum term for each option under the Option Plan is ten years. No option granted may be transferred by the optionee other than by will, the laws of descent and distribution, or by a qualified domestic relations order, and each option is exercisable during the lifetime of the optionee only by such optionee. Options under the Option Plan are exercisable in whole or in part at such times after the date of grant as set forth in an option agreement as determined by the Committee or the Board of Directors. Each option granted will be for a term, and exercisable only in accordance with, option agreements approved by the Board or the Committee. The Board intends to establish a policy under the Option Plan of limiting the term of stock options to a period of no more than five years from the date of grant. Although the Board of Directors reserves the right to establish other terms and conditions as to any option granted under the Option Plan, it is currently anticipated that the Board of Directors and the Committee will continue to follow this policy as to options granted under the Option Plan. Terms relating to the exercisability of an option under the Option Plan may be determined upon an individual basis by the Committee at the time of grant. In the event of termination of employment or other termination of the optionee's relationship with the Company, the optionee's option will terminate and may be exercised during a three month period after termination to the extent the option was exercisable on the date of termination. In the event such termination was caused by death or permanent disability, however, the period of exercisability is extended under the Option Plan to one year after the date of termination, but in no event after the date the option would have expired in the absence of termination. No shares acquired on exercise of an option granted under the Option Plan may be sold or otherwise disposed of by an optionee until the expiration of at least six months following the date on which the option was originally granted by the Company. The Option Plan contains provisions which authorize the Committee, in the event of a sale or merger of all or substantially all of the Company's assets, or a merger or consolidation in which the Company is not the surviving corporation, to take certain action in its discretion. In the event of such a transaction the Committee may accelerate the exercisability of any option to permit its exercise in full during such period as the Committee may prescribe following the public announcement of a sale of assets or merger, and may elect to earlier grant that right at the time an individual option is granted. The Committee may also require an optionee in the event of such a transaction to surrender an option in return for a substitute option issued by a surviving corporation which is determined by the Committee to have a value substantially equal to the value of the surrendered option. 44 48 Shares of Common Stock acquired upon exercise of options under the Option Plan will be paid for in cash or, in the sole discretion of the Committee, through the delivery of shares of the Company's Common Stock with a market value equal to the option exercise price. The ability to pay the option price in shares would, if permitted by the Committee, enable an optionee to engage in a series of successive stock for stock exercises of an option (sometimes referred to as "pyramiding") and thereby fully exercise an option with little or no cash investment by the optionee. The Board of Directors has not established any policy as to whether it will permit exercises of options through payment with shares. The Board of Directors may amend the Option Plan without the approval of stockholders, except that stockholder approval will be required for any amendment which would (i) increase the total number of shares optionable under the Option Plan, or (ii) reduce the option price of options granted under the Option Plan below 100% of fair market value of the stock on the day the option is granted, or (iii) change the class of persons eligible to participate in the Option Plan, or (iv) extend the period during which options may be granted or exercised. Adjustments in the total number of shares optionable under the Option Plan and adjustments of the option price may be made, however, without stockholder approval pursuant to the adjustment provisions mentioned above for any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's Common Stock. As of the date of this Prospectus, no options had been exercised under the Option Plan, one unexercised option granted to Ghassan Barazi, the Company's President, was outstanding to purchase 50,000 shares of Common Stock, and up to 150,000 shares were available for future grants of options under the Option Plan. The option outstanding was granted to Mr. Barazi on January 12, 1996 at an option exercise price of $1.00 per share for a term of five years expiring on January 12, 2001, and is fully exercisable from the date of grant. OTHER The Company currently has no pension, retirement, annuity, savings or similar benefit plan which provides compensation to its executive officers or directors. Upon the completion of this offering, the Company anticipates it will obtain a group health insurance plan in which all of its employees will be eligible to participate. CERTAIN TRANSACTIONS ISSUANCE AND SALE OF SECURITIES The Company was recently organized on June 30, 1995. On July 31, 1995, Refractive Services-800, Inc. paid the Company $100,000 for the purchase of 100,000 shares of the Company's Series A Preferred stock, or a price equal to $1.00 per share. The Company has been advised that Refractive Services-800, Inc. is a Panama corporation with offices in The Netherlands controlled by Marcel Jouby, a Dutch citizen, Kerry Lynne O'Rourke, a South African citizen residing in The Netherlands, and Sukumal Chintagavongse, a Thailand citizen. To the best knowledge of the Company, Refractive Services-800, Inc. was formed to invest in and promote the Vista Laser Centers businesses sponsored by Vista Technologies and, via a wholly-owned subsidiary Refractive Services 800 Corp. ("RS-800"), to own and license the use of 800 and 900 telephone numbers. In order to limit cash dividends on its investment to a 10% return per annum, Refractive Services-800, Inc. (see "Principal and Selling Stockholders") has agreed that dividends on shares of Series A Preferred stock purchased by it in July 1995 will be limited to $0.10 per share annually until such time as those shares are resold by Refractive Services-800, Inc. to an unaffiliated third party. Thereafter, such shares will bear dividends at the same rate of $0.50 per share annually that will be applicable to shares of Series A Preferred sold in this offering. In the opinion of the Board of Directors, taking into consideration the fact that the Company had no assets or business prior to this investment, the fair market value of 100,000 shares of Series A Preferred stock purchased by Refractive Services-800, Inc. on July 31, 1995 was equal to its purchase price of $100,000. On November 16, 1995, the Company issued 200,000 shares of its Series B Preferred stock (see "Description of Securities -- Series B Preferred Stock") to Vista Technologies Inc. in exchange for 200,000 45 49 shares of common stock in Vista Technologies. Although there was no quoted market for Vista Technologies' common stock at the time of that transaction, primarily as a result of Vista Technologies' then delinquency in filing periodic reports with the Securities and Exchange Commission (the "Commission"), Vista Technologies represented it would take such steps as were necessary to become current in required filings with the Commission and seek to obtain an actively quoted market for its common shares. The organization of the Company was sponsored and promoted by Vista Technologies as a founder, and the Company's Board of Directors believed the experience of Vista Technologies in management of PRK businesses in Europe and services Vista Technologies proposed to make available under its ten-year Consulting Services Agreement with the Company would be of valuable assistance to the Company's negotiation of agreements prior to the date of this Prospectus and its planned future operations. Due to Vista Technologies' shortage of cash resources, Vista Technologies proposed that its investment in the Company would be in the form of 200,000 shares of Vista Technologies common stock in exchange for 200,000 shares of the Company's Series B Preferred stock. In view of Vista Technologies' status as a founder of the Company and its representation on the Company's Board of Directors, such transaction should not be considered as having been negotiated at arms-length. Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Public market quotations for Vista Technologies common stock became available in March 1996 following Vista's filings of previously delinquent reports with the Commission, and such quotations to date in 1996 have range from approximately $2.00 to $4.00 per share of Vista Technologies common stock. The liquidation preference of Series B Preferred stock is $2.50 per share and cumulative dividends on Series B Preferred stock are $0.12 1/2 per annum (see "Description of Securities -- Series B Preferred Stock"). Vista Technologies has granted Ghassan Barazi an irrevocable proxy, so long as he remains employed by the Company and expiring in any event after the initial five year term of his employment agreement, to vote the 200,000 shares of the Company's Series B Preferred stock owned by Vista Technologies on any matter on which stockholders are entitled to vote. This proxy is subject to an agreement by Vista Technologies that the Series B Preferred shares owned by Vista Technologies will be voted in favor of the election of three nominees of Dr. Tayfour to the Company's Board of Directors for a term of five years after the date of this Prospectus, one of whom will be Mr. Barazi's so long as he is employed as the Company's Chief Executive Officer. The Company, in turn, has granted Vista Technologies' Board of Directors an irrevocable proxy for a term of five years following the date of this Prospectus to vote the 200,000 shares of Vista Technologies owned by the Company on any matter on which Vista Technologies stockholders are entitled to vote. Each of the above proxies provides that it will expire as to any of the shares covered thereby that are sold to an unaffiliated third party in a bona fide sale transaction. On November 28, 1995, and pursuant to a commitment authorized by the Board of Directors on September 1, 1995, the Registrant issued and sold 20,000 shares of its Common Stock to Ghassan Barazi, the Company's President and Chief Executive Officer, at a cash price of $20,000, or $1.00 per share. In the opinion of the Company's Board of Directors, the fair market value of the Company's Common Stock on November 28, 1995 was $1.00 per share. Under the commitment made by the Company on September 1, 1995, the Company also reserved and authorized the sale to Mr. Barazi of 180,000 Class A common stock purchase warrants stock at a cash price of $18,000, or $0.10 per warrant. Each Class A warrant represents the right to purchase one share of the Company's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the date of this Prospectus. See "Description of Securities -- Common Stock Purchase Warrants". Payment for these warrants was received from Mr. Barazi on April 29, 1996. In the opinion of the Company's Board of Directors, the fair market value of the Company's Class A common stock purchase warrants on the dates of these transactions was equal to the purchase price paid of $0.10 per warrant. On December 1, 1995, and pursuant to a commitment made under his Consulting Agreement dated as of November 15, 1995, the Company sold to Dr. Donald G. Johnson, a director of the Company, 5,000 shares of its Common Stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants stock at a cash price of $4,500, or $0.10 per warrant. On November 15, 1995, the Company also 46 50 reserved and authorized the sale to Dr. J. Charles Casebeer, a director and Chairman of the Board of the Company, of 5,000 shares of Common Stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants stock at a cash price of $4,500, or $0.10 per warrant. Payment for these shares and warrants was received from Dr. Casebeer on April 17, 1996. Each Class A warrant represents the right to purchase one share of the Company's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the date of this Prospectus. See "Description of Securities -- Common Stock Purchase Warrants". In the opinion of the Company's Board of Directors, the fair market value of the Company's Class A common stock purchase warrants on the dates of these transactions was equal to the purchase price paid of $0.10 per warrant and $1.00 per share of Common Stock. Based upon a subsequent independent third party valuation of the Company's Common Stock and Class A Warrants, the fair values of the Common Stock was determined to be $1.08 per share as of November 28, 1995, and the fair value of the Class A Warrants was determined to be $0.09 per warrant as of November 28, 1995. The Company has determined that the differences between these valuations and the prices at which the Board of Directors authorized the issuance and sale of Common Stock and Class A Warrants to Mr. Barazi, Dr. Johnson and Dr. Casebeer were nominal. AGREEMENTS WITH DR. TAYFOUR AND AFFILIATE As described under the caption "Proposed Business", the Company has entered into a Facilities Agreement and a Consulting Agreement, each dated as of October 16, 1995, with Dr. Fouad Tayfour effective upon completion of this offering. Among other terms, the Company agreed to elect Ghassan Barazi as its President and Chief Executive Officer and to cause Mr. Barazi and up to two other professionals to be designated by Dr. Tayfour to be elected directors of the Company. Vista Technologies and Refractive Services-800, Inc. have agreed to cause all shares of the Company's capital stock that they are entitled to vote in favor of the election of Mr. Barazi and two other nominees of Dr. Tayfour to the Company's Board of Directors for the term of Mr. Barazi's employment agreement (see "Management -- Employment Agreement" above). Mr. Barazi has acted on a part-time basis as Administrative Director and Business Manager for the Windsor Laser Eye Institute founded by Dr. Tayfour in 1991 (see "Management"). To date, Dr. Tayfour has not nominated two other individuals for election to the Company's Board of Directors, and he has advised the Company that he does not anticipate such persons will be identified or designated until after the completion of this offering. The Company has also entered into an Agreement of Purchase of Assets dated December 1995 (the "Asset Agreement") with Windsor Excimer Corporation, an affiliate of Dr. Tayfour. Under the Asset Agreement, the Company has agreed to purchase two surgical lasers (see "Proposed Business -- Company LVC Service Sites") and related medical and other office equipment from Windsor Excimer Corporation concurrent upon the closing of this offering. The lasers are located at facilities that will be subleased by the Company in Windsor as described below. The price to be paid by the Company for the equipment will be $1,000,000, of which $500,000 is to be paid in cash from proceeds of this offering and $500,000 will be financed by a note. The purchase price approximates the fair market value of the equipment and was determined by arms-length negotiation between Dr. Tayfour and representatives of the Company after consultation with its financial advisors. The note will bear interest at 10% per annum payable on the last day of each month, and all principal is due and payable on the second anniversary of the date of this Prospectus. The Company's obligations under the note will be collateralized by a fixed and floating security interest in all assets of the Company's Canadian subsidiary which will include, among other assets, all assets purchased under the Asset Agreement. Under the terms of the security instruments, the Company's Canadian subsidiary will be permitted to incur purchase money security interests in additional equipment that may be acquired in the future. The Asset Agreement provides that the Company will enter into sublease agreements with an affiliate of Dr. Tayfour upon completion of this offering for the sublease by the Company of a portion of certain premises at a medical building in Windsor, Ontario currently used by Dr. Tayfour. These facilities will include approximately 2,228 square feet to be subleased for a term expiring on March 30, 2004 and approximately 400 square feet to be subleased for a term expiring on December 30, 1996. The monthly rental rate for these 47 51 facilities will be approximately $2,921 (Canadian currency) per month subject to an increase of approximately 10% in April 1999. AGREEMENTS WITH AFFILIATES AND RELATED PARTIES LICENSE AGREEMENT WITH RS-800 RS-800 and the Company entered into a License Agreement dated October 16, 1995, under which RS-800 granted the Company the right to use certain 800 and 900 area code telephone numbers in its geographic markets of Michigan and Southern Ontario, including among others 800-WE-DO-PRK, for the Company's marketing and public education programs. If the Company elects to use one or more of those telephone numbers, RS-800 will receive 2 1/2% of the Company's revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. During the term of the License Agreement, RS-800 has agreed to maintain the exclusive right to license 800 and 900 telephone numbers covered by the License Agreement that are actively used by the Company, and to offer the Company rights to license, at no additional royalty, any other 800 and 900 telephone numbers that may be acquired hereafter by RS-800 for use in the Company's geographic markets of Michigan and Southern Ontario. The License Agreement is for a term of five years from the date of this Prospectus, and is automatically renewed thereafter on a year-to-year basis unless either party provides six months' prior notice of an intent not to extend the term. The Company has not yet determined whether it will elect to use the 800 and 900 telephone numbers covered by the RS-800 License Agreement. All of the capital stock in RS-800 is owned by Refractive Services-800, Inc., a founder and stockholder of the Company. The Company has been advised that Refractive Services-800, Inc. has granted an option to Vista Technologies exercisable until December 31, 1998 granting Vista Technologies the right to purchase all of the RS-800 capital stock for an option price of $25,000 plus the cost to Refractive Services-800, Inc. of its investment in RS-800. CONSULTING SERVICES AGREEMENT WITH VISTA TECHNOLOGIES Vista Technologies and the Company entered into a Consulting Services Agreement dated as of October 16, 1995. Under the Consulting Services Agreement, Vista Technologies will provide certain consulting services to the Company relating to LVC developments in Europe, location of additional sites for LVC Centers, financing, accounting and legal requirements and investor relations. In exchange for such services, Vista Technologies will receive 5% of the Company's revenues attributable to charges for the use of its facilities and support services, less a credit to the Company of $5,000 per month. In the event any of such revenues are attributable to a subsidiary of the Company that is not wholly-owned by the Company, Vista Technologies' 5% will be reduced in proportion to the Company's percentage ownership in the subsidiary, but to not less than 2 1/2% of such revenues. The Consulting Services Agreement is for a term of ten years from the date of this Prospectus, and is automatically renewed thereafter for periods of five years unless either party provides six months' prior notice of an intent not to extend the term. Rights to the service mark "Vista Laser Centers" are owned by Vista Technologies and have been licensed to the Company by Vista Technologies for no additional consideration on a non-exclusive basis for the term of the Consulting Services Agreement and any renewals of such term. Vista Technologies has advised the Company of the following information extracted from Vista Technologies' public filings with the Securities and Exchange Commission: Vista Technologies is primarily engaged in providing excimer laser equipment for PRK treatment and related support services at Vista Vision(TM) outpatient LVC surgical centers in Europe. Vista Technologies commenced business operations in March 1994 and operates three PRK centers in Italy though a majority-owned subsidiary named Vista Vision SpA and two PRK centers in Sweden through a wholly-owned subsidiary named Vista Vision Scandinavia AB. During May 1994, Vista Technologies also acquired an equity interest in Medical Development Resources, Inc. ("MDRI"), which designs, manufactures and markets precision surgical instruments and related products, consisting primarily of diamond scalpels and stainless steel and titanium surgical instruments. As a result of investigations 48 52 following the negotiation of an agreement to merge with MDRI, Vista Technologies determined in July 1995 to not proceed with this proposed merger and the value of its prior investments in MDRI was written down to zero. The Vista Vision PRK centers in Italy each operates a VISX excimer laser, and include a Milan center originally opened in February 1992, a Pisa clinic established in March 1993 and a Rome center started in January 1995. The Vista Vision centers in Sweden operate two lasers, and include a center in Stockholm purchased by Vista Technologies in June 1994 plus a center in Malmoe opened in August 1995. Until June 1995, Vista Technologies also owned a 50% joint venture interest in a PRK center in London, England, which has been closed due to a change in business strategy of its joint venture partner and extremely competitive market conditions in London. The following chart summarizes certain information as to the number of PRK surgical procedures performed at Vista Technologies' existing PRK centers for the periods indicated.
YEAR ENDED MARCH 31, NINE MONTHS ENDED -------------- DECEMBER 31, 1995 1995 1994 ----------------- ----- ---- Milan, Italy(a)..................... 451 466 239 Pisa, Italy(b)...................... 339 404 213 Rome, Italy(c)...................... 227 41 (c) Stockholm, Sweden(d)................ 341 524 420 Malmoe, Sweden(e)................... 51 (e) (e) ----- ----- --- Total..................... 1,409 1,435 972 ===== ===== ===
- --------------- (a) Opened in February 1992. (b) Opened in March 1993. (c) Opened in January 1995. (d) Includes procedures performed for periods prior to June 1994 purchase by Vista Technologies. (e) Opened in August 1995. Vista Technologies' common stock is publicly-traded in the over-the-counter market and quoted on the NASD Electronic Bulletin Board under the symbol "VIII". Vista Technologies is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission") which may be inspected and copied at the public reference facilities maintained by the Commission at its principal office in Washington D.C. and at its regional offices in Chicago and New York. Until approximately the end of February 1996, Vista Technologies was delinquent in the filings of its Form 10-KSB for its fiscal year ended March 31, 1995 and its Quarterly Reports on Form 10-QSB for the periods ended June 30, September 30 and December 31, 1995. Vista Technologies has attributed that delinquency primarily to its inability to obtain reliable finance information as to MDRI. By March 1, 1996, Vista had filed all of these reports with the Commission. OTHER CONSULTING AGREEMENTS Dr. J. Charles Casebeer, a director and Chairman of the Board, entered into a Consulting Agreement with the Company dated November 15, 1995 which will become effective on the date of this Prospectus. Dr. Casebeer is an educator and trainer in the LASIK procedure and has previously served other companies as a consultant in the LASIK field. Dr. Casebeer also has conducted studies on the TMM PRK method developed by Dr. Johnson. Since 1983, Dr. Casebeer's experience includes over 10,000 refractive procedures and the education of more than 3,200 MDs worldwide in various refractive procedures ranging from RK to ALK and LASIK. See also "Management". 49 53 Dr. Casebeer's Consulting Agreement provides he will assist the Company and Dr. Tayfour in managing the Company's program for training MDs and ODs in the use and performance of LVC procedures and in recommending standards to establish a program of credentialing and training MDs and ODs in various aspects relating to LVC procedures and patient treatment. In consideration of his services, Dr. Casebeer's professional corporation will receive from the Company compensation at the rate of $60,000 per annum plus additional compensation of $2,500 for supervising the training of each MD and OD that enters the credentialing program. The $60,000 annual payment to Dr. Casebeer's professional corporation will be paid upon completion of this offering by the Company for the first year of his consulting services and thereafter at the rate of $5,000 per month. Compensation for each MD and OD that enters the credentialing program will be payable at the rate of $500 per month over a period of five months commencing in the first month following the date on which each such MD and OD has started his or her accreditation program. Dr. Casebeer is expected in the future to promote advanced LVC methods for both the Company and for other Vista Laser Centers companies that may be formed in the future by the Company's founders, Vista Technologies Inc. and Refractive Services-800, Inc., to service other North American geographic markets. (The Company and investors in this offering will not acquire an interest in other companies formed by Vista Technologies Inc. and Refractive Services-800, Inc.) Dr. Donald G. Johnson, a director of the Company, entered into a Consulting Agreement with the Company dated November 15, 1995 which will become effective on the date of this Prospectus. No continuing compensation will be required to be paid to Dr. Johnson under this agreement. Dr. Johnson has agreed to render part-time consulting services to the Company. Dr. Johnson developed TMM PRK procedures with VISX equipment and as of December 31, 1995 has successfully treated approximately 7,400 eyes with excimer laser procedures. See also "Management". AFFILIATION BETWEEN PRESIDENT OF VISTA TECHNOLOGIES AND PARENT OF THE UNDERWRITERS' REPRESENTATIVE Thomas A Schultz was hired as the President and Chief Executive Officer of Vista Technologies and elected a director of Vista Technologies on February 16, 1996. Mr. Schultz has also served since November 1995 as a director of Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the parent of Dickinson & Co., the Representative of the Underwriters for Series A Preferred offered by the Company. 50 54 PRINCIPAL AND SELLING STOCKHOLDERS PRINCIPAL STOCKHOLDERS The following table sets forth information (except as otherwise indicated by footnote) as to shares of the Company's Common Stock, Series A Preferred stock and Series B Preferred stock owned at the date of this Prospectus by (i) each person known by management to beneficially own more than 5% of each class of the Company's outstanding securities, (ii) each of the Company's directors, and (iii) all executive officers and directors as a group:
SHARES BENEFICIALLY OWNED(2) --------------------------------------------------------------- PREFERRED STOCK ----------------------------------------- COMMON % OF % OF % OF NAME OR GROUP(1) STOCK CLASS(2) SERIES A CLASS SERIES B CLASS - ----------------------------------------- ------- --------- -------- -------- -------- -------- DIRECTORS: Ghassan Barazi(3)........................ 250,000 96.2% -- -- 200,000* 100% J. Charles Casebeer, M.D.(4)............. 50,000 66.7% -- -- 200,000* 100% Donald G. Johnson, M.D.(5)............... 50,000 66.7% -- -- 200,000* 100% Jac. J. Lam(6)........................... -- -- -- -- 200,000* 100% All executive officers and directors as a group [five in number](7).............. 350,000 100.0% -- -- 200,000* 100% OTHER 5% STOCKHOLDERS: Refractive Services-800, Inc.(8)....... -- -- 100,000 100.0% -- -- The Company has been advised that Refractive Services-800, Inc. is controlled by Marcel Jouby, a Dutch citizen, Kerry Lynne O'Rourke, a South African citizen residing in The Netherlands, and Sukumal Chintagavongse, a Thailand citizen. Vista Technologies Inc.(6)(9).......... -- -- -- -- 200,000* 100.0%
- --------------- * These are the same securities deemed beneficially owned by more than one person. (1) The persons named in the table have sole voting and investment power with respect to all shares shown to be beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. (2) Includes securities beneficially owned plus, where applicable, Common Stock issuable upon exercise of outstanding Class A Warrants and stock options held only by the person or group indicated that are fully exercisable or exercisable within 60 days after the date of this Prospectus. (3) Includes 20,000 shares of Common Stock, 180,000 shares issuable upon exercise of Class A Warrants and 50,000 shares issuable upon exercise of a stock option directly owned by Mr. Barazi. The table also includes 100,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as beneficially owned by Messrs. Casebeer, Johnson and Lam and directly owned by Vista Technologies (see Notes 4, 5, 6 and 9 to this table). Mr. Barazi holds an irrevocable proxy granting him the power to vote Series B Preferred shares owned by Vista Technologies, but disclaims beneficial ownership of such shares. The current business address for Mr. Barazi is 2224 Walker Road, Suite 30, Windsor, Ontario, Canada N8W 3P6. (4) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon exercise of Class A Warrants beneficially owned by Dr. Casebeer. The table also includes 100,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as beneficially owned by Messrs. Barazi, Johnson and Lam and directly owned by Vista Technologies (see Notes 3, 5, 6 and 9 to this table). Dr. Casebeer is a director of Vista Technologies and by virtue of such relationship may be deemed to influence power of disposition as to Series B Preferred shares owned by Vista Technologies; Dr. Casebeer disclaims beneficial ownership of such shares. The business address for Dr. Casebeer is 15100 North 78th Way, Suite 100, Scottsdale, Arizona 85260. 51 55 (5) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon exercise of Class A Warrants beneficially owned by Dr. Johnson. The table also includes 100,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as beneficially owned by Messrs. Barazi, Casebeer and Lam and directly owned by Vista Technologies (see Notes 3, 4, 6 and 9 to this table). Dr. Johnson is Chairman of the Board and a director of Vista Technologies and by virtue of such relationships may be deemed to influence power of disposition as to Series B Preferred shares owned by Vista Technologies; Dr. Johnson disclaims beneficial ownership of such shares. The business address for Dr. Johnson is 918 12th Street, New Westminster, British Columbia, Canada V3M 6B1. (6) 100,000 Series B Preferred shares listed in the table are owned by Vista Technologies and are included elsewhere in the table as beneficially owned by Messrs. Barazi, Casebeer and Johnson and directly owned by Vista Technologies (see Notes 3, 4, 5 and 9 to this table). Mr. Lam is a director of Vista Technologies and by virtue of such relationship may be deemed to influence power of disposition as to Series B Preferred shares owned by Vista Technologies; Mr. Lam disclaims beneficial ownership of such shares. The business address for Mr. Lam is Reaal 5-V, P.O. Box 4, 2350 AA Leiderdorp, The Netherlands. (7) Includes shares described in Notes (3) through (6) above. (8) The business address for Refractive Services-800, Inc., a Panama company, is Reaal 5-V, P.O. Box 4, 2350 AA Leiderdorp, The Netherlands. (9) Shares held by Vista Technologies are subject to a proxy and voting agreement granted in favor of Ghassan Barazi and Dr. Fouad Tayfour (see "Certain Transactions"). Such shares are included elsewhere in the table as beneficially owned by Messrs. Barazi, Casebeer, Johnson and Lam (see Notes 3, 4, 5 and 6 to this table). The business address for Vista Technologies is 1250 Oakmead Parkway, Suite 210, Sunnyvale, California 92088-3599. After giving effect to the sale of 800,000 shares of Series A Preferred offered by the Company (and assuming the Underwriter's over-allotment option to purchase an additional 120,000 shares of Series A Preferred stock is not exercised and the Underwriter's Warrants to purchase 80,000 shares of Common Stock are not exercised), the following table shows the number of shares, voting power and percentage of each person and group shown in the foregoing table as adjusted for this offering:
SHARES BENEFICIALLY OWNED, AS ADJUSTED(A) --------------------------------------------------------------- VOTING POWER PREFERRED STOCK --------------- ----------------------------------------- VOTES COMMON % OF % OF % OF NAME OR GROUP (B) % STOCK CLASS(B) SERIES A CLASS SERIES B CLASS - -------------------------------- -------- ---- ------- --------- -------- -------- -------- -------- DIRECTORS: Ghassan Barazi.................. 450,000 33.1% 250,000 96.2% -- -- 200,000* 100% J. Charles Casebeer, M.D........ 50,000 4.3% 50,000 66.7% -- -- 200,000* 100% Donald G. Johnson, M.D.......... 50,000 4.3% 50,000 66.7% -- -- 200,000* 100% Jac. J. Lam..................... -- -- -- -- -- -- 200,000* 100% All executive officers and directors as a group [five in number]... 550,000 37.9% 350,000 100.0% -- -- 200,000* 100% OTHER 5% STOCKHOLDERS: Refractive Services-800, Inc......................... 100,000 8.8% -- -- 100,000 11.1% -- -- Vista Technologies Inc.(b).... -- -- -- -- -- -- 200,000* 100.0%
- --------------- * These are the same securities deemed beneficially owned by more than one person. (a) As adjusted for the sale of 800,000 shares of Series A Preferred stock offered by the Company. (b) Includes securities beneficially owned plus, where applicable, Common Stock issuable upon exercise of outstanding Class A Warrants and stock options held only by the person or group indicated that are fully exercisable or exercisable within 60 days after the date of this Prospectus. Shares held by Vista Technologies are subject to a proxy and voting agreement granted in favor of Ghassan Barazi and Dr. Fouad Tayfour (see "Certain Transactions"). 52 56 SELLING STOCKHOLDER The registration statement of which this Prospectus is a part also covers the resale of 100,000 outstanding shares of Series A Preferred stock or, if converted into 100,000 shares of Common Stock, all of the Common Stock issuable upon conversion of such Series A Preferred stock, to be offered for the account of Refractive Services-800, Inc. (the "Selling Stockholder"), a founder of the Company (see "Certain Transactions"). The Company will not receive any proceeds from the offering of securities by the Selling Stockholder. The Selling Stockholder has agreed that it will not sell any of such securities at any time during the 12 month period after the date of this Prospectus without the prior consent of the Representative of the Underwriters. The following table sets forth certain information with respect to the beneficial ownership of securities offered hereby by the Selling Stockholder.
BENEFICIAL OWNERSHIP OF SERIES A PREFERRED STOCK --------------------------------------------------- PRIOR TO SALE AFTER SALE(1) ------------------------ ------------------------ NUMBER OF PERCENT OF NUMBER OF PERCENT OF NAME AND ADDRESS SHARES CLASS(2) SHARES CLASS ----------------------------------- --------- ---------- --------- ---------- Refractive Services-800, Inc. ..... 100,000 16.7% -0- -- Reaal 5-V, P.O. Box 4 2350 AA Leiderdorp The Netherlands
- --------------- (1) Assumes all shares offered by the Selling Stockholder are sold. (2) Percentage after giving effect to the sale of 600,000 shares of Series A Preferred offered hereby. See "Plan of Distribution by Selling Stockholder". DESCRIPTION OF SECURITIES The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share. As of the date of this Prospectus, there were 30,000 shares of Common Stock, 100,000 shares of Series A Preferred stock and 200,000 shares of Series B Preferred stock issued and outstanding. PREFERRED STOCK The Company is authorized to issue 5,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). Under the Company's articles of incorporation, the Company's Board of Directors is authorized, without further stockholder action, to issue Preferred Stock in one or more series and to fix the number of shares and the rights, preferences and limitations of each series. Among the specific matters that may be determined by the Board of Directors are the dividend rate, the redemption price, if any, conversion rights, if any, the amount payable in the event of any voluntary liquidation or dissolution of the Company and voting rights, if any. No dividends or payments in liquidation may be made with respect to Common Stock unless all accumulated dividends on the Preferred Stock of all series have been paid in full and, in the event of liquidation, unless the liquidation preference of all series of Preferred Stock has been satisfied. In case stated dividends and amounts payable on liquidation on Preferred Stock of all series are not payable in full, shares of all series of Preferred Stock are entitled to share ratably in the payment of dividends and in any distribution of assets otherwise than by way of dividends SERIES A PREFERRED STOCK The Company has designated 1,100,000 shares of Preferred Stock as "10% Series A Cumulative Convertible Preferred Stock" (herein called the "Series A Preferred"). Of such shares, 100,000 shares were issued and sold to Refractive Services-800 Inc. in July 1995 for $100,000 in cash. In order to limit cash dividends on its investment to a 10% return per annum, Refractive Services-800, Inc. (see "Principal and 53 57 Selling Stockholders") has agreed that dividends on shares of Series A Preferred stock purchased by it in July 1995 will be limited to $0.10 per share annually until such time as those shares are resold by Refractive Services-800, Inc. to an unaffiliated third party. Thereafter, such shares will bear dividends at the same rate of $0.50 per share annually that will be applicable to shares of Series A Preferred sold in this offering. The remaining 1,000,000 designated shares of Series A Preferred include 800,000 shares reserved for issuance in this offering, 120,000 shares reserved for the Underwriters' over-allotment option and 80,000 shares reserved for the Underwriter's Warrants. Dividends. Series A Preferred will be entitled to cumulative dividends at the rate of $0.50 per share per annum, payable annually commencing one year after this offering. Dividends will commence to accrue from the date of initial issuance. On the basis that 900,000 shares of Series A Preferred stock will be outstanding after the offering hereunder (assuming the Underwriter's over-allotment option is not exercised), the annual dividend requirement of the Series A Preferred will be $450,000 per annum (assuming resale by the Selling Stockholder of its 100,000 Series A Preferred shares). As of March 31, 1996, accrued and unpaid dividends on Series A Preferred shares issued prior to this offering were $6,667. Nevada law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will be $4,750,000 ($5,350,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. In the event the Company is prohibited by law from the payment of cash dividends, the Company at its option may elect to pay accrued dividends in shares of the Company's Series A Preferred Stock or Common Stock. In the event of such an election by the Company, each holder of record of Series A Preferred stock will be advised in writing, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Company's election to make an interest payment in additional capital stock. Prior to distributing shares of Series A Preferred or Common Stock as a dividend, the Company will be obligated to register such shares under the Securities Act of 1933. The number of shares issuable for any such dividend payment will be determined by dividing the cumulative accrued dividend payments due on the dividend payment date by the Fair Market Value, defined as the unweighted average closing sale prices for the class of dividend shares distributed during the ten days on which such shares are actually traded in the Nasdaq System or on a national securities exchange immediately prior to the record date for payment of the dividend. If for any reason closing sale prices are not quoted by the Nasdaq System on any such day, then the closing market price for such day will be deemed the closing bid price for such day as reported by the National Quotation Bureau. Should market quotations for the class of dividend shares distributed not be available, the market value will be determined by the Company's Board of Directors based on a good faith determination. Conversion. The holders of Series A Preferred will have the right to convert their stock to shares of the Company's Common Stock at any time prior to the second business day before a date designated by the Company for the redemption of such shares. The date of redemption must be designated by the Company at least 30 days prior to the redemption date of such shares (see "Redemption" below). Each Series A Preferred share may be converted into one (1) share of Common Stock. In the case of such conversion, there will be no adjustment for accumulated dividends and the Series A Preferred stockholders electing to convert will forfeit their rights to payment of accrued and unpaid dividends. So long as there is any Series A Preferred outstanding, the Company will reserve unissued, out of the authorized shares of Common Stock, a sufficient number of shares to provide for such conversion. The conversion ratio is subject to automatic proportionate adjustment if the Common Stock is subdivided or combined, in case stock dividends are paid on the Common Stock, or in the event of any other reclassification or reorganization affecting the outstanding shares of Common Stock. Upon conversion, no certificates for fractional shares will be issued, and a cash adjustment will be made in lieu thereof. 54 58 Redemption. The Series A Preferred may be redeemed, as a whole at any time or in part from time to time thereafter, at the option of the Company, upon at least 30 days' prior notice, at a redemption price of $7.50 per share. If shares are redeemed in part, those shares to be redeemed will be selected by lot in an appropriate manner determined by the Company's Board of Directors. All dividends accrued and unpaid to the date of redemption will be paid at the time of such redemption. No shares of Series A Preferred stock may be redeemed unless all dividends accrued and unpaid to the date of redemption have been paid or provided for on all series of Preferred Stock. There are no sinking fund or mandatory redemptions provisions relating to the Series A Preferred. Liquidation Preference. The holders of Series A Preferred will be entitled to receive out of the assets of the Company in the event of its liquidation, and before any class of stock ranking junior to Preferred Stock, all dividends accrued and unpaid to the date of liquidation plus $5.00 per share. Voting Rights. Each share of Series A Preferred will be entitled to one vote per share on all matters on which stockholders or the Company are entitled to vote or act by consent. Miscellaneous. Holders of Series A Preferred will not have any preemptive or preferential rights to subscribe for or purchase any additional securities issued by the Company. Shares of Series A Preferred offered hereunder will be, upon payment of the offering price, duly and validly issued, fully paid and nonassessable. Transfer Agent. The transfer agent for the Series A Preferred will be American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005. SERIES B PREFERRED STOCK The Company has designated 200,000 shares of Preferred Stock as "5% Series B Cumulative Convertible Preferred Stock" (herein called the "Series B Preferred"), all of which are issued and outstanding as of March 31, 1996. Series B Preferred is entitled to cumulative dividends at the rate of $0.12 1/2 per share per annum, payable annually on each anniversary of the Company's initial public offering in the same manner as dividends on Series A Preferred. The annual dividend requirement of the Series B Preferred is currently $25,000 per annum; as of March 31, 1996, accrued and unpaid dividends on Series B Preferred shares issued prior to this offering were $9,375. Holders of Series B Preferred have the right to convert their stock to shares of the Company's Common Stock at any time prior to the second business day before a designated date for the optional redemption of such shares. Each Series B Preferred share may be converted into one (1) share of Common Stock. In the case of such conversion, there will be no adjustment for accumulated dividends. The conversion ratio is subject to automatic proportionate adjustment if the Common Stock is subdivided or combined, in case stock dividends are paid on the Common Stock, or in the event of any other reclassification or reorganization affecting the outstanding shares of Common Stock. The Series B Preferred may be redeemed, as a whole at any time after the first anniversary of the date of this Prospectus or in part from time to time thereafter, at the option of the Company, upon at least 30 days' prior notice, at a redemption price of $5.00 per share, except that the Company may not elect to redeem Series B Preferred if any Series A Preferred would remain issued and outstanding after the redemption of Series B Preferred. All dividends accrued and unpaid to the date of redemption will be paid upon redemption of Series B Preferred. No shares of shares of Series B Preferred stock may be redeemed unless all dividends accrued and unpaid to the date of redemption have been paid or provided for on all other series of Preferred Stock. There are no sinking fund or mandatory redemptions provisions relating to the Series B Preferred. Holders of Series B Preferred will be entitled to receive out of the assets of the Company in the event of its liquidation, and before any class of stock ranking junior to Preferred Stock, all dividends accrued and unpaid to the date of liquidation plus $2.50 per share. Each share of Series B Preferred is entitled to one vote per share on all matters on which stockholders or the Company are entitled to vote or act by consent. Holders of Series B Preferred do not have any preemptive or preferential rights to subscribe for or purchase any 55 59 additional securities issued by the Company. All outstanding shares of Series B Preferred are fully paid and nonassessable. COMMON STOCK The Company is authorized to issue 20,000,000 shares of Common Stock, par value $.01 per share, of which 30,000 shares were issued and outstanding at the date of this Prospectus. Holders of Common Stock are entitled to one vote for each share held on each matter to be acted upon by stockholders of the Company. Stockholders do not have preemptive rights or the right to cumulate votes for the election of directors. Shares are not subject to redemption nor to any liability for further calls. All shares of Common Stock issued and outstanding are, and all shares issuable upon conversion of Series A Preferred stock offered by the Company hereby will be, validly issued, fully paid and non-assessable. Subject to provisions relating to Preferred Stock discussed above, holders of Common Stock are entitled to receive such dividends, if any, as may be declared by the Board of Directors in its discretion out of funds legally available for that purpose, and to participate pro rata in any distribution of the Company's assets upon liquidation or dissolution. In the event of liquidation or dissolution of the Company, all assets available for distribution after satisfaction of all debts and other liabilities and after payment or provision for the liquidation preference of Preferred Stock are distributable among the holders of the Common Stock. The Transfer Agent for the Company's Common Stock will be American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005. COMMON STOCK PURCHASE WARRANTS The Company at present has reserved for issuance up to 270,000 shares of Common Stock for issuance in the event of the exercise of up to 270,000 outstanding Class A Common Stock Purchase Warrants (the "Class A Warrants"). Class A Warrants are exercisable at $1.00 per share until the Class A warrants expire on the fourth anniversary of this Prospectus. Class A Warrants are not subject to redemption by the Company. The holders of the Class A Warrants do not have any of the rights or privileges of stockholders of the Company, such as voting rights or the right to receive dividends, prior to exercise of the Class A Warrants. The exercise price of the Class A Warrants and the number of Class A Warrants are subject to automatic proportionate adjustment in the event of any stock dividend, stock split or other recapitalization affecting the outstanding Common Stock. Investors in this offering should note that for the term of the Class A Warrants, the holder or holders thereof are given, at nominal cost, the opportunity to profit from a rise in the market price of the Common Stock subject to the Class A Warrants with a resulting dilution in the interests of other stockholders. At any time when the holders of the Class A Warrants might be expected to exercise the same, the Company would in all likelihood be able to obtain additional equity capital on terms more favorable than those provided in the Class A Warrants. See "Certain Transactions". CERTAIN CHARTER AND BYLAW PROVISIONS AND OTHER INDEMNIFICATION ARRANGEMENTS Possible Additional Issuances of Common and/or Preferred Stock Without Stockholder Action. The flexibility to issue additional shares of Common Stock and/or shares of Preferred Stock in one or more series as permitted by the Company's articles of incorporation (the "Charter") can enhance the Board of Directors' bargaining capability on behalf of the Company's stockholders in a takeover situation and could, under some circumstances, be used to render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities, or the removal of incumbent management, even if such a transaction were favored by the holders of the requisite number of shares. Under these circumstances, the existence of a significant number of authorized and unissued Common shares and/or one or more series of Preferred Stock may have the effect of limiting stockholder participation in these types 56 60 of transactions. The Company is not aware of any present efforts to gain control of the Company or to organize a proxy contest. Number of Directors; Removal; Filling Vacancies. The By-Laws provide that the Board will consist between three and not more than fifteen directors, with the exact number to be fixed from time to time by resolution adopted by the Board. The Board of Directors at the present time has fixed the number of directors at six, with two vacancies to be filled after completion of this offering (see "Certain Transactions"). Subject to the rights, if any, of the holders of any series of Preferred Stock then outstanding, the By-Laws authorize the Board to fill vacant directorships, including newly created directorships. Accordingly, these provisions could prevent a stockholder from obtaining majority representation on the Board by permitting the Board to enlarge the Board and fill the new directorships with its own nominees. Each director so elected by the Board or by stockholders hold office until the next election of directors and until his successor is elected and qualified. Limitation of Liability and Indemnification. Under the Nevada General Corporation Law, a corporation may adopt a provision in its articles of incorporation eliminating, with certain exceptions, the personal liability of a director to the corporation or its shareholders for monetary damages for breach of the director's fiduciary duty as a director. The Company's Charter eliminates the liability of directors to the fullest extent permissible under Nevada law. Under Nevada law, however, the Company is not allowed to eliminate or limit director monetary liability for: (a) breaches of the director's duty of loyalty to the corporation or its stockholders; (b) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; (c) unlawful dividends, stock repurchases or redemptions; or (d) transactions from which the director received an improper personal benefit. Under the Nevada General Corporation Law, a corporation may not indemnify any director, officer, employee or agent made or threatened to be made party to any threatened, pending, or completed proceeding unless such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceedings, had no reasonable cause to believe that his or her conduct was unlawful. FEDERAL INCOME TAX CONSIDERATIONS The following is a general summary of the material Federal income tax aspects relating to the Series A Preferred stock. The Company has not received an opinion of counsel as to the following income tax aspects. Purchasers of the Series A Preferred stock offered hereby should consult their own advisors as to the tax treatment of this issue in particular circumstances, including the application of state and local laws. DIVIDENDS ON PREFERRED STOCK Dividends paid on the Series A Preferred stock, whether paid in cash or in shares of the Company's Common Stock, are taxable as ordinary income to the extent of the Company's current or accumulated earnings and profits, but may qualify for the dividends received deduction allowable to corporations and for the dividend exclusion available to individuals. However, under Section 246A of the Internal Revenue Code of 1986, as amended (the "Code"), to the extent a corporation incurs indebtedness for the purpose of making a portfolio stock investment (which would include the Series A Preferred stock), the deduction for dividends received on the leverage is generally disallowed. Corporate investors should note that pending legislative proposals may reduce the corporate dividends received deduction from the current deduction of 70% to 50%. Dividends paid in Common Stock, if any, would be valued at fair market value on the date of payment for income tax purposes. REDEMPTION Under Section 305(c) of the Code and Section 1,305-5(b) of the Treasury Regulations, if the redemption price of redeemable preferred stock exceeds its issue price, the portion of such excess which constitutes an unreasonable redemption premium, if any, will be taxable as a dividend over the period during which the preferred stock cannot be redeemed. A premium is considered to be reasonable if it is in the nature 57 61 of a penalty for a premature redemption and if such premium does not exceed the amount which the issuer would be required to pay for such redemption right under market conditions existing at the time of issuance of the preferred stock. Although no assurance can be given, the Company believes that the redemption premium of the Series A Preferred stock meets this test. If this test is not met, the amount by which the redemption premium (based on all or a portion of the excess of the $7.50 redemption price over the $5.00 issue price) exceeds a reasonable redemption premium will be considered to be a dividend received by a shareholder ratably over any period during which the Preferred Stock cannot be redeemed. Any sale or exchange, other than by way of redemption or exchange with the Company, will produce capital gain or loss if the Series A Preferred stock is held as a capital asset. Generally, any redemption of the Series A Preferred stock for cash would result in taxable gain or loss equal to the difference between the amount of cash received and the shareholder's tax basis in the Series A Preferred stock redeemed. Such gain or loss would be capital gain or loss if the Series A Preferred stock were held as a capital asset, and would be long-term capital gain or loss if the holding period for Series A Preferred stock were to exceed one year. Under certain circumstances an exception to this rule applies, which would cause the entire amount of the cash received upon redemption of the Series A Preferred stock to be taxable as a dividend. However, if a shareholder completely terminates his interest in the Company (taking into account shares deemed owned by that shareholder by reason of the constructive ownership rules applied by Section 302(c) of the Code) as a result of a redemption of the Series A Preferred stock, such shareholder would be exempt from such dividend treatment. Moreover, if, as a result of a cash redemption of the Series A Preferred stock, a shareholder whose relative stock interest in the Company is minimal (an interest of less than 1% should satisfy this requirement) and who exercises no control over the Company's affairs experiences an actual reduction in his proportionate interest in the Company (taking into account the constructive ownership rules mentioned above), such shareholder should not be subject to dividend treatment, because such distribution is "not essentially equivalent to a dividend" under Section 302(b)(1) of the Code. CONVERSION TO COMMON STOCK No gain or loss will be recognized for Federal income tax purposes on conversion of the Series A Preferred stock into shares of Common Stock, except with respect to any cash received in exchange for a fractional interest, if any. The tax basis for the shares of Common Stock received upon conversion will be equal to the tax basis of the Series A Preferred stock converted, reduced by the portion of such basis allocable to any fractional interest exchanged for cash. Provided that the Series A Preferred stock was held as a capital asset, the holding period of the shares of Common Stock will include the holding period of the Series A Preferred stock converted. SHARES ELIGIBLE FOR FUTURE SALE Upon the completion of this offering, the Company will have outstanding 30,000 shares of Common Stock, 900,000 shares of Series A Preferred stock (convertible into 900,000 shares of Common Stock), 200,000 shares of Series B Preferred stock (convertible into 200,000 shares of Common Stock), 270,000 Class A Warrants (exercisable at $1.00 per share into 270,000 shares of Common Stock) and stock options exercisable at $1.00 per share into 50,000 shares of Common Stock. Of these shares, the 900,000 shares of Series A Preferred (1,120,000 shares if the Underwriter's over-allotment option is exercised in full) will be freely tradeable without restriction or further registration under the Securities Act of 1933 (the "Securities Act"), except for any shares purchased by an "affiliate" of the Company (in general, a person who has a control relationship with the Company) which would be subject to the resale limitations of Rule 144 under the Securities Act other than holding period limitations. The remaining 30,000 shares of Common Stock and up to 520,000 shares of Common Stock issuable upon conversion of Series B Preferred and exercise of Class A Warrants and stock options are deemed to be "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act, in that such shares were issued and sold by the Company in private transactions not involving a public offering. Under Rule 144 as currently in effect, none of such shares will become eligible for sale prior to November 16, 1997. 58 62 As discussed below, there are certain amendments that may be proposed to Rule 144 which, if adopted, may enable a portion of such shares to become eligible for sale before November 16, 1997. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or other persons whose shares are required to be aggregated), who has owned restricted shares of the Company's Common Stock or Series B Preferred stock beneficially for at least two years is entitled to sell, within any three-month period, a number of shares of Common Stock that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the shares are quoted on the Nasdaq system, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least the three months immediately preceding the sale and who has beneficially owned shares for at least three years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. The Securities and Exchange Commission has recently proposed for comment the possibility of amendments to Rule 144 that would reduce the two and three year periods referenced above to one and two years, respectively. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. A person who has not been an affiliate of the Company at any time during the three months preceding a sale, and who has beneficially owned his Common Stock for at least three years, would be entitled to sell such Common Stock under Rule 144(k) without regard to the other requirements of Rule 144. All of the Company's officers, directors and existing stockholders have agreed not to sell or otherwise dispose of any of their shares of Common Stock or Preferred stock for a period of 12 months from the date of this Prospectus without the prior written consent of the Underwriter. Prior to this offering, there has been no market for the Series A Preferred stock or Common Stock. No predictions can be made of the effect, if any, that sales of Series A Preferred stock or Common Stock under Rule 144, or the availability of such shares for sale, will have on the market price for the securities of the Company prevailing from time to time. Nevertheless, the possibility that substantial amounts of Series A Preferred stock or Common Stock may be sold in the public market may adversely affect prevailing market prices for the Company's securities and could impair the Company's ability to raise additional capital through the sale of its equity securities. 59 63 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below, through their Representative, Dickinson & Co. (the "Representative") have severally agreed to purchase from the Company the following respective number of shares of Series A Preferred stock at the initial public offering price, less the underwriting discounts and commissions, set forth on the cover page of this Prospectus.
NUMBER OF SHARES OF SERIES A PREFERRED UNDERWRITER TO BE PURCHASED ----------------------------------------------------------- ------------------- Dickinson & Co............................................. ------- Total............................................ 800,000 =======
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase all Series A Preferred offered hereby of any of the Series A Preferred shares offered hereby are purchased. The Company has been advised by the Representative that the Underwriters propose to offer the shares of Series A Preferred stock directly to the public at the public offering price set forth on the cover page of this Prospectus. The Underwriters may allow to certain securities dealers who are members of the National Association of Securities Dealers, Inc. ("NASD") a concession, not in excess of $ per share of Series A Preferred Stock, of which not in excess of $ per share of Series A Preferred Stock may be reallowed to other securities dealers who are members of the NASD. After the initial public offering, the public offering price, concession and reallowance may be changed by the Representative. The Company has granted to the Underwriter an option, exercisable within 45 days from the date of this Prospectus, to purchase from the Company up to 120,000 additional shares of Series A Preferred stock at the public offering price set forth on the cover page of this Prospectus, less the underwriting discounts and commissions. The Underwriter may exercise this option in whole or, from time to time, in part, solely for the purpose of covering over-allotments, if any, made in connection with the sale of the shares of Series A Preferred stock offered hereby. The Company will be obligated, pursuant to the over-allotment option, to sell shares to the Underwriter to the extent such over-allotment option is exercised. The Company has agreed to pay the Underwriter a nonaccountable expense allowance of 3% of the gross proceeds of this offering. The Company has also agreed to pay all expenses in connection with qualifying the shares of Series A Preferred stock offered hereby and Common Stock issuable upon conversion thereof for sale under the laws of such states as the Underwriter may designate, including expenses of counsel retained for such purpose by the Underwriter. The Company has agreed to sell to the Underwriter, for an aggregate of $80, warrants (the "Underwriter's Warrants") to purchase up to 80,000 shares of Series A Preferred stock at an exercise price of $6.00 per share. The Underwriter's Warrants may not be sold, transferred, assigned or hypothecated during the life of the Underwriter's Warrants except to the officers of the Representative and to members of the selling group and their officers, and will be exercisable for a four-year period commencing one year after the date of this Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term, the holders of the Underwriter's Warrants are given, at nominal cost, the opportunity to profit from a rise in the market price of the Company's Series A Preferred stock. To the extent that the Underwriter's Warrants are exercised or if Series A Preferred shares issued on such exercise are converted into Common Stock, dilution to the interests of the Company's stockholders may occur. Further, the terms upon which the Company will be able to obtain 60 64 additional equity capital while the Underwriter's Warrants are outstanding may be adversely affected since the holders of the Underwriter's Warrants can be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital on terms more favorable to the Company than those provided in the Underwriter's Warrants. Any profit realized by the Representative on the sale of the Underwriter's Warrants or the underlying securities may be deemed additional underwriting compensation. Subject to certain limitations and exclusions, the Company has agreed to register the Underwriter's Warrants and the underlying securities under the Securities Act on one occasion during the Warrant Exercise Term and to include such Underwriter's Warrants and the underlying securities in any appropriate registration statement that is filed by the Company during the seven years following the date of this Prospectus. The Company has agreed, for a period of five years from the date of this Prospectus, if so requested by the Representative, to nominate and use its best efforts to appoint a designee of the Representative as a non-voting advisor to the Company's Board of Directors. Each person so designated may be a director, officer, partner, employee or affiliate of the Representative. Such person will receive reimbursement of actual expenses and no other compensation. The Selling Stockholder holding 100,000 shares of Series A Preferred stock and all of the Company's other existing stockholders, officers and directors have agreed, pursuant to lock-up agreements executed in connection with this offering, that until 12 months after the date of this Prospectus, such parties will not sell, make any short sale of, loan, grant any option for the purchase or otherwise dispose of any shares of Series A Preferred stock or Common Stock or any securities convertible into or exchangeable or exercisable for such shares without the consent of the Representative. The Representative does not intend to participate in sales of Series A Preferred Stock which may be offered by the Selling Stockholder under the registration statement of which this Prospectus is a part. The Underwriting Agreement requires other commitments on the part of the Company during the five years following the date of the Prospectus, including (i) providing the Representative on an annual basis with internal forecasts of projected results of operations for the following two years, (ii) providing the Representative with quarterly statements setting forth the Company's results of operations and financial position as regularly prepared by management, (iii) a requirement that the Company will cause its independent public accountants to review the Company's interim financial statements for each of the first three fiscal quarters in each fiscal year prior to announcement of quarterly financial information, (iv) a requirement that KPMG Peat Marwick LLP or another nationally recognized accounting firm reasonably acceptable to the Representative be retained as the Company's independent public accountants, and (v) a requirement that American Stock Transfer & Trust Company will be retained as the transfer agent for the Series A Preferred unless otherwise agreed to by the Representative The Company has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act, and to contribute to payments that the Underwriters may be required to make in respect thereof. The Underwriter has agreed it will not confirm sales of the shares offered hereby to any account over which the Underwriter exercises discretionary authority. Prior to this offering, there has been no public trading market for the Series A Preferred stock or the Common Stock. Consequently, the initial public offering price of the Series A Preferred stock and the one-for-one conversion rate whereby Series A Preferred may by converted into shares of Common Stock have been determined by negotiations between the Company and the Underwriter. Among the factors considered in determining the offering price and conversion rate were the Company's limited history of operations, financial condition and prospects, market prices of similar securities of comparable publicly-traded companies, certain financial and operating information of companies engaged in activities similar to those of the Company and the general condition of the securities market. Thomas A. Schultz was hired as the President and Chief Executive Officer of Vista Technologies and elected a director of Vista Technologies on February 16, 1996. Mr. Schultz has also served since November 1995 as a director of Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the parent of the Representative. 61 65 PLAN OF DISTRIBUTION OF SELLING STOCKHOLDER The 100,000 shares of Series A Preferred stock and/or up to 100,000 shares of Common Stock issuable upon conversion to be offered by the Selling Stockholder after the date of this Prospectus may be sold from time to time directly by the Selling Stockholder or its transferrees. Alternatively, the Selling Stockholder may from time to time offer such securities through underwriters, dealers or agents. The distribution of securities by the Selling Stockholder may be effected in one or more transactions that may take place on the over-the-counter market or on any exchange on which such securities may be listed, including ordinary broker's transactions, privately-negotiated transactions or through sales to one or more broker-dealers for resale of such shares as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Stockholder in connection with such sales of securities; however, such fees or commissions shall not exceed 10% of the sales price. The Selling Stockholder and intermediaries through whom such securities are sold may be deemed "underwriters" within the meaning of the Securities Act with respect to the securities offered, and any profits realized or commissions received may be deemed underwriting compensation. The Selling Stockholder has agreed that it will not sell any of such shares or Common Stock issuable upon conversion of such shares at any time during the 12 month period after the date of this Prospectus without the prior consent of the Representative of the Underwriters. The Company has agreed to indemnify the Selling Stockholder against certain civil liabilities, including liabilities under the Securities Act, and to contribute to payments that the Selling Stockholder may be required to make in respect thereof. DIVIDEND POLICY No cash dividends have been declared or paid by the Company to date. The Company intends to employ all available funds for development of its business and accordingly, does not intend to pay cash dividends on its Common Stock in the foreseeable future. The Board of Directors of the Company will review its Common Stock dividend policy from time to time to determine the desirability and feasibility of paying dividends after giving consideration to the Company's earnings, financial condition, capital requirements, dividend obligations on Preferred Stock, the advisability of redeeming outstanding Preferred Stock from time to time, and such other factors as the Board of Directors deems relevant. The estimated annual dividend requirements on the Company's Preferred Stock will be $450,000 for Series A Preferred ($510,000 if the Underwriters' over-allotment option is exercised and $550,000 if the Underwriters' overallotment option and the Underwriter's Warrants are exercised) and $25,000 for Series B Preferred shares. As of March 31, 1996, dividends in arrears on Series A Preferred and Series B Preferred shares issued prior to this offering were $6,667 and $9,357, respectively. LEGAL MATTERS The validity of the securities offered hereby will be passed upon for the Company by the Law Office of William M. Curtis, Laguna Hills, California. Certain legal matters will be passed upon for the Underwriter by Titus, Brueckner & Berry, P.C., Scottsdale, Arizona. EXPERTS The consolidated financial statements of Vista Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996 and for the period from June 30, 1995 (date of inception) through March 31, 1996 have been included in this Prospectus and Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 62 66 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES INDEX
PAGE ---- Independent Auditors' Report.......................................................... F-2 Consolidated Financial Statements: Consolidated Balance Sheet as of March 31, 1996..................................... F-3 Consolidated Statement of Operations for the period from June 30, 1995 (date of inception) to March 31, 1996............................................ F-4 Consolidated Statement of Changes in Stockholders' Equity for the period from June 30, 1995 (date of inception) to March 31, 1996......................... F-5 Consolidated Statement of Cash Flows for the period from June 30, 1995 (date of inception) to March 31, 1996............................................ F-6 Notes to Consolidated Financial Statements............................................ F-7
F-1 67 INDEPENDENT AUDITORS' REPORT The Board of Directors Vista Laser Centers of Michigan, Inc.: We have audited the accompanying consolidated balance sheet of Vista Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the period from June 30, 1995 (date of inception) to March 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vista Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996, and the results of their operations and their cash flows for the period from June 30, 1995 (date of inception) to March 31, 1996 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company is currently a development stage enterprise and dependent on raising additional financing through a public offering or private placement to meet its obligations and commitments. This dependency raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG Peat Marwick LLP New York, New York April 26, 1996 F-2 68 VISTA LASER CENTERS OF MICHIGAN, INC, (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 ASSETS Current assets: Cash and cash equivalents....................................................... $ 39,648 Prepaid expenses................................................................ -- -------- Total current assets.................................................... 39,648 Deferred offering costs (note 6)................................................ 113,339 Marketable equity securities (note 3)........................................... 500,000 -------- Total assets............................................................ $652,987 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued liabilities............................................................. 58,134 -------- Total current liabilities............................................... 58,134 Deferred income taxes............................................................. 113,000 -------- Total liabilities....................................................... 171,134 Stockholders' equity: Preferred stock, $.01 par value. Authorized 5,000,000 shares; 850,000 shares designated 10% Series A Cumulative Convertible; issued and outstanding 100,000 shares ($500,000 liquidation value) (note 4)............ 1,000 200,000 shares designated 5% Series B Cumulative Convertible; issued and outstanding 200,000 shares ($500,000 liquidation value) (notes 3 and 4)..... 2,000 Common stock, $.01 par value, Authorized 20,000,000 shares; issued and outstanding 30,000 shares.................................................... 300 Additional paid-in capital...................................................... 371,297 Stock subscription receivable (note 4).......................................... (5,000) Warrant subscription receivable (note 4)........................................ (22,500) Deficit accumulated during the development stage................................ (34,647) Unrealized holding gain on marketable equity securities (note 3)................ 169,403 -------- Total stockholders' equity.............................................. 481,853 Commitments and contingencies (note 7) -------- Total liabilities and stockholders' equity.............................. $652,987 ========
See accompanying notes to consolidated financial statements. F-3 69 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 Interest income................................................................... $ 557 Operating expenses: General and administrative expenses............................................. 35,204 -------- Loss from operations.................................................... (34,647) Provision for income taxes........................................................ -- -------- Net loss................................................................ (34,647) -------- Dividends in arrears: Series A preferred stock........................................................ (6,667) Series B preferred stock........................................................ (9,375) -------- (16,042) -------- Net loss adjusted for dividends in arrears.............................. $(50,689) ======== Net loss per share................................................................ $ (.22) ======== Weighted average shares used in computing net loss per share (note 2) 226,269 ========
See accompanying notes to consolidated financial statements. F-4 70 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
DEFICIT ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK WARRANT DURING THE UNREALIZED ---------------- --------------- PAID-IN SUBSCRIPTION SUBSCRIPTION DEVELOPMENT GAIN ON SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE RECEIVABLE STAGE INVESTMENTS TOTAL ------- ------ ------ ------ ---------- ------------ ------------ ----------- ----------- -------- Balance at June 30, 1995..... -- $ -- -- $ -- -- -- -- -- -- -- Issue of 10% Series A cumulative convertible preferred stock... 100,000 1,000 -- -- 99,000 -- -- -- -- 100,000 Issue of 5% Series B cumulative convertible preferred stock in exchange for Vista common stock (note 4)..... 200,000 2,000 -- -- 215,597 -- -- -- -- 217,597 Issue of common stock... -- -- 30,000 300 29,700 -- -- -- -- 30,000 Issue of warrants... -- -- -- -- 27,000 -- -- -- -- 27,000 Issuance of notes receivable (note 4)..... -- -- -- -- -- (5,000) (22,500) -- -- (27,500) Net loss... -- -- -- -- -- -- -- (34,647) -- (34,647) Unrealized gain on investments (note 3)..... -- -- -- -- -- -- -- -- 169,403 169,403 ------- ------ ------ ---- ------- ------ ------- ------- ------- -------- Balance (deficit) at March 31, 1996..... 300,000 $3,000 30,000 $300 371,297 (5,000) (22,500) (34,647) 169,403 481,853 ======= ====== ====== ==== ======= ====== ======= ======= ======= ========
See accompanying notes to consolidated financial statements. F-5 71 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 Cash flows from operating activities: Net loss....................................................................... $ (34,647) Adjustments to reconcile net loss to net cash used in operating activities: Changes in: Deferred offering costs................................................... (113,339) Accrued liabilities....................................................... 58,134 --------- Net cash used in operating activities.................................. (89,852) --------- Cash flows from financing activities: Proceeds from issuance of Series A preferred stock............................. 100,000 Proceeds from issuance of common stock and stock subscriptions................. 25,000 Proceeds from issuance of common stock purchase warrants....................... 4,500 --------- Net cash provided by financing activities.............................. 129,500 --------- Net increase in cash and cash equivalents.............................. 39,648 Cash and cash equivalents at beginning of period................................. -- --------- Cash and cash equivalents at end of period....................................... $ 392,648 =========
Supplemental disclosures of noncash financing and investing information: -- On November 16, 1995, the Company issued 200,000 shares of its 5% Series B preferred stock to Vista Technologies, Inc. ("Vista") in exchange for 200,000 shares of common stock in Vista. -- The Company has issued common stock subscription notes receivable totaling $5,000 and Class A common stock purchase warrant subscription notes receivable totaling $22,500. See accompanying notes to consolidated financial statements. F-6 72 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Vista Laser Centers of Michigan, Inc. (the "Company") is a development stage enterprise recently organized on June 30, 1995 to establish, manage and administer laser vision correction ("LVC") support services ("Services") and related LVC equipment. The accompanying consolidated financial statements include the Company's wholly owned subsidiary, Vista Laser Centers of Windsor, Inc., a Canadian company. All significant intercompany balances have been eliminated. Vista Laser Centers of Windsor, Inc. is a calendar year corporation. The Company is considering a proposed initial public offering of its 10% cumulative convertible preferred stock ("proposed offering") (see note 9). The planned centers will employ advanced laser technology, which has been commercially available for several years for use in foreign countries, including Canada. In late 1995, the U.S. Food and Drug Administration ("FDA") granted approval to Summit Technology Inc. ("Summit") for commercial use in the U.S. of Summit's excimer laser systems for photorefractive keratectomy ("PRK") treatment of myopia (nearsightedness) and conditional approval to VISX Incorporated ("VISX") for similar PRK equipment. Generally speaking, PRK is useful in correcting the vast majority of myopia cases. The first LVC Services site to be established by the Company immediately upon completion of a proposed offering (see note 9) will be located in Windsor, Ontario, directly adjacent to Detroit, Michigan. Due to regulatory constraints in the U.S., the Company expects that some U.S. patients, as well as Canadians, will seek treatment at the Company's Ontario location when the method of treatment preferred by the physician requires an LVC procedure not commercially available in the U.S. The Company anticipates that laser assisted in situ keratomileusis ("LASIK") will be the most significant procedure performed in its first site planned for Windsor, Ontario. The Company also plans to establish one or more strategically positioned LVC Services locations in Michigan where licensed ophthalmologists ("MDs") and optometrists ("ODs") who enter into facilities use agreements with the Company may bring their patients for LVC diagnosis, PRK laser procedures and postoperative care. The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary to establish its first LVC Service site in Windsor, Ontario, and negotiating agreements to provide facilities use and management services to eye care professionals. (b) Cash Equivalents Cash equivalents are temporarily invested in interest-bearing savings accounts, bank certificates of deposit, money market accounts, government obligations or other forms of liquid short-term interest-bearing investments with maturities of three months or less. (c) Income Taxes Effective June 30, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary F-7 73 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (d) Revenue Recognition The Company plans to enter into Facilities Use and Support Services Agreements with licensed MDs and ODs. Support services offered by the Company are expected to include accounting and other administrative services. The Company is also expected to provide billing and collection services on behalf of MDs and ODs. In each instance there will be a licensed MD or OD who will perform actual LVC procedures as part of an individual practice and in whose name patients will be billed. It is anticipated that the Company will earn its revenues by billing MDs and ODs for facilities use and support services at time of use. Facilities use and support service revenues are expected to be a contractually agreed-upon percentage of patient billings as defined in the Facilities Use and Support Services Agreement. The Company will recognize revenue when it has substantially completed its obligations under the Facilities Use and Support Services Agreements. (e) Foreign Currency Translation The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of the Company's revenues and expenses may be collected and paid in Canadian dollars. The Company publishes its consolidated financial statements in U.S. dollars after translating transactions in Canadian currency to U.S. dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. (f) Marketable Equity Securities Effective June 30, 1995, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities." Under SFAS 115, the Company's marketable equity securities have been classified as available-for-sale securities and are carried at fair market value. Unrealized gains and losses are reflected as a separate component of stockholders' equity, net of income taxes. (g) Financial Instruments Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value of Financial Instruments," defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Fair value of financial instruments approximates their carrying value in the consolidated financial statements, except for investments for which fair value information is provided in note 3. (h) Liquidity and Going Concern The Company is a development stage enterprise and, accordingly, has not earned revenue to date. As discussed in notes 7 and 11, the Company has entered into a lease commitment, subsequent to March 31, 1996, in the amount of $416,192. As discussed in note 9, the Company's Board of Directors authorized a filing of a registration statement with the Securities and Exchange Commission for the sale of units of 10% Series A F-8 74 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 cumulative convertible preferred stock. Management believes that the proceeds received from such offering will be sufficient to allow the Company to operate and meet its current obligations and commitments, although there are no assurances that this offering will take place. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported net asset amounts or the amounts of liabilities that might result from the outcome of the uncertainty. (2) NET LOSS PER SHARE Net loss per common and common equivalent share is computed based upon the weighted average number of shares of common stock outstanding during the period. Also pursuant to the requirements of the Securities and Exchange Commission, all stock, warrants and options issued within the twelve months immediately preceding the initial filing of the registration statement for the Company's proposed offering at a price below the anticipated offering price, totaling 100,000 shares of Series A preferred stock, 200,000 shares of Series B preferred stock, 30,000 shares of common stock, 270,000 common stock purchase warrants and 50,000 options to purchase common stock, have been included in the calculation of primary loss per share for all periods presented utilizing the "treasury stock method." The net loss per share calculation assumes the conversion of all Series A cumulative convertible preferred stock and Series B cumulative convertible preferred stock into 300,000 shares of common stock. (3) MARKETABLE EQUITY SECURITIES Marketable Investment Securities Marketable investment securities at March 31, 1996 consist of equity securities in Vista Technologies Inc. ("Vista"), an operator of five outpatient PRK surgical clinics in Europe and a co-founder of the Company (see note 4). The Company has classified its marketable equity securities as available-for-sale securities and recorded them at fair market value. At March 31, 1996, the marketable equity securities had a cost of $217,597 and a market value of $500,000. Accordingly, the Company has recorded an unrealized holding gain of $169,403, net of income taxes of $113,000, as a component of stockholders' equity in the accompanying consolidated balance sheet. (4) RELATED PARTY TRANSACTIONS The Company was organized on June 30, 1995. On July 31, 1995, Refractive Services-800, Inc. ("RS 800 Inc.") paid the Company $100,000 for the purchase of 100,000 shares of the Company's 10% Series A cumulative convertible preferred stock, or a price equal to $1.00 per share. The liquidation preference of Series A preferred stock is $5.00 per share. On November 16, 1995, the Company issued 200,000 shares of its 5% Series B cumulative convertible preferred stock to Vista in exchange for 200,000 shares of common stock in Vista. The liquidation preference of Series B preferred stock is $2.50 per share. The Company had an independent appraisal performed on the value of the Series B stock as of the date of this transaction. The stock was valued at $1.087 per share giving the total consideration a value of $217,597. On November 28, 1995, and pursuant to the terms of the Company's employment agreement with Ghassan Barazi, the Company issued and sold 20,000 shares of its common stock to Mr. Barazi, its President and Chief Executive Officer, at a cash price of $20,000, or $1.00 per share. The Company had an independent appraisal performed on the value of the common stock which was valued at $1.081 per share. The Company F-9 75 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 also agreed to sell Mr. Barazi 180,000 Class A common stock purchase warrants at a cash price of $18,000, or $0.10 per warrant. The Company had an independent appraisal performed on the value of the warrants to purchase common stock. The value of each warrant was determined to be $.09 per warrant. Each Class A warrant represents the right to purchase one share of the Company's common stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of the proposed offering, or June 30, 2000 if the proposed offering is not effective as of June 30, 1996. As of March 31, 1996, the Company had not received any cash related to the sale of the warrants. Accordingly, the sale has been recorded as warrant subscription receivable in the accompanying consolidated financial statements. On November 15, 1995, the Company agreed to sell to Dr. J. Charles Casebeer, a director and Chairman of the Board of the Company, 5,000 shares of its common stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants at a cash price of $4,500, or $0.10 per warrant. An independent appraisal valued the common stock at $1.081 per share and the warrants at $.09 per warrant. On November 15, 1995, the Company also agreed to sell to Dr. Donald G. Johnson, a director of the Company, 5,000 shares of its common stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants at a cash price of $4,500, or $0.10 per warrant. An independent appraisal valued the common stock at $1.081 per share and the warrants at $.09 per warrant. Each Class A warrant represents the right to purchase one share of the Company's common stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of the proposed offering. As of March 31, 1996, the Company had not received any cash related to the sale of stock and warrants to Dr. Casebeer. Accordingly, the sales have been recorded as stock subscriptions receivable in the accompanying consolidated financial statements. Vista and the Company entered into a consulting services agreement (the "Vista Agreement") dated as of October 16, 1995. Under this agreement, Vista will render advice and assistance to the Company in the areas of marketing, financial planning, development of accounting systems and internal controls, investor and public relations, compliance with applicable regulations in relation to the operation of surgical centers and relationships with health care professionals and compliance in periodic filings with the Securities and Exchange Commission. Under the terms of this agreement, Vista is entitled to receive monthly consulting fees equal to 5% of the Company's net revenues as defined by the Vista Agreement less $5,000 per month. The term of the Vista Agreement is for ten years from the effective date of the proposed offering, and is automatically renewed thereafter for successive five-year terms unless either party provides six months' prior notice of an intent not to extend the term. The Company entered into a license agreement with Refractive Services 800 Corp. ("RS-800 Corp."), an affiliate of RS 800 Inc., as of October 16, 1995 which grants the Company the right to use, in its geographic markets of Michigan and southern Ontario, certain 800 and 900 telephone numbers that are held by RS 800 Corp. Under the terms of this license agreement, RS 800 Corp. is entitled to receive a monthly royalty equal to 2 1/2% of the Company's net revenues during the term of the license agreement that are attributable to use of its facilities and support services for patients referred to MDs and ODs by virtue of the Company's use of the licensed 800 and 900 telephone numbers. The term of the license agreement is for five years from the effective date of the proposed offering, and is automatically renewed thereafter on a year-to-year basis unless either party provides six months' prior notice of an intent not to extend the term. During the term of the license agreement, RS 800 Corp. has agreed to maintain the exclusive right to license 800 and 900 telephone numbers covered by the license agreement that are actively used by the Company, and to offer the Company rights to F-10 76 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 license, at no additional royalty, any other 800 and 900 telephone numbers that may be acquired hereafter by RS 800 Corp. for use in the Company's geographic markets of Michigan and southern Ontario. Dr. J. Charles Casebeer, a director and Chairman of the Board, has entered into a consulting agreement (the "Agreement") with the Company commencing on the effective date of the proposed offering. Under this agreement, Dr. Casebeer will provide consulting and training services to the Company and has agreed to serve as the Chairman of its Board of Directors. Dr. Casebeer will receive compensation for consulting services at the rate of $60,000 per annum payable monthly (except that the first year's fees will be payable in advance upon completion of the proposed offering), and additional compensation for training services for each MD and OD in the credentialing program. On December 11, 1995, the Company organized its wholly owned subsidiary, Vista Laser Centers of Windsor, Inc. (5) INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liability as of March 31, 1996 are presented below: Deferred tax assets: Deferred start-up costs................................................ $ 59,200 --------- Total gross deferred tax assets..................................... 59,200 Less valuation allowance................................................. 59,200 --------- Net deferred tax assets............................................. $ -- ========= Deferred tax liability: Unrealized holding gain on marketable equity securities................ $(113,000) =========
(6) DEFERRED OFFERING COSTS Costs associated with the Company's proposed offering of Series A preferred stock, Series B preferred stock, common stock and warrants are deferred and will be recorded as a reduction of the proceeds received upon consummation of the proposed offering (see note 9). Deferred offering costs will be expensed if and when it becomes evident that the proposed initial public offering will not be completed. (7) COMMITMENTS AND CONTINGENCIES The Company may elect to establish and operate a telemarketing information and advertising service in Michigan and southern Ontario using 800 and 900 telephone numbers. The Company is licensed by RS-800 Corp., an affiliate of a principal stockholder and co-founder of the Company, to use certain 800 and 900 telephone numbers. The Company plans to use its 800/900 number telemarketing programs for marketing and educational purposes directed to the public and to obtain referrals for ophthalmologists and optometrists that utilize the Company's facilities or services. In exchange for such services, RS-800 Corp. will receive approximately 2 1/2% of the Company's net revenues (see note 4) attributable only to charges for the use of its facilities and support services by patients referred to MDs and ODs as a result of the Company's direct use of licensed 800 and 900 telephone numbers. F-11 77 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 The Company has entered into an agreement with Vista Technologies Inc., one of its founders. Vista currently operates five outpatient PRK surgical clinics in Europe (three in Italy and two in Sweden). Vista will provide management and technical consulting services to the Company including a review of operating strategies and manuals, personnel and professional training, advertising and promotion information and technical assistance and advice. In exchange for such services, Vista will receive approximately 5% of the Company's net revenues as defined by the agreement attributable to charges for the use of its facilities and support services less $5,000 per month (see note 4). The Company has entered into an agreement (the "Facilities Agreement") with Dr. Fouad Tayfour for facilities use effective upon the completion of the proposed offering (see note 9). Under the terms of the Facilities Agreement, the Company will receive 50% of the gross procedure fee, as defined by the Facilities Agreement. Dr. Tayfour's minimum compensation is based on 150 procedures being performed in any month during the 24-month period beginning with the third month after the effective date of the Facilities Agreement. The Facilities Agreement with Dr. Tayfour is for a term of five years from the effective date of the proposed offering and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is obligated under its Facilities Agreement with Dr. Tayfour to provide LVC Services and equipment at a site in Windsor, Ontario, meeting all ethical and professional standards prescribed by the Company's Medical Advisory Board and equipped with state-of-the-art equipment appropriate for LVC care including equipment to be acquired by the Company pursuant to an agreement with an affiliate of Dr. Tayfour. The Company is also committed to establish and maintain billing, collection and accounting procedures for the collection of fees and to establish a public education and marketing program to promote LVC care to the public in the geographic markets of Ontario and the Midwestern United States. In addition, the Company has agreed to train and maintain an adequate support staff for the management, administration and operation of its LVC Services, and to sponsor and promote general awareness of LVC care within the professional community by sponsoring and promoting educational and training seminars for health care professionals. The Company has also entered into a consulting agreement ("Consulting Agreement") with Dr. Tayfour effective upon the completion of a proposed offering (see note 9). Under that agreement, Dr. Tayfour will act as a professional consultant to the Company concerning the establishment of ethical standards and procedures for LVC Services, periodically conduct training and education seminars, and will agree to serve as an Executive Committee member of the Company's Medical Advisory Board. In consideration of the consulting services, Dr. Tayfour will receive 100% of the net support fees, as defined by the Consulting Agreement, for the first 10 LVC procedures performed in each month with use of the Company's LVC Services at its Windsor, Ontario location by credentialed surgeons other than Dr. Tayfour. For the next 20 LVC procedures performed, Dr. Tayfour will receive 50% of the net support fees as defined by the Consulting Agreement. The Consulting Agreement with Dr. Tayfour is for a term of five years from the effective date of the proposed offering and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company has entered into an agreement for purchase of assets ("Purchase Agreement") upon the completion of a proposed offering whereby the Company has a commitment with Windsor Excimer Corporation, an affiliate of Dr. Tayfour, to purchase equipment for LVC Services at its Windsor, Ontario site. The price of this equipment, which approximates its fair value, will be $1,000,000, of which $500,000 will be financed through the proposed offering and the remainder will consist of a promissory note with 10% interest per annum, payable monthly. The principal will be due and payable on the second anniversary of the effective date of the proposed offering. F-12 78 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 In addition, the Company will sublease facilities located at the Windsor Excimer Corporation for a term until March 30, 2004 which will be effective upon completion of the proposed offering. The Company has entered into consulting agreements with Dr. Donald G. Johnson and Dr. J. Charles Casebeer (see note 4) that will be effective from the date of the proposed offering. Dr. Casebeer will be compensated in advance for the first year at the completion of the proposed offering. He will receive compensation for both consulting services and for training services. Dr. Johnson will also assist in the training of MDs and ODs. On January 12, 1996, the Board of Directors of the Company authorized amendments to the employment agreement of Ghassan Barazi, its Chief Executive Officer and Chief Financial Officer. Under the terms of the amendment, the Company granted Mr. Barazi an option to purchase 50,000 shares of common stock at $1.00 per share, pursuant to the terms and provisions of the 1995 stock option plan (see note 8). The option expires January 12, 2001. In addition, in the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during the initial five-year term or is not renewed for at least one additional year at the end of its initial five-year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment if he has not exercised any portion of the stock option described above. However, should such termination be the result of Mr. Barazi's voluntary resignation, the Company has the right to issue 180,000 shares of common stock to Mr. Barazi in lieu of the $200,000 cash payment and Mr. Barazi's rights to exercise the stock option and the 180,000 Class A warrants (see note 4) will terminate unexercised in such events. The amendment also provides for a one-time hiring bonus of $20,000 upon the completion of the proposed offering. In April 1996, Neptune Technology Leasing Corp. ("Neptune") agreed to redocument an existing lease agreement between Neptune and Richard C. Mertz, M.D., P.C., ("Dr. Mertz") to reflect the Company as the new lessee of a Summit Holmium Laser System (the "Laser") and other equipment used in conjunction with the Laser subject to Dr. Mertz's personal guaranty remaining in full force and effect on the lease. Dr. Mertz has agreed to have his personal guaranty remain in full force and effect on the lease as redocumented. The total lease commitment is $416,192 and is for a term of 48 months at an interest rate of 14%. The Company will record this lease as a capital lease in accordance with SFAS No. 13, "Accounting for Leases". (8) STOCK OPTION PLANS On September 1, 1995, the Board of Directors and stockholders of the Company adopted the 1995 Stock Option Plan (the "Option Plan"). As discussed in note 7, the Company has created an option to purchase 50,000 shares of common stock to its chief executive officer. The Option Plan is structured to allow the Board of Directors and a future Stock Option Committee of the Board discretion in creating equity incentives to management, key employees and professional consultants for the purpose of assisting the Company in motivating and retaining appropriate talent. The Option Plan covers up to a maximum of 200,000 shares of the Company's common stock. The Option Plan provides for the granting of stock options which, at the discretion of the Board or its Stock Option Committee, may be either "incentive stock options" within the meaning of Section 422A of the U.S. Internal Revenue Code or nonqualified stock options which do not qualify as incentive stock options. The F-13 79 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 Option Plan provides that both incentive stock options and nonqualified options under the Option Plan must be granted at an option price which is not less than the fair market value of the common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option under the Option Plan to such a participant must be not less than 110% of fair market value on the date of grant. Options under the Option Plan may be granted to officers, directors, key employees of, and professional consultants to, the Company and its subsidiaries. Under the terms of the Option Plan, the aggregate fair market value (determined at the time an option is granted, which will normally be equal to the option exercise price per share) of common stock exercisable under an incentive stock option for the first time in any calendar year may not exceed $100,000. Under the Option Plan, the number of shares available for options and subject to option, and the option exercise price of outstanding options, is to be adjusted upward or downward, as the case may be, in the event of any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's common stock. If any option granted under the Option Plan terminates or expires without having been exercised in full, the shares not purchased under such option will again be available for purposes of the Option Plan. (9) INITIAL PUBLIC OFFERING On November 15, 1995, the Board of Directors of the Company authorized the filing of a registration statement with the Securities and Exchange Commission for the sale of units of 10% Series A cumulative convertible preferred stock. (10) NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. Those plans include all arrangements by which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. Examples are stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS 123 also applies to transactions in which an entity issues its equity instruments to acquire goods or services from nonemployees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. SFAS 123 is effective for fiscal years that begin after December 15, 1995. The Company will review the appropriate accounting and disclosure under SFAS 123 for its fiscal year ending March 31, 1997. (11) SUBSEQUENT EVENTS In April 1996, the Company received $9,500 from Dr. J. Charles Casebeer in payment of the subscription price for common stock and Class A common stock warrants (see note 4). In April 1996, the Company also received $18,000 from Ghassan Barazi, the Company's Chief Executive Officer and Chief Financial Officer, in payment of the Class A common stock purchase warrants (see note 4). In April 1996, the Company entered into a commitment to lease a laser system and other equipment from Neptune Technology Leasing Corp. for $416,192 (see note 4). F-14 80 GLOSSARY As used in this Prospectus, the following terms have the following meanings unless the context clearly indicates otherwise. ablation: the removal of corneal tissue by ultraviolet light generated by a laser. alternative refractive care: the treatment of refractive disorders other than through the use of traditional means such as eyeglasses and contact lenses. astigmatism: a common refractive disorder in which images transmitted through the cornea fail to focus at any one point on the retina, resulting in blurred vision. cornea: the transparent front portion of the eye through which images are transmitted and which is the principal focusing component of the eye. corneal pathologies: diseases, injuries and conditions of the cornea resulting in impaired vision, discomfort or blindness. diopter: a unit of measurement of the refractive power of the eye; a negative value indicates nearsightedness and a positive value indicates farsightedness. epithelium: a layer of cells comprising the outer surface of the cornea. excimer laser: an ophthalmic laser surgical system which delivers pulses of ultraviolet laser light to an eye for the purpose of correcting nearsightedness, farsightedness, astigmatism and other ophthalmic disorders. FDA: the United States Food and Drug Administration. glaucoma: a disease of the eye characterized by a sustained elevation of intraocular pressure. holmium laser: an ophthalmic laser surgical system which delivers high intensity pulses of infrared light to an eye for the purpose of treating the symptoms of glaucoma and, in certain circumstances, correcting farsightedness and astigmatism. hyperopia: a common refractive disorder, also known as farsightedness, in which images transmitted through the cornea focus behind the retina, resulting in blurred vision. laser assisted in situ keratomileusis ("LASIK"): a refractive procedure performed with an excimer laser system to treat extreme cases of myopia (nearsightedness) and also having applications for treatment of hyperopia and astigmatism. laser sclerostomy ("LS"): a surgical procedure performed with a holmium laser to treat symptoms of glaucoma by making an opening in the front chamber of the eye. laser thermal keratoplasty ("LTK"): a refractive procedure performed with a holmium laser to treat hyperopia (farsightedness) and astigmatism in which peripheral corneal tissue is thermally shrunk, causing the central portion of the cornea to steepen. micron: a unit of length equal to one-thousandth of a millimeter. myopia: a common refractive disorder, also known as nearsightedness, in which images transmitted through the cornea focus in front of the retina, resulting in blurred vision. photorefractive keratectomy ("PRK"): an outpatient surgical procedure performed with an excimer laser system for the purpose of correcting myopia (nearsightedness), hyperopia (farsightedness) and astigmatism, whereby submicron layers of tissue are ablated from the surface of the cornea in a predetermined pattern to reshape the cornea. phototherapeutic keratectomy (PTK): an outpatient surgical procedure performed with an excimer laser system to alleviate symptoms of certain corneal pathologies by ablating submicron layers of tissue in order to remove diseased, scarred or sight-inhibiting tissue. S-1 81 premarket approval ("PMA"): a determination by the FDA, based on an application supported by data (including preclinical trial results), that a medical device is safe and efficacious and can be commercially marketed in the United States. radial keratotomy ("RK"): a manual surgical procedure to treat nearsightedness, whereby incisions are made in the cornea to cause it to flatten. refractive care: the treatment of refractive disorders, through the use of traditional means such as eyeglasses and contact lenses, or through the use of alternative means, such as photorefractive keratectomy. refractive disorder: the inability of the eye to properly focus images on the retina; the most common refractive disorders are nearsightedness, farsightedness and astigmatism. retina: the lining of the insider of the eye that receives images entering the eye and transmits them to the brain. S-2 82 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. ------------------------ TABLE OF CONTENTS
PAGE ---- Additional Information................ 2 U.S. Dollar Presentation.............. 2 Prospectus Summary.................... 3 Risk Factors.......................... 7 Dilution.............................. 15 Use of Proceeds....................... 17 Capitalization........................ 19 Selected Financial Data............... 20 Management Discussion and Analysis and Plan of Operation................... 21 Proposed Business..................... 24 Management............................ 40 Certain Transactions.................. 45 Principal and Selling Stockholders.... 51 Description of Securities............. 53 Federal Income Tax Considerations..... 57 Shares Eligible for Future Sale....... 58 Underwriting.......................... 60 Plan of Distribution by Selling Stockholder......................... 62 Dividend Policy....................... 62 Legal Matters......................... 62 Experts............................... 62 Index to Financial Statements......... F-1 Glossary.............................. S-1
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OF THE COMPANY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ VISTA LASER CENTERS OF MICHIGAN, INC. 900,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK -------------------- PROSPECTUS -------------------- DICKINSON & CO. , 1996 - ------------------------------------------------------ - ------------------------------------------------------ 83 [ALTERNATIVE COVER PAGE FOR SELLING STOCKHOLDER PROSPECTUS] SUBJECT TO COMPLETION, DATED JUNE 6, 1996 PROSPECTUS VISTA LASER CENTERS OF MICHIGAN, INC. 900,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK Of the 900,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $.01 per share ("Series A Preferred") of Vista Laser Centers of Michigan, Inc., a Nevada corporation (the "Company"), offered hereby, this Prospectus covers 100,000 shares of Series A Preferred stock and/or up to 100,000 shares of the Company's common stock, par value $.01 per share ("Common Stock") issuable upon conversion of such Series A Preferred shares to be offered from time to time hereafter for the account of Refractive Services-800, Inc. (the "Selling Stockholder"). The Company will not receive any proceeds from the offering by the Selling Stockholder. Shares of Series A Preferred are entitled to a $.50 cumulative dividend per annum, payable annually in cash or, if cash dividends may not legally be paid, at the Company's option in Series A Preferred or Common Stock. Commencing 30 days after the date of this Prospectus, each share of Series A Preferred is convertible into one (1) share of the Company's Common Stock, subject to adjustment in certain events to prevent dilution. Series A Preferred may be redeemed at the option of the Company at any time upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. The liquidation preference of Series A Preferred is $5.00 per share and each share is entitled to one vote on all matters on which any stockholders are entitled to vote. See "Description of Securities", "Principal and Selling Stockholders", "Underwriting" and "Plan of Distribution by Selling Stockholder". The shares of Series A Preferred and/or Common Stock offered by this Prospectus may be sold from time to time by the Selling Stockholder, or by its transferees. No underwriting arrangements have been entered into by the Selling Stockholder. The distribution of Series A Preferred and/or Common Stock by the Selling Stockholder may be effected in one or more transactions that may take place on the over-the-counter market or on any exchange on which such securities may be listed, including ordinary broker's transactions, privately-negotiated transactions or through sales to one or more dealers for resale of such shares as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Stockholders in connection with such sales; however, such fees or commissions will not exceed 10% of the sales price. The Selling Stockholder and intermediaries through whom such securities are sold may be deemed "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered, and any profits realized or commissions received may be deemed underwriting compensation. The Company has agreed to indemnify the Selling Stockholder against certain liabilities, including liabilities under the Securities Act. See "Plan of Distribution by Selling Stockholder". On the date of this Prospectus, an additional 800,000 shares of Series A Preferred (without giving effect to an over-allotment option granted to the Underwriters of such offering) are being offered pursuant to another prospectus in a firm commitment underwriting at a price of $5.00 per share. The Company will receive approximately $3,600,000 in net proceeds from the underwritten public offering (assuming no exercise of the Underwriters' over-allotment option) and before payment of expenses of that offering estimated at $200,000 plus a nonaccountable expense allowance in the amount of $120,000 ($138,000 if the Underwriters' over-allotment option is exercised) payable to the Representative of the Underwriters. The Representative of the Underwriters does not intend to participate in sales of Series A Preferred Stock offered by the Selling Stockholder. (continued on following page) THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY ANY PERSON WHO CANNOT AFFORD RISK OF LOSS OF THE INVESTMENT. SEE "RISK FACTORS" AT PAGE 7 OF THIS PROSPECTUS. THE COMPANY IS IN THE DEVELOPMENT STAGE AND CURRENTLY HAS NO OPERATIONS PRIOR TO THE DATE OF THIS PROSPECTUS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1996 84 [ALTERNATIVE PAGE 2 FOR SELLING STOCKHOLDER PROSPECTUS] - --------------------------- continued from cover page Prior to the date of this Prospectus, there has been no public market for any securities of the Company and there can be no assurance that an active public market will develop or, if developed, that it will be sustained. The initial offering price of the Series A Preferred for the underwritten public offering was determined by negotiations between the Company and Dickinson & Co. (the "Representative"), as representative of the several Underwriters of that offering, and does not necessarily relate to the Company's book value or other established criteria of value. See "Underwriting". The Company has applied for listing of the Series A Preferred Stock on the Nasdaq SmallCap Market under the trading symbol "IIMIP" and on the Boston Stock Exchange, but there can be no assurance that either of such applications will be approved. Even if approved for listing, the Company will be required to maintain certain minimum criteria to maintain such listings, as to which there can be no assurance. The Selling Stockholder has agreed that it will not sell any Series A Preferred or Common Stock issuable upon conversion of such shares at any time during the 12 month period after the date of this Prospectus without the prior consent of the Representative of the Underwriters. Sales of such securities by the Selling Stockholder, or the potential of such sales, may have an adverse effect on the market price of the securities offered hereby. See "Risk Factors", "Principal and Selling Stockholders", "Underwriting" and "Plan of Distribution by Selling Stockholder". ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission ("Commission") a Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities covered by this Prospectus. For the purposes hereof, the term "Registration Statement" means the original Registration Statement and any and all amendments thereto, including the schedules and exhibits to such original Registration Statement or any such amendment. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, to which reference is hereby made. Each statement made in this Prospectus concerning a document filed as an exhibit to the Registration Statement is qualified in its entirety by reference to such exhibit for a complete statement of its provisions. Any interested party may inspect the Registration Statement, without charge, at the public reference facilities of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices in Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661) and in New York (Seven World Trade Center, Suite 1300, New York, New York 10048). Any interested party may obtain copies of all or any portion of the Registration Statement at prescribed rates from the Public Reference Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. U.S. DOLLAR PRESENTATION The Company publishes its consolidated financial statements in U.S. dollars. The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of its revenues and expenses may be collected and paid in Canadian dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. Except as otherwise stated herein, in this Prospectus all references to "$" are to United States currency and all monetary amounts are presented in U.S. dollars. - -------------------------------------------------------------------------------- The Company intends to furnish its stockholders each year with annual reports containing audited financial statements and a report thereon expressed by independent public accountants and such other reports as the Company deems appropriate or as may be required by law. 2 85 [ALTERNATIVE PAGE 5 FOR SELLING STOCKHOLDER PROSPECTUS] The Company's principal executive offices are temporarily located at 126 E. 56th Street, 2nd Floor, New York, New York 10022, telephone number (212) 832-9292. After completion of this offering, the Company's principal place of business will be relocated to its first LVC equipment site in Canada, which will be located at 2224 Walker Road, Windsor, Ontario N8W 3P6. It is anticipated that the Company's Canadian operations will be conducted through a recently-formed, wholly-owned Ontario subsidiary that has not previously engaged in any business activities. All references in this Prospectus to the Company includes both the Company and its subsidiaries unless otherwise indicated by the context. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". THE OFFERING Securities Offered: 900,000 shares of Series A Preferred stock, of which 100,000 shares of Series A Preferred and/or the Common stock issuable upon conversion thereof are being offered from time to time hereafter pursuant to this Prospectus for the account of the Selling Stockholder and 800,000 shares are being offered under a separate prospectus in a firm commitment underwriting at a price of $5.00 per share. See "Description of Securities", "Underwriting" and "Plan of Distribution by the Selling Stockholder". Securities to be 900,000 shares of Series A Preferred stock, 200,000 shares of outstanding after this Series B Preferred stock and 30,000 shares of Common Stock. offering(1): Summary terms of Series A Preferred: Dividends 10% ($.50 per share) cumulative dividend per annum, payable annually commencing one year after this offering. Dividends will be payable in cash or, if cash dividends may not legally be paid, at the Company's option may be paid in Series A Preferred or Common Stock subject to the prior registration of such dividend shares under the Securities Act of 1933. Conversion Rights Each share will be convertible into one (1) share of Common Stock at any time commencing 30 days after the date of this Prospectus until the second business day prior to redemption of Series A Preferred, if called for redemption. Optional Redemption Each share will be redeemable at the option of the Company upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. There are no sinking fund or other mandatory redemption provisions. Voting One vote per share on all matters on which stockholders are entitled to vote or consent. Liquidation Preference $5.00 per share. Use of Proceeds: The Company will not receive any proceeds from the offering by the Selling Stockholder. Proceeds of the underwritten public offering will be applied to equipment purchases and hiring personnel to provide LVC Services and related working capital requirements. At least $500,000 of such proceeds used for equipment purchases will be paid to an affiliate of Dr. Fouad Tayfour, who has entered into certain agreements with the Company effective upon completion of this offering, and at least $155,000 of proceeds will be applied to the payment of compensation to officers and directors within 12 months after the date of this Prospectus. An affiliate of Dr. Tayfour will also receive a $500,000 10% note payable due on the second anniversary of the date of this Prospectus. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". Risk Factors: The securities offered hereby are speculative, involve a high degree of risk, and should not be purchased by investors who cannot afford the loss of their investment. Investors should review and carefully consider the information set forth under "Risk Factors" and "Dilution".
- --------------- (1) Does not include the Underwriter's over-allotment option, shares of Series A Preferred stock reserved for issuance upon exercise of the Underwriter's Warrants, shares of Common Stock reserved for conversion of Series A Preferred and Series B Preferred stock or shares reserved for issuance upon exercise of outstanding Class A Warrants and stock options. See "Management -- 1995 Stock Option Plan", "Description of Securities" and "Underwriting". 5 86 [ALTERNATIVE PAGE 6 FOR SELLING STOCKHOLDER PROSPECTUS] SUMMARY FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
PERIOD FROM INCEPTION (JUNE 30, 1995) THROUGH MARCH 31, 1996 ----------------------- Interest income.......................................... $ 557 Net (loss) adjusted for dividends in arrears............. $ (50,689) Net (loss) per common and common equivalent share........ $ (0.22) Weighted average common and common equivalent shares outstanding............................................ 226,269 Dividends in arrears..................................... $ 16,042
CONSOLIDATED BALANCE SHEET DATA:
MARCH 31, 1996 ACTUAL AS ADJUSTED(1) -------- -------------- Current assets..................................... $ 39,648 $2,322,353 Total assets....................................... $652,987 $5,138,545 Long-term debt..................................... -- $ 916,192 Stockholders' equity............................... $481,853 $4,109,353
- --------------- (1) Gives effect to (i) the sale of 800,000 shares of Series A Preferred stock offered on a firm commitment basis by the several Underwriters, (ii) the anticipated application of estimated net proceeds therefrom (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with such offering), including cash outlays for equipment purchases totaling $550,000 and a $500,000 10% note payable due on the second anniversary of the date of this Prospectus to Dr. Fouad Tayfour and certain other cash payments to unaffiliated third parties for equipment totalling $700,000 and an investment in a proposed joint venture totaling $150,000, and (iii) the assumed exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding stock options. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Management -- 1995 Stock Option Plan", "Certain Transactions", "Description of Securities" and "Underwriting". 6 87 ALTERNATIVE REAR COVER PAGE FOR SELLING STOCKHOLDER PROSPECTUS - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. ------------------------ TABLE OF CONTENTS
PAGE ---- Additional Information................ 2 U.S. Dollar Presentation.............. 2 Prospectus Summary.................... 3 Risk Factors.......................... 7 Dilution.............................. 15 Use of Proceeds....................... 17 Capitalization........................ 19 Selected Financial Data............... 20 Management Discussion and Analysis and Plan of Operation................... 21 Proposed Business..................... 24 Management............................ 40 Certain Transactions.................. 45 Principal and Selling Stockholders.... 51 Description of Securities............. 53 Federal Income Tax Considerations..... 57 Shares Eligible for Future Sale....... 58 Underwriting.......................... 60 Plan of Distribution by Selling Stockholder......................... 62 Dividend Policy....................... 62 Legal Matters......................... 62 Experts............................... 62 Index to Financial Statements......... F-1 Glossary.............................. S-1
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OF THE COMPANY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ VISTA LASER CENTERS OF MICHIGAN, INC. -------------------- PROSPECTUS -------------------- , 1996 - ------------------------------------------------------ - ------------------------------------------------------ 88 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Reference is made to Articles SEVENTH and EIGHTH of the Registrant's articles of incorporation, which provide as follows: "SEVENTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. "EIGHTH: The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. indemnify any and all persons whom it shall have power to indemnify under said Law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Law, 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." Reference is made to Article VI of the Registrant's bylaws dealing with indemnification of directors and officers, which provide as follows: "ARTICLE VI -- INDEMNIFICATION "Section 1. DEFINITIONS. For the purposes of this Article, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent or another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes without limitation attorneys' fees and any expenses of establishing a right to indemnification under Sections 4 or 5(c) of this Article. "Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in a manner such persons reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. "Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of the corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action if such person acted in good faith, in a manner such person believed II-1 89 to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. "Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an agent of the corporation has been successful on the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article or in defense of any claim, issue or matter therein, and as otherwise provided by authorization of the Board of Directors or stockholders of this corporation, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. "Section 5. REQUIRED DETERMINATIONS. Any indemnification under this Article shall be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of this Article, by: "(a) A majority vote of a quorum consisting of directors who are not parties to such proceeding; or "(b) Approval of the stockholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or "(c) The court in which such proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney or other person is opposed by the corporation. "Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article. "Section 7. OTHER INDEMNIFICATION. No provision made by the corporation to indemnify it or its subsidiary's directors or officers for the defense of any proceeding, whether contained in the Articles, By-laws, a resolution of stockholders or directors, an agreement or otherwise, shall be valid unless consistent with this Article and approved by a majority of the Directors; provided, however, that any such agreement approved by a majority of the shares of capital stock voted at any meeting called to consider the same or by written consent of a majority of the shares entitled to vote for the election of directors shall supercede the provision of this Article to the extent of any inconsistencies. Nothing contained in this Article shall affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise. "Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No indemnification or advance shall be made under this Article, except as provided in Sections 4 or 5(c), in any circumstances where it appears: "(a) That it would be inconsistent with a provision of the Articles, these By-laws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnifications; or "(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. "Section 9. INSURANCE. The corporation shall have power to purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not the corporation would have the power to indemnify the agent against such liability under the provisions of this Article. "Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT PLANS. This Article does not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an II-2 90 agent of the corporation as defined in Section 1 of this Article. The corporation shall have power to indemnify such trustee, investment manager or other fiduciary to the extent permitted by applicable law." Reference is also made to Sections 78.751 and 78.752 of the Nevada General Corporation Law which provides for indemnification of directors and officers. "78.751. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; ADVANCEMENT OF EXPENSES. "1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which 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, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. "2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. "3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. "4. Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. "5. The certificate or articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director II-3 91 or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. "6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. "78.752. INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. "1. A corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. "2. The other financial arrangements made by the corporation pursuant to subsection 1 may include the following: (a) The creation of a trust fund. (b) The establishment of a program of self-insurance. (c) The securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation. (d) The establishment of a letter of credit, guaranty or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court. "3. Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the board of directors, even if all or part of the other person's stock or other securities is owned by the corporation. "4. In the absence of fraud: (a) The decision of the board of directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (b) The insurance or other financial arrangement: (1) Is not void or voidable; and II-4 92 (2) Does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. "5. A corporation or its subsidiary which provides self-insurance for itself or for another affiliated corporation pursuant to this section is not subject to the provisions of Title 57 of Nevada Revised Statutes." Reference is also made to Indemnification Agreements between the Registrant and each of its directors and officers obligating the Registrant to indemnify directors and officers to the maximum extent permitted by the laws of the State of Nevada, copies of which have been filed as Exhibits 10.13.1 through 10.13.5 inclusive to this Registration Statement. The Registrant's Board of Directors has authorized the Registrant to apply for an errors and omissions liability insurance policy covering acts and omissions of its officers and directors as soon as practicable after the filing of this Registration Statement. For indemnification agreements between the Registrant and the Underwriters, reference is made to Section 8 of the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses of this offering will be paid by the Registrant and are estimated as follows: Filing fees to Securities and Exchange Commission................. $ 1,924 Filing fees to National Association of Securities Dealers, Inc.... 5,000* Printing Expenses................................................. 50,000* Legal Fees and Expenses........................................... 60,000* Accounting Fees................................................... 35,000* Valuation report.................................................. 20,000 Blue Sky Filing Fees and Legal Expenses........................... 10,000* Transfer Agent and Registrar Fees and Expenses.................... 5,000* Miscellaneous..................................................... 13,076* -------- Total........................................................ $200,000* ========
- --------------- * Estimated amount -- subject to revision by amendment. ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. During the last three years, the Registrant has issued and sold the following securities which were not registered at the time of sale under the Securities Act of 1933, as amended (the "Securities Act"): 1. On July 31, 1995, the Registrant issued and sold 100,000 shares of its 10% Series A Cumulative Convertible Preferred Stock to Refractive Services-800, Inc., for a consideration of $100,000 in cash. 2. On November 16, 1995, the Registrant issued and sold 200,000 shares of its 5% Series B Cumulative Convertible Preferred Stock to Vista Technologies Inc. in exchange for a consideration consisting of 200,000 shares of common stock in Vista Technologies Inc. 3. Pursuant to a contractual commitment made as of September 1, 1995, on November 28, 1995 the Registrant issued and sold 20,000 shares of its Common Stock to Ghassan Barazi, its President, at a cash price of $1.00 per share ($20,000 total). Under the commitment, as of September 1, 1995 the Registrant also reserved 180,000 Class A common stock purchase warrants stock for sale to Ghassan Barazi at a cash price of $0.10 per warrant ($18,000) that was paid in cash on April 29, 1996. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Mr. Barazi was elected a director and executive officer of the Registrant on September 1, 1995. II-5 93 4. On December 1, 1995, the Registrant issued and sold to Dr. Donald G. Johnson 5,000 shares of its Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500) pursuant to a Consulting Agreement dated November 15, 1995. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Dr. Johnson was elected a director of the Registrant on October 16, 1995. 5. Pursuant to a Consulting Agreement dated November 15, 1995, the Registrant reserved for issuance and sale to Dr. J. Charles Casebeer 5,000 shares of its Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500). The total purchase price of $9,500 was paid in cash on April 17, 1996. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Dr. Casebeer was elected a director and Chairman of the Board of the Registrant on October 16, 1995. 6. On January 12, 1996, the Registrant issued a stock option covering 50,000 shares of its common stock to one director and executive officer under its 1995 Stock Option Plan, as follows:
OPTION DATE OF NUMBER OF OPTION PRICE EXPIRATION NAME OF OPTIONEE GRANT SHARES PER SHARE (A) DATE - ------------------------------------------ -------- --------- ------------- ----------- Ghassan Barazi (b)........................ 1/12/96 50,000 $1.00 1/12/2001
- --------------- (a) Represents not less than 100% of fair market value at date of grant as determined by the Board of Directors. (b) Executive officer and director of the Registrant. Reference is made to "Management" and "Certain Transactions" in the Prospectus. No underwriter was involved in the issuance or sale of the above-referenced securities and no discounts or commission were paid. None of the securities described in this Item 26 were registered under the Securities Act at the time of original issuance in reliance upon the exemption from registration in Section 4(2) of the Securities Act for transactions not involving a public offering. All of the certificates evidencing the securities described in this Item 26 were imprinted at the time of original issuance with a restrictive legend indicating that they have not been registered under the Securities Act and that resales thereof are restricted to comply with the Securities Act. ITEM 27. EXHIBITS. (X) Indicates exhibits filed herewith. (M) Denotes management contract or compensation plan or arrangement.
EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- (X) 1.1 Form of Underwriting Agreement between the Registrant and Dickinson & Co. (X) 3.1.1 Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on June 30, 1995. (X) 3.1.2 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on November 2, 1995. (X) 3.1.3 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 changing corporate name to Vista Laser Centers of Michigan, Inc. (X) 3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995.
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EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- (X) 3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on April 12, 1996. (X) 3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996. (X) 3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995. (X) 3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on January 8, 1996. (X) 3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996. (X) 3.4 By-Laws of the Registrant. 4.1 Specimen certificate representing Registrant's common stock (to be filed by amendment). 4.2 Specimen certificate representing Registrant's Series A Cumulative Convertible Preferred Stock (to be filed by amendment). 5.1 Opinion of counsel as to validity of securities (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 5.2 Opinion of counsel as to liquidation preference of preferred stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.1.2 Stock option agreement covering option for 50,000 shares granted January 12, 1996 by Registrant to Ghassan Barazi (incorporated by reference to Exhibit 10.1.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.2 License Agreement dated as of October 16, 1995 between the Registrant and Refractive Services 800 Corp. for use of 800 and 900 telephone numbers (incorporated by reference to Exhibit 10.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.3 Consulting Services Agreement dated as of October 16, 1995 between the Registrant and Vista Technologies Inc. (incorporated by reference to Exhibit 10.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement between the Registrant and Vista Technologies Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares reserved for issuance by the Registrant to Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares reserved for issuance by the Registrant to Casebeer Enterprises, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued by the Registrant to Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.6 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.7 Consulting Agreement dated as of November 15, 1995 among the Registrant, Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).
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EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- (M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.8 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to Exhibit 10.9.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment Agreement among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.10 Agreement of Purchase of Assets dated December 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Windsor Excimer Corporation for the purchase of certain equipment (incorporated by reference to Exhibit 10.10 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.11 Facilities Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.11 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.12 Consulting Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.12 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi (incorporated by reference to Exhibit 10.13.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J. Mayer (incorporated by reference to Exhibit 10.13.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles Casebeer (incorporated by reference to Exhibit 10.13.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.13.4 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam (incorporated by reference to Exhibit 10.13.5 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.14 Assignment of Lease dated March 29, 1996 between the Registrant and Richard C. Mertz, M.D., P.C., with attached: equipment lease dated November 4, 1994 between Neptune Technology Leasing Corp. as lessor and Richard C. Mertz, M.D., P.C., as lessee; Consent to assignment by Neptune Technology Leasing Corp.; and Purchase Option between Richard C. Mertz, M.D., P.C. and Neptune Technology Leasing Corp. granting option to purchase equipment for $1.00 at lease expiration (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).
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EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- 10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi and Dr. Fouad Tayfour executed by Vista Technologies Inc. as to shares of Registrant's 5% Series B Cumulative Convertible Preferred Stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.16 Irrevocable Proxy in favor of the Board of Directors of Vista Technologies Inc. executed by the Registrant as to 200,000 shares of Vista Technologies Inc. common stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.17 Form of Service Agreement between the Registrant and ophthalmologists that agree to use the Registrant's equipment and support services (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and 5.2 filed with Amendment No. 1 to the Registration Statement on May 6, 1996. (X) 23.2 Consent of KPMG Peat Marwick LLP, independent public accountants. 25.1 Powers of Attorney (incorporated by reference to signature pages to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).
ITEM 28. UNDERTAKINGS. Undertaking for Rule 415 Offering: The undersigned small business issuer hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"). (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Undertaking for equity offering of nonreporting small business issuer. The undersigned small business issuer hereby undertakes that it will provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. II-9 97 Undertaking for request for acceleration of effective date. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-10 98 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this Registration Statement or Amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Windsor, Province of Ontario, Canada, on the 5th day of June, 1996. VISTA LASER CENTERS OF MICHIGAN, INC. Registrant By: /s/ GHASSAN BARAZI -------------------------------- Ghassan Barazi President and Treasurer Chief Executive Officer and Chief Financial Officer In accordance with the requirements of the Securities Act of 1933, this Registration Statement or Amendment was signed by the following persons in the capacities and on the dates stated.
SIGNATURE TITLE AND CAPACITY DATE - ------------------------------------------ ------------------------------------ ------------- /s/ GHASSAN BARAZI President and Treasurer; Director June 5, 1996 - ------------------------------------------ (principal executive officer Ghassan Barazi and principal financial officer) /s/ THEODORE J. MAYER Secretary June 5, 1996 - ------------------------------------------ (principal accounting officer) Theodore J. Mayer J. CHARLES CASEBEER* Director June 5, 1996 - ------------------------------------------ J. Charles Casebeer, M.D. DONALD G. JOHNSON* Director June 5, 1996 - ------------------------------------------ Donald G. Johnson, M.D. JAC. J. LAM* Director June 5, 1996 - ------------------------------------------ Jac. J. Lam * By: /s/ GHASSAN BARAZI June 5, 1996 - ------------------------------------------ Ghassan Barazi, Attorney-in-Fact pursuant to powers of attorney filed with this Registration Statement on Form SB-2 on January 22, 1996
II-11 99 INDEX TO EXHIBITS (X) Indicates exhibits filed herewith. (M) Denotes management contract or compensation plan or arrangement.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ --------------------------------------------------------------- ------------- (X) 1.1 Form of Underwriting Agreement between the Registrant and Dickinson & Co................................................. (X) 3.1.1 Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on June 30, 1995.................. (X) 3.1.2 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on November 2, 1995............................................... (X) 3.1.3 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 changing corporate name to Vista Laser Centers of Michigan, Inc............................................... (X) 3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995............... (X) 3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on April 12, 1996....................................................... (X) 3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996....................................................... (X) 3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995............... (X) 3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on January 8, 1996................................................ (X) 3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996....................................................... (X) 3.4 By-Laws of the Registrant...................................... 4.1 Specimen certificate representing Registrant's common stock (to be filed by amendment)......................................... 4.2 Specimen certificate representing Registrant's Series A Cumulative Convertible Preferred Stock (to be filed by amendment)..................................................... 5.1 Opinion of counsel as to validity of securities (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)................................... 5.2 Opinion of counsel as to liquidation preference of preferred stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............. (M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)....... (M) 10.1.2 Stock option agreement covering option for 50,000 shares granted January 12, 1996 by Registrant to Ghassan Barazi (incorporated by reference to Exhibit 10.1.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)...........................................
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ --------------------------------------------------------------- ------------- 10.2 License Agreement dated as of October 16, 1995 between the Registrant and Refractive Services 800 Corp. for use of 800 and 900 telephone numbers (incorporated by reference to Exhibit 10.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................ 10.3 Consulting Services Agreement dated as of October 16, 1995 between the Registrant and Vista Technologies Inc. (incorporated by reference to Exhibit 10.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).......................................................... 10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement between the Registrant and Vista Technologies Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).................... (M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares reserved for issuance by the Registrant to Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).................... (M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares reserved for issuance by the Registrant to Casebeer Enterprises, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).......................................................... (M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued by the Registrant to Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.6 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)....... (M) 10.7 Consulting Agreement dated as of November 15, 1995 among the Registrant, Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)....... (M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.8 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................. (M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to Exhibit 10.9.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)........................................... (M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment Agreement among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).......................................................... 10.10 Agreement of Purchase of Assets dated December 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Windsor Excimer Corporation for the purchase of certain equipment (incorporated by reference to Exhibit 10.10 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).......................
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ --------------------------------------------------------------- ------------- 10.11 Facilities Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.11 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)....... 10.12 Consulting Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.12 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)....... (M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi (incorporated by reference to Exhibit 10.13.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)........................................... (M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J. Mayer (incorporated by reference to Exhibit 10.13.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)........................................... (M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles Casebeer (incorporated by reference to Exhibit 10.13.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................ (M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.13.4 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................ (M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam (incorporated by reference to Exhibit 10.13.5 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)........................................... 10.14 Assignment of Lease dated March 29, 1996 between the Registrant and Richard C. Mertz, M.D., P.C., with attached: equipment lease dated November 4, 1994 between Neptune Technology Leasing Corp. as lessor and Richard C. Mertz, M.D., P.C., as lessee; Consent to assignment by Neptune Technology Leasing Corp.; and Purchase Option between Richard C. Mertz, M.D., P.C. and Neptune Technology Leasing Corp. granting option to purchase equipment for $1.00 at lease expiration (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)................................... 10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi and Dr. Fouad Tayfour executed by Vista Technologies Inc. as to shares of Registrant's 5% Series B Cumulative Convertible Preferred Stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)................................................... 10.16 Irrevocable Proxy in favor of the Board of Directors of Vista Technologies Inc. executed by the Registrant as to 200,000 shares of Vista Technologies Inc. common stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)...................................
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ --------------------------------------------------------------- ------------- 10.17 Form of Service Agreement between the Registrant and ophthalmologists that agree to use the Registrant's equipment and support services (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).......................................................... 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)....................... 23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and 5.2 filed with Amendment No. 1 to the Registration Statement on May 6, 1996....................................... (X) 23.2 Consent of KPMG Peat Marwick LLP, independent public accountants.................................................... 25.1 Powers of Attorney (incorporated by reference to signature pages to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)............................
EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 800,000 Shares of Preferred Stock VISTA LASER CENTERS OF MICHIGAN, INC. Offering of 10% Cumulative Convertible Preferred Stock UNDERWRITING AGREEMENT June ___, 1996 Dickinson & Co. As Representative (the "Representative") of the Several Underwriters Named in Schedule I c/o Dickinson & Co. 110 Wall Street 23rd Floor New York, NY 10005 Dear Sirs: Vista Laser Centers of Michigan, Inc., a Nevada corporation (the "Company"), proposes to sell an aggregate of 800,000 shares (the "Firm Stock") of its 10% Series A Cumulative Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock") to the several underwriters named in Schedule I (the "Underwriters") on the terms and conditions set forth herein. The Preferred Stock shall be convertible at the option of the holder at any time after the Effective Date, as defined herein, into shares of common stock, $0.01 par value (the "Common Stock") on the terms set forth in the Registration Statement, as defined herein. The Company also agrees to sell to the Underwriters up to 120,000 shares of Preferred Stock for the purpose of covering over-allotments (the "Additional Stock") if and as requested by the Underwriters pursuant to Section 2 hereof. The Firm Stock and the Additional Stock are collectively referred to herein as the "Securities." 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form SB-2 (File No. 333-448) (including the preliminary prospectus therein) relating to the Securities (the "Registration Statement"). As used in this Agreement, the term "Registration Statement" means the Registration Statement as amended when declared effective by the Commission, including financial statements, exhibits and the information, if any, deemed to be a part of the registration statement pursuant to Rule 430A under the Act, and the term "Prospectus" means the prospectus in the form first filed with the Commission pursuant to Rule 424(b) under the Act; provided, however, that until such filing (if any) the term "Prospectus" shall mean the prospectus included in the Registration Statement; and provided further, that if no prospectus is filed on behalf of the Company pursuant to Rule 424(b) or if any other Prospectus is used to confirm sales of Securities prior to the Closing Date (as hereinafter defined), the term "Prospectus" shall mean any prospectus used to confirm sales of Securities prior to the Closing Date. 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell the Firm Stock to the several Underwriters and each Underwriter agrees, severally and not jointly, to purchase from the Company at a price of $ 4.50 per share of Firm Stock (the "Stock Purchase Price") the number of shares of Firm Stock set forth opposite the name of such Underwriter in Schedule I. 2 On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell to the several Underwriters, as determined by the Representative, and the Underwriters shall have the right to purchase, severally and not jointly, an aggregate of up to 120,000 shares of the Additional Stock from the Company at the Stock Purchase Price. Additional Stock may be purchased in the manner provided in Section 4 solely for the purpose of covering over-allotments made in connection with the offering of the Firm Stock. The Company will not, directly or indirectly, offer, sell, contract to offer or sell, make subject to any purchase option or otherwise dispose of any securities of the Company or any securities convertible into or exchangeable for Preferred Stock, Series B preferred stock or Common Stock, except to the Underwriters pursuant to this Agreement, for a period of 120 days after the commencement of the public offering of the Securities by the Underwriters without the prior written consent of the Representative. The Company further agrees to not grant any stock options, rights or warrants during this 120-day period. Notwithstanding the foregoing, during such period the Company may (i) grant stock options pursuant to the Company's existing stock options plans, (ii) issue Common Stock upon the exercise of any option or warrant or the conversion of any security outstanding on the date hereof, and (iii) issue Common Stock upon the conversion of any Preferred Stock issued pursuant to the Registration Statement. The Company has caused each of its directors, officers and holders of 2% or more of its outstanding Preferred Stock, Series B preferred stock or Common Stock (the "Principal Stockholders") to agree to not directly or indirectly, offer, sell, contract to offer or sell, make subject to any purchase option or otherwise dispose of any securities of the Company or any securities convertible into or exchangeable for securities of the Company for a period of twelve (12) months following the Effective Date (as defined herein) without the prior written consent of the Representative. 3. TERMS OF PUBLIC OFFERING. The Company is advised by you and acknowledges that the Underwriters propose (i) to make a public offering of their respective portions of the Securities as soon after the Effective Date of the Registration Statement and the determination of the public offering price as in your judgment is advisable and (ii) initially to offer the Securities at the public offering price upon the terms set forth in the Prospectus. 4. DELIVERY AND PAYMENT. The Firm Stock will be delivered by or on behalf of the Company to you for the accounts of the several Underwriters to the Representative's agent in New York, New York, against payment of the purchase price therefor by bank wire or by check or checks, in United States dollars and in next day funds, payable to the order of the Company at the offices of Dickinson & Co., 110 Wall Street, 23rd Floor, New York, NY 10005, at 9:30 a.m. EST, ________________, 1996 (which date shall not be more than ten (10) business days after the Effective Date) or at such other place or time as you and the Company may determine, such time being herein referred to as the "Closing Date." It is understood that you, acting individually and not in a representative capacity, may (but shall not be obligated to) make payment to the Company on behalf of any other Underwriter for the Securities to be purchased by such Underwriter. Any such payment by you shall not relieve any such Underwriter of any of its obligations hereunder. Delivery to the Underwriters of and payment for any Additional Stock purchased by the Underwriters shall be made in the same place and manner as for delivery and payment of the Firm Stock, at 9:30 a.m. EST, on such date or dates (individually an "Option Closing Date" and collectively the "Option Closing 3 Dates"), which may be the same as the Closing Date, but shall in no event be earlier than the Closing Date nor later than ten (10) business days after the giving of written notice from you to the Company of your determination to purchase specified amounts of Additional Stock. Any such notice may be given at any time within thirty (30) days after the Effective Date. Certificates for the Firm Stock and any Additional Stock shall be registered in such names and issued in such denominations as you shall request in writing not later than two full business days prior to the Closing Date or any applicable Option Closing Date. Such certificates shall be made available to you for inspection not later than 9:30 a.m., EST, on the business day next preceding the Closing Date or applicable Option Closing Date. Certificates in definitive form evidencing the Firm Stock and Additional Stock shall be delivered to you on the Closing Date or applicable Option Closing Date with any transfer taxes thereon duly paid by the Company, for the respective accounts of the several Underwriters. 5. AGREEMENTS OF THE COMPANY. The Company agrees with you as follows: (a) To cause the Registration Statement to be declared effective by the Commission at the earliest possible date (the "Effective Date"). (b) The Company will advise you promptly and, if requested by you, will confirm such advice in writing (i) when the Registration Statement has become effective (if such Registration Statement has not become effective prior to the execution of this Agreement), if and when any Prospectus is mailed (or otherwise transmitted) for filing pursuant to Rule 424 under the Act, and when any post-effective amendment to the Registration Statement becomes effective, (ii) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Securities for offer or sale in any jurisdiction, or the initiation of any proceeding for such purposes and (iv) of the happening of any event during the period referred to in Section 5(e) below that makes any statement made in the Registration Statement or the Prospectus untrue or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. (c) The Company will furnish to you one signed copy of the Registration Statement as first filed with the Commission and of each amendment to it, including all exhibits, and will furnish to you or to each Underwriter designated by you such number of conformed copies of the registration statement as so filed and of each amendment to it, without exhibits, as you may reasonably request. (d) The Company will not file any amendment or supplement to the Registration Statement, whether before or after the time when it becomes effective, or make any amendment, supplement or change to the Prospectus of which you shall not previously have been advised or to which you shall reasonably object. (e) From time to time during such period as in the opinion of counsel for the Underwriters a prospectus is required by law to be delivered in connection with sales by an Underwriter or a dealer, the Company will furnish to each Underwriter and dealer as many copies of the Prospectus (and of any 4 amendment or supplement to it) as such Underwriter or dealer may reasonably request. (f) If during the period specified in Section 5(e) any event shall occur as a result of which, in the opinion of counsel for the Underwriters or in the judgment of the Company, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with any law, the Company forthwith will prepare and file with the Commission an appropriate amendment or supplement to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with law, and will furnish to each Underwriter and to such dealers as you shall specify such number of copies thereof as such Underwriter or dealers may reasonably request. (g) Prior to any public offering of the Securities, the Company will cooperate with you and counsel for the Underwriters in connection with the registration or qualification of the Securities for offer and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as you may reasonably request, will continue such qualification in effect so long as reasonably required for distribution of the Securities and will file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided, however, that the Company shall not be required to register or qualify as a foreign corporation or to take any action which would subject it to the service of process in suits, other than as to matters and transactions relating to the offer and sale of the Securities, in any jurisdiction where it is not now so subject. (h) At or prior to the Effective Date, the Company will register the Securities with the Securities and Exchange Commission under the provisions of Section 12(g) of the Securities Exchange Act of 1934 and will maintain such registration in effect for a period of five (5) years from the Effective Date. (i) The Company will make generally available to its securities holders, as soon as reasonably practicable, an earnings statement covering a period of at least 12 months after the Effective Date (but in no event commencing later than 90 days after such date) which shall satisfy the provisions of Section 11(a) of the Act as defined in Rule 158 thereunder, and will advise you in writing when such statement has been so made available. (j) During the period of five (5) years after the Effective Date, the Company will deliver to the Representatives: (i) copies of such financial statements and annual, periodic, special or other reports filed or required to be filed with the Commission, at the time of filing with the Commission; (ii) copies of all other statements, documents or other information that the Company shall mail or otherwise make available to any class of its security holders; and (iii) from time to time such other information concerning the Company as you may reasonably request; provided, however, that the Company shall have no obligation to disclose material, nonpublic information. (k) The Company will pay all costs, expenses, fees and taxes incident to (i) the preparation, printing, filing and distribution under the Act of the Registration Statement (including financial statements, schedules and exhibits), each preliminary prospectus and all amendments and supplements to any of them prior to or during the period specified in Section 5(e), but not exceeding nine months after the Effective Date, (ii) the printing and delivery of the Prospectus and all amendments or supplements to it during the period specified in Section 5(e), but not exceeding nine months after the Effective 5 Date, (iii) the printing and delivery of this Agreement, the Preliminary and any Supplemental Blue Sky Memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection with the offering of the Securities, (iv) the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of the several states (including the reasonable fees and disbursements of counsel for the Underwriters relating to such registration or qualification), (v) fees relating to filings and clearance with the National Association of Securities Dealers, Inc. (the "NASD") in connection with the offering, (vi) the listing of the Securities on the National Association of Securities Dealers Automated Quotation system ("NASDAQ"), (vii) the listing of the Securities on the Boston Stock Exchange ("BSE"), (viii) furnishing such copies of the Registration Statement, any preliminary prospectus, the Prospectus and all amendments and supplements thereto as may be requested for use in connection with the offer or sale of the Securities by the Underwriters or by dealers to whom Securities may be sold, (ix) the fees, expenses, disbursements and costs of Company's counsel, accountants, transfer agent and other retained professionals, if any, (x) the performance by the Company of its obligations under this Agreement, and (xi) the costs of prospectus memorabilia and of placing any "tombstone" advertisement in such publications as the Company and the Representative shall determine. The provisions of this Section 5(k) are intended to relieve the Underwriters from the payment of the costs and expenses that the Company hereby agrees to pay and shall not affect any agreement that the Company may make, or may have made, for the sharing of any such costs and expenses. (l) In addition to the expenses described in Section 5(k), the Company shall pay the Representative as a nonaccountable reimbursement for the expenses incurred by the Representative in connection with the offering (a) at the Closing on the Closing Date, three percent (3%) of the gross proceeds (based on the public offering price) of the Securities sold in the offering on such Closing Date, less the greater of (i) any amounts previously paid to the Representative as an accountable expense or (ii) $25,000, as a nonaccountable reimbursement for the expenses incurred by the Representative in connection with the offering, and (b) at the Closing on any Option Closing Date, three percent (3%) of the gross proceeds (based on the public offering price) of the Securities sold in the offering on such Option Closing Date less any amounts previously paid to the Representative as an accountable expense and not deducted from the nonaccountable reimbursement paid under subpart (a) above. If the sale of the Securities provided for herein is not consummated by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Underwriter's obligations hereunder is not fulfilled, the Company will reimburse the Representative for all out-of-pocket disbursements (including fees and disbursements of counsel) incurred by the Representative up to $75,000 (less amounts previously paid as a nonaccountable reimbursement pursuant to the immediately preceding paragraph) in connection with the investigation, preparation to market and marketing of the Securities or in contemplation of performing such obligations hereunder, except as otherwise agreed by the Company in writing, but the Company shall not be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Securities. (m) The Company will do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to the Closing Date or any Option Closing Date and to satisfy all conditions precedent to the delivery of the Securities. (n) The Company will cause the Securities to be listed on the NASDAQ and BSE. 6 (o) The Company will comply fully and in a timely manner with the applicable provisions of Rule 424 and Rule 430A under the Act. (p) The Company will apply the net proceeds of the sale of the Securities sold by it in accordance with the statements under the caption "USE OF PROCEEDS" in the Prospectus. Prior to the application of such net proceeds, the Company will invest or reinvest such proceeds only in Eligible Investments. For the purposes of this Agreement, "Eligible Investments" shall mean the following investments so long as they have maturities of one year or less: (i) obligations issued or guaranteed by the United States or by any person controlled or supervised by or acting as an instrumentality of the United Stated pursuant to authority granted by Congress; (ii) obligations issued or guaranteed by any state or political subdivision thereof rated either Aa or higher, or MIG 1 or higher, by Moody's Investors Service, Inc. or AA or higher, or an equivalent, by Standard & Poor's Corporation, both of New York, New York, or their successors; (iii) commercial or finance paper which is rated either Prime-1 or higher or an equivalent by Moody's Investors Services, Inc. or A-1 or higher or an equivalent by Standard & Poor's Corporation, both of New York, New York, or their successors; and (iv) certificates of deposit or time deposits of banks or trust companies, organized under the laws of the United States, and which the Representative first approves in writing, which approval shall not be unreasonably withheld; provided, further, the Representative's consent to the deposit of proceeds initially with ______________, is hereby given and confirmed. (q) The Company shall use its best efforts to cause its officers, directors and beneficial owners of ten percent (10%) or more of any of its registered securities to deliver a copy of any of the Commission Forms 3, 4 or 5 filed with the Commission to the Representative and the Company shall deliver copies of all such Forms received by it to the Representative promptly following receipt thereof. In addition, the Company agrees to promptly deliver to the Representative copies of any Commission Schedules 13D or 13G received by the Company, directly or indirectly, which relate to any of the Company's securities. (r) The Company will maintain sufficient authorized but unissued shares of Preferred Stock to cover exercise of all Underwriters' Warrants, as defined herein. The Company will maintain sufficient authorized but unissued Common Stock to cover conversion of all Preferred Stock, Series B preferred stock and Underwriters' Underlying Securities, as defined herein. (s) Prior to the Closing Date, the Company will cause to be released in full any and all liens encumbering the assets of the Company or any of its subsidiaries which have been pledged for the purpose of securing personal obligations of any shareholder, director or officer of the Company to any lender. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The term "Company" as used in this Section 6 shall include Vista Laser Centers of Michigan, Inc. and any and all of its subsidiaries existing as of the Closing Date or any Option Closing Date. The Company represents and warrants to each Underwriter that: (a) The Commission has not issued any order preventing or suspending the use of any preliminary Prospectus with respect to the Securities. The preliminary Prospectus dated __________ 1996, as amended, contained all statements required to be stated therein in accordance with the Act, conformed in all material respects with the requirements of the Act and did not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. At the time of effectiveness of the Registration Statement and at all times subsequent thereto up to the Closing Date or any Option Closing Date, the Registration Statement 7 and the Prospectus and any amendments and supplements thereto have complied and will comply in all material respects with the provisions of the Act. The Registration Statement and the Prospectus and any supplements or amendments thereto do not, and at the Closing Date and any Option Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, except that the representations and warranties contained in this sentence shall not apply to statements or omissions in the Registration Statement or Prospectus (or any supplement or amendment to them) based upon information furnished to the Company by or on behalf of such Underwriter contained in the last paragraph on the cover page of the Prospectus, the last paragraph of text on the inside front cover of the Prospectus concerning stabilization and over-allotment by the Underwriters, and the section captioned "Underwriting," concerning the terms of the offering by the Underwriters. Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder and did not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. (b) The accountants who certified the consolidated financial statements included in the Registration Statement are independent certified public accountants within the meaning of the Act. (c) The consolidated financial statements included in the Registration Statement and the Prospectus (and any amendment or supplement thereto) present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the results of its operations and changes in its financial position for the periods specified. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout such periods. The supporting schedules included in the Registration Statement present fairly the information required to be stated therein. No other financial statements or schedules are required to be included in the Registration Statement or the Prospectus. (d) The Company (i) keeps and will continue to keep books, records and accounts that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company and (ii) maintains and will continue to maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management's general or specific authorization and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Neither the Company nor any of its subsidiaries, nor any employee or agent of the Company or any of its subsidiaries, has made, directly or indirectly, any payment of funds of the Company or any subsidiary or received or retained funds in violation of any law, rule or regulation. (e) Since the dates as of which information is given in the Registration Statement, except as otherwise stated or contemplated therein: (i) there has been no material adverse change in the condition, financial or otherwise, of the Company and its subsidiaries taken as a whole, or in the earnings, business affairs or business prospects of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business; (ii) there have been no material transactions entered into by the 8 Company or any of its subsidiaries other than transactions in the ordinary course of business; (iii) neither the Company nor any of its subsidiaries has incurred any material obligation, contingent or otherwise; (iv) there has been no change in the capital stock or debt of the Company or any of its subsidiaries, and (v) there has been no dividend or distribution of any kind declared, paid or made by the Company on its capital stock. (f) The Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the power and authority and holds all licenses necessary or required to carry on its business and to own or lease and operate its properties as described in the Registration Statement, and is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification. All of the outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable and is owned by the Company free of any restriction on transfer, lien, encumbrance, security interest or claim whatsoever. Except as set forth in the Registration Statement, the Company does not own, and at the Closing Date will not own, directly or indirectly, any share of stock or any other security of any corporation or have any equity interest in any firm, partnership, joint venture, association or other entity. Except as set forth on Schedule II hereto, there is no outstanding right, warrant or option to acquire, or instrument convertible into or exchangeable for, any capital stock or other equity interest in the Company or any of its subsidiaries. (g) All the outstanding shares of Preferred Stock, Series B Preferred Stock and Common Stock of the Company are duly authorized and have been validly issued and are fully paid, nonassessable and free of pre-emptive rights. All outstanding shares of Preferred Stock, Series B preferred stock and Common Stock of the Company and all rights, warrants or options to acquire, and all instruments convertible or exchangeable for, shares of Preferred Stock or Common Stock of the Company have been issued in accordance with applicable Federal and state securities laws. The Securities to be sold by the Company are duly authorized and, when delivered to the Underwriters against payment therefor as provided by this Agreement, will have been validly issued and will be fully paid, nonassessable and free of preemptive or similar rights. (h) The authorized capital stock of the Company, including the Preferred Stock, conforms to the description thereof in the Registration Statement and the Prospectus. All outstanding Securities will be listed on the NASDAQ and BSE, subject only to official notice of issuance. The certificates for the Securities are in valid and proper legal form. Except as set forth on Schedule III, no holder of securities of the Company has any right to require the Company to register shares of Preferred Stock, Series B preferred stock, Common Stock or other securities. (i) Neither the Company nor any of its subsidiaries is in violation of any term or provision of its charter or bylaws or in default in the performance or observance of any material obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any indenture or other instrument or agreement to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any property of the Company or any of its subsidiaries is bound. (j) This Agreement has been duly authorized, executed and delivered by the Company. The Company has full power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, the compliance by the Company with all 9 provisions hereof and the consummation of the transactions contemplated hereby will not conflict with or result in a breach of any of the terms or provisions of, or a default under, the charter or by laws of the Company or any of its subsidiaries or any agreement, indenture or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any property of the Company or any of its subsidiaries is bound, or violate or conflict with any law, regulation or ruling or any order, judgment or decree applicable to the Company or any of its subsidiaries or to any property of the Company or any of its subsidiaries. No consent, approval, authorization or order of any court or any governmental agency or body is required for the consummation by the Company of the transactions contemplated hereby, except such as have been obtained or may be required under the Act or under state securities or Blue Sky Laws. (k) Except as disclosed in the Prospectus, there is no material action, suit or proceeding pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject, and no such action, suit or proceeding is threatened or, to the best of the Company's knowledge, contemplated. No labor disturbance by the employees of the Company or any of its subsidiaries exists or is imminent that might be expected to materially and adversely affect the earnings, business affairs or business prospects of the Company and its subsidiaries taken as a whole, and the Company is not aware of any existing or imminent labor disturbances by the employees of any of its principal suppliers or customers that might be expected to result in any material adverse change in the earnings, business affairs or business prospects of the Company and its subsidiaries. (l) Except as otherwise set forth in the Registration Statement, the Company and each of its subsidiaries have good and marketable title, free and clear of all liens, claims and encumbrances, except liens for taxes not yet due and payable, to all property and assets that are described in the Registration Statement as being owned by the Company and its subsidiaries, subject only to such exceptions as in the aggregate are not material and do not adversely affect the earnings, business affairs or business prospects of the Company and its subsidiaries. All material leases to which the Company or any of its subsidiaries is a party are valid and binding and no default has occurred thereunder, and the Company and its subsidiaries enjoy peaceful and undisturbed possession under all such leases. (m) Neither the Company nor any of its subsidiaries is in violation of any law, ordinance, governmental rule or regulation or court decree to which it may be subject, or has failed to obtain and maintain in full force and effect any license, permit, certificate or other governmental authorization necessary to the ownership of any property of the Company or any of its subsidiaries, or to the conduct of the business of the Company or any of its subsidiaries, except for any such violation or failure that would not have had a material adverse effect on the financial condition, earnings, business affairs or business prospects of the Company. (n) There are no contracts or other documents that are required to be filed as exhibits to or described in the Registration Statement which have not been so filed or described. Each contract so described has been duly and validly executed and delivered and is in full force and effect in accordance with its terms. (o) Except as set forth in the Registration Statement and Prospectus, neither the Company nor any of its subsidiaries has violated any environmental, safety or similar law applicable to its business, nor any federal, provincial, state or local U.S. or Canadian law relating to discrimination in the hiring, promotion or pay of employees, employment 10 conditions, working hours, employee benefits, nor any provisions of the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, except for any such violation that would not have had a material adverse effect on the financial condition, earnings, business affairs or business prospects of the Company. (p) To the knowledge of the Company and its directors and officers, the real property owned, leased or otherwise utilized by the Company and its subsidiaries in connection with the operation of their businesses, including without limitation any subsurface soils and ground water is free of contamination from any substance or material presently known to be toxic or hazardous, including without limitation any radioactive substance, methane, volatile hydrocarbons, industrial solvents or any other material or substance which based on present knowledge could now or at any time in the future cause a material detriment to or materially impair the beneficial use thereof by the Company or such subsidiary or constitute or cause a significant health, safety or other environmental hazard to occupants or users thereof; such real property does not contain any underground storage or treatment tanks, active or abandoned water, gas or oil wells, or any other underground improvements or structures, other than the foundations, footings or other supports for the improvements located thereon. (q) The Company and each of its subsidiaries maintains reasonably adequate insurance for the conduct of their respective businesses and the value of their respective properties. All such insurance is issued and in force on the date hereof. The Company engaged or consulted with an appropriately qualified insurance and risk management professional who has evaluated the probability of occurrence and estimated severity of the casualty, liability, property damage and similar risks encountered in the business of the Company and its subsidiaries and advised the Company that it is adequately insured against material losses. (r) The Company and each of its subsidiaries have such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own, lease and operate their respective properties and to conduct their businesses in the manner described in the Prospectus, subject to such qualifications as may be set forth in the Prospectus. The Company and each of its subsidiaries have fulfilled and performed all of their material obligations with respect to such permits, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit, subject in each case to such qualification as may be set forth in the Prospectus. Except as described in the Prospectus, such permits contain no restrictions that are materially burdensome to the Company or any of its subsidiaries. (s) The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (t) All tax returns required to be filed by the Company and each of its subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due or claimed to be due from such entities have been paid, other than those being contested in good faith and for which adequate reserves have been provided or those currently payable without penalty or interest. (u) Vista Laser Centers of Michigan, Inc. is classified as a "C" corporation with the Internal Revenue Service. The Company and its subsidiaries are subject to direct taxation of their earnings (subject to group or 11 consolidated tax reporting) and the shareholders thereof are not subject to taxation on the undistributed earnings of the Company or its subsidiaries. (v) The Company's Board of Directors consists of those persons listed in the Prospectus. Except as disclosed in the Prospectus, none of such persons is employed by the Company nor is any of them affiliated with the Company, except for service on its Board of Directors. (w) Except as provided for herein, no broker's or finder's fees or commissions are due and payable by the Company, and none will be paid by it. (x) The Company is eligible to use Form SB-2 for the registration of the Securities. (y) Neither the Company nor, to its knowledge after due and diligent inquiry, any person other than any Underwriter, has made any representation, promise or warranty, whether verbal or in writing, to anyone, whether an existing shareholder or not, that any of the Securities will be reserved for or directed to them during the proposed public offering. (z) Except as set forth in the Prospectus, the Company has not established, contributed to or maintained any "employee benefit plan" as defined in the Employment Retirement Income Security Act or in the Internal Revenue Code of 1986, as amended. (aa) Neither the Company nor, to its knowledge, any of its officers, directors or affiliates has taken, directly or indirectly, any action designed to cause or result in, or which has constituted the stabilization or manipulation of the price of the outstanding Preferred Stock or any other outstanding securities of the Company to facilitate the sale or resale of the Securities in the offering. 7. SALE RESTRICTIONS AND LOCKUP AGREEMENTS. The Company agrees to not permit or cause any of the shares of Preferred Stock, Series B preferred stock or Common Stock (or securities which can be converted, exchanged or exercised for any such stock) owned by any Principal Stockholders to be offered, sold or disposed of, directly or indirectly, in any manner whatsoever (including pursuant to Rule 144 under the Act) for a period of twelve (12) months following the Effective Date without obtaining the prior written approval of the Representative. The Company shall cause the Principal Stockholders to execute an agreement (the "Lockup Agreement") with the Underwriters regarding such restrictions in form and substance satisfactory to the Representative and its counsel. 8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities, judgments and expenses (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any preliminary prospectus or the Prospectus or in any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses are caused by any such untrue statement or omission or 12 alleged untrue statement or omission based upon information furnished to the Company by or on behalf of such Underwriter contained in the last paragraph on the cover page of the Prospectus, the first paragraph of text on page 2 of the Prospectus, concerning stabilization and over-allotment by the Underwriters, and the section captioned "Underwriting," concerning the terms of the offering by the Underwriters. (b) In case any action shall be brought against any Underwriter or any person controlling such Underwriter, based upon any preliminary Prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and with respect to which indemnity may be sought against the Company, such Underwriter shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Any Underwriter or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the employment of such counsel has been specifically authorized in writing by the Company, (ii) the Company has failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the Company and such Underwriter or such controlling person shall have been advised by counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the Company (in which case the Company shall not have the right to assume the defense of such action on behalf of such Underwriter or such controlling person, it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Underwriters and controlling persons, which firm shall be designated in writing by the Representative, and that all such fees and expenses shall be reimbursed as they are incurred). The Company shall not be liable for any settlement of any such action effected without their written consent, but if settled with the written consent of the Company, the Company agrees that each person so consenting shall indemnify and hold harmless any Underwriter and any such controlling person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than ten business days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, any person controlling the Company to the same extent as the foregoing indemnity from the Company to each Underwriter but only with reference to information furnished by or on behalf of such Underwriter contained in the last paragraph of the cover page of the Prospectus, the last paragraph of text on the inside front cover of the Prospectus concerning 13 stabilization and over-allotment by the Underwriters, and the section captioned "Underwriting," concerning the terms of the offering by the Underwriters. In case any action shall be brought against the Company, any of its directors, any such officer, any such controlling person based on the Registration Statement, the Prospectus or any preliminary Prospectus and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company (except that if the Company shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the Company, its directors, any such officers, and any such controlling person shall have the rights and duties given to such Underwriter by Section 8(b) hereof. (d) If the indemnification provided for in this Section 8 is unavailable to the Underwriters or the Company, as the case may be, in respect of any losses, claims, damages, liabilities, judgments or expenses referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, judgments and expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus and in the notes thereto. The relative fault of the Company on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities, judgments or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such 14 fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 8 are several in proportion to the respective underwriting commitment of each Underwriter and not joint. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company in this Agreement shall remain operative and in full force and effect regardless of any termination of this Agreement or any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter. 9. CONDITIONS TO UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Firm Stock under this Agreement are subject to the satisfaction of each of the following conditions: (a) All of the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date and any Option Closing Date with the same force and effect as if made on and as of the Closing Date and any Option Closing Date. (b) The Registration Statement shall have become effective not later than 5:00 p.m. EST, on the date of this Agreement or at such later date and time as you may approve in writing and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending before or contemplated by the Commission, and any request for additional information on the part of the Commission shall have been fulfilled. (c) Since the date of the latest balance sheet included in the Registration Statement and in the Prospectus: (i) there shall not have occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries, whether or not arising in the ordinary course of business; (ii) there shall not have been any change in the capital stock or increase in the long-term debt of the Company or any of its subsidiaries from that set forth in the Registration Statement and the Prospectus; and (iii) the Company and its subsidiaries shall have no liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole, other than those reflected in the Registration Statement and the Prospectus. (d) You shall have received on the Closing Date a certificate dated the Closing Date signed by the principal executive officer and the principal financial or accounting officer of the Company confirming the matters set forth in Section 9(c) and to the effect that (i) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending before or, to the knowledge of such signers, contemplated by the Commission; (ii) the Company has performed all agreements and satisfied all conditions on its part to be performed or satisfied under this Agreement at or prior to the Closing Date; (iii) the representations and warranties of the Company herein contained are true and correct to the same extent as if made on and as of the Closing Date; (iv) there is no litigation or governmental proceeding pending or threatened against the Company or any of its subsidiaries or any property of the Company or any of its subsidiaries that is required to be disclosed in the Registration Statement and the Prospectus and is not so disclosed; and (v) there is no failure by the Company or any of its subsidiaries to comply with any applicable Federal, state or other law or regulation relating to the conduct of the business of the Company and its subsidiaries that may have a material adverse effect on the condition, financial or otherwise, or on the earnings, business affairs or business 15 prospects of the Company and its subsidiaries, taken as a whole, other than as set forth in the Registration Statement and the Prospectus. (e) You shall have received on the Closing Date or on any Option Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date or Option Closing Date, as applicable, of Law Office of William M. Curtis, counsel for the Company, to the effect that: (i) the Company and each of its subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to carry on its business and to own, lease and operate its properties as described in the Registration Statement and the Prospectus; (ii) the Company and each of its subsidiaries is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure so to qualify would not have a material adverse effect on the earnings, business affairs or business prospects of the Company and its subsidiaries, taken as a whole; (iii) (A) the Company has the corporate power and authority to enter into and perform this Agreement and to issue, sell and deliver the Securities; and (B) this Agreement has been duly and validly authorized, executed and delivered by the Company; (iv) (A) the authorized and issued capital stock of the Company is correctly set forth in the Registration Statement and Prospectus under the caption "Capitalization," and (B) the Securities to be sold by the Company hereunder have been duly authorized and, when issued and delivered and paid for hereunder, will be validly issued, fully paid and nonassessable and free of pre-emptive or similar rights; (v) all of the issued and outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable and, to such counsel's knowledge, are owned (or will be owned on the Closing Date) by the Company free and clear of any mortgage, pledge, lien, encumbrance, claim or equity; there is no outstanding right, warrant or option to acquire, or instrument convertible into or exchangeable for, any shares of capital stock or other equity interest in any subsidiary; (vi) the description of the Securities contained or to be contained in the Company's Registration Statement on Form 8-A under the caption "Description of Registrant's Securities to be Registered," is true and correct in all material respects and fairly presents the information called for with respect to the Securities, and the statements in the Registration Statement and the Prospectus under the captions "The Company," "Risk Factors," "Proposed Business", "Federal Income Tax Considerations", and "Shares Eligible for Future Sale", insofar as such statements constitute a summary of the statutes, rules, regulations, documents or proceedings referred to therein, are true and correct in all material respects and fairly present the information called for by the Act with respect thereto; (vii) the Registration Statement has become effective under the Act, the Company has complied in a timely manner with the applicable provisions of Rule 424 and Rule 430A under the Act, and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending before or, to the knowledge of such counsel, contemplated by the Commission; 16 (viii) such counsel does not know of any legal or governmental proceeding pending or threatened to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is subject that is required to be described in the Registration Statement or Prospectus and is not so described; (ix) such counsel does not know of any contract or other document that is required to be described in the Registration Statement or Prospectus or is required to be filed as an exhibit to the Registration Statement that is not described or filed as required; the descriptions thereof or references thereto in the Registration Statement and Prospectus are accurate in all material respects; and to such counsel's knowledge, each such contract or other document is in full force and effect in accordance with its terms; (x) neither the Company nor any of its subsidiaries is in violation of its charter or bylaws, and neither the Company nor any of its subsidiaries, to the knowledge of such counsel, is in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material indenture or other agreement to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any property of the Company or any of its subsidiaries is bound; (xi) the Company and each of its subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own, lease and operate its respective properties and to conduct its business in the manner described in the Prospectus, subject to such qualifications as may be set forth in the Prospectus; to the best of such counsel's knowledge, after due inquiry, the Company and each of its subsidiaries has fulfilled and performed all of its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit, subject in each case to such qualification as may be set forth in the Prospectus; and, except as described in the Prospectus, such permits contain no restrictions that are materially burdensome to the Company or any of its subsidiaries; (xii) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or bylaws of the Company or any of its subsidiaries or any agreement, indenture or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any property of the Company or any of its subsidiaries is bound, or (assuming compliance with all applicable state securities and Blue Sky laws) violate or conflict with any laws, administrative regulations or rulings or orders, judgments or decrees applicable to the Company or any of its subsidiaries or to any property of the Company or any of its subsidiaries; (xiii) except for the order of the Commission (which has been obtained) declaring the Registration Statement effective and except for permits and similar authorizations required under the securities or Blue Sky laws of certain jurisdictions, no consent, approval, authorization or other order of any court or regulatory body, administrative agency or other governmental body is required for the consummation of the transactions contemplated by this Agreement; and no consents or waivers from the holders of the Company's capital stock or debt securities are required in connection with the consummation of the transactions contemplated hereby; 17 (xiv) to such counsel's knowledge, after due inquiry, neither the Company nor any of its subsidiaries has violated any environmental, safety or similar law applicable to its business, nor any federal or state law relating to discrimination in the hiring, promotion or pay of employees nor any applicable federal or state wages and hours laws, nor any provisions of the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, which in each case might result in any material adverse change in the business, prospects, financial condition or results of operations of the Company and its subsidiaries taken as a whole; (xv) to such counsel's knowledge, after due inquiry, all material leases to which the Company or any of its subsidiaries is a party are valid and binding and no default has occurred or is continuing thereunder, which might result in any material adverse change in the business, prospects, financial condition or results of operations of the Company and its subsidiaries taken as a whole; (xvi) the Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (xvii) except as set forth on Schedule III, to such counsel's knowledge, after due inquiry, no holder of any security of the Company has any right to require registration of Preferred Stock, Series B preferred stock, Common Stock or any other security of the Company; (xviii) each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Registration Statement and the Prospectus (except for financial statements and schedules as to which such counsel need not express any opinion) complied in all material respects with the requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder; (xix) the Company is classified as a "C" corporation with the Internal Revenue Service. The Securities constitute an equity interest in the Company, and not indebtedness of the Company, for federal income tax purposes under Section 385 of the Internal Revenue Code of 1986, as amended. (xx) The certificates evidencing the Securities to be delivered hereunder are in due and proper form under Nevada law and the Securities conform in all material respects to the description thereof contained in the Prospectus. (xxi) the Underwriters' Warrants, as hereafter defined, have been duly authorized, executed, delivered, and validly issued by the Company; the Underwriters' Underlying Securities, as hereafter defined, to be issued on exercise of the Underwriters' Warrants, and Common Stock to be issued on conversion of the Underwriters' Underlying Securities, will be duly authorized, validly issued, fully paid, nonassessable, and free of preemptive rights; the holders thereof will not be subject to personal liability by reason of being such holders; no governmental or regulatory approvals are required in connection with the execution and delivery of the Underwriters' Warrants, the issuance of the Underwriters' Underlying Securities upon exercise thereof and issuance of Common Stock on conversion of Underwriters' Underlying Securities (other than such approval as may be required by the NASD); and the execution, delivery, and exercise of the Underwriters' Warrants and conversion of Underwriters' Underlying Securities will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the Articles of Incorporation or bylaws of the Company or any agreement, indenture, other 18 instrument, order, or decree to which the Company is a party or by which it is bound, or any law or regulation applicable to the Company; (xxii) no transfer or other taxes are required to be paid under Nevada law in connection with the sale and delivery of the Securities and Underwriters' Warrants to the Underwriters hereunder. (xxiii) the Company has sufficient authorized but unissued shares of Preferred Stock to cover exercise of any and all Underwriters' Warrants; the Company has sufficient authorized but unissued shares of Common Stock to cover conversion of any and all Preferred Stock, Series B preferred Stock and Underwriters' Underlying Securities. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, counsel for the Underwriters, representatives of the independent public accountants for the Company and you at which the contents of the Registration Statement and Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus, on the basis of the foregoing, no facts have some to the attention of such counsel that lead them to believe that the Registration Statement or the Prospectus contain an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading (it being understood that such counsel need express no comment with respect to the financial statements, schedules and other financial and statistical data included in the Registration Statement or Prospectus). In giving such opinion such counsel may rely as to matters of fact, to the extent proper, on certificates of responsible officers of the Company. To the extent such opinion involves matters governed by the laws of jurisdictions other than the United States, such counsel may rely on the opinions of local counsel satisfactory to the Underwriters. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities hereunder as you reasonably may request. (f) You shall have received from Titus, Brueckner & Berry, P.C., counsel for the Representative, such opinion or opinions, dated as of the Closing Date, with respect to the incorporation of the Company, the validity of the Firm Stock being sold on such Closing Date, the Registration Statement, the Prospectus and other related matters as you reasonably may request, and such counsel shall have received such papers and information as they reasonably request to enable them to pass upon such matters. In rendering its opinion, such counsel shall be entitled to rely upon the opinion of the Company's counsel delivered pursuant to Section 9(e) above and upon certificates of the Company's officers executed in support thereof. (g) At the time of execution of this Agreement and on each Closing Date or Option Closing Date, you shall have received a letter, addressed to you, from KPMG Peat Marwick LLP, independent accountants, confirming that they are independent certified public accountants within the meaning of the Securities Act and the applicable Rules and Regulations, and stating, as of the date of such letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given or incorporated in the Registration Statement and Prospectus, as of a date not more than five days prior to the date of such letter) the conclusions and findings of such firm with respect to the financial information contained in the Registration Statement and prospectus, and other matters covered by its letter delivered to you concurrently with the execution 19 of this Agreement, and confirming the conclusions and findings set forth in such prior letter. (h) The Company shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. (i) The Securities shall have been approved for listing upon notice of issuance by the NASDAQ and the BSE. The several obligations of the Underwriters to purchase any Additional Stock hereunder are subject to satisfaction on and as of any Option Closing Date of the conditions set forth in Section 9 (a) through (i) above, except that the opinion called for in Section 9 (e) and the letter referred to in Section 9 (g) shall be revised to reflect the sale of the Additional Stock. 10. POST-EFFECTIVE AGREEMENTS AND COVENANTS OF THE COMPANY. The Company agrees and covenants to act or cause others to act as described below following the Effective Date: (a) For a period of five (5) years from the Effective Date, the Company shall cause the appointment of a non-voting advisor, designated by the Representative, to its Board of Directors. Such designee shall attend meetings of the Board and shall be entitled to receive reimbursement for all reasonable costs incurred in attending such meetings, including, but not limited to, food, lodging and transportation. To the extent permitted by law, the Company agrees to indemnify the Underwriters and their designee against any and all claims arising out of the designee's service as a non-voting advisor to the Board of Directors. In the event the Company maintains a liability insurance policy affording coverage for the acts of its officers and directors, it shall use its best efforts to include each of the Underwriters and their designee as insureds under such policy. If the Representative does not exercise its option to designate an advisor to the Company's Board of Directors, the Representative shall nonetheless have the right to send a representative (who need not be the same individual from meeting to meeting) to observe each meeting of the Board of Directors. The Company agrees to give the Representative notice of each such meeting and to provide the Representative with an agenda and minutes of the meeting no later than the time it gives such notice and provides such items to the directors. (b) The Company shall retain American Stock Transfer & Trust Company, as transfer agent, unless otherwise agreed to by Representative, for the Securities for a period of five (5) years following the Effective Date. In addition, for a period of five (5) years following the Effective Date, at the request of the Representative, the Company shall cause such transfer agent to provide the Representative on a monthly basis with copies of the Company's stock transfer sheets and, when requested by the Representative, a current list of the Company's securities holders, including a list of the beneficial owners of securities held by a depository trust company, and other nominees. (c) For a period of five (5) years from the Effective Date, the Company shall provide to the Representative on a timely basis quarterly statements setting forth such information regarding the Company's results of operations and financial position (including balance sheets, profit and loss statements, and cash flow statements) as is regularly prepared by management of the Company. 20 (d) For a period of five (5) years from the Effective Date, the Company shall continue to retain the accountants retained in accordance with Section 9(g) hereof (or another nationally recognized accounting firm reasonably acceptable to the Representative). (e) For a period of five (5) years from the Effective Date, the Company, at its expense, shall cause its regularly engaged independent certified public accountants to review (but not audit) the Company's financial statements for each of the first three (3) fiscal quarters prior to the announcement of quarterly financial information, the filing of the Company's Form 10-Q quarterly report and the filing of quarterly financial information to stockholders. (f) For a period of five (5) years from the Effective Date, the Company shall provide the Representative, on a not less than annual basis, with internal forecasts setting forth projected results of operations for each quarterly and annual period in the two fiscal years following the respective dates of such forecasts. Such forecasts shall be provided to the Representative more frequently than annually if prepared more frequently by management. Revised forecasts shall be prepared and provided to the Representative when required to reflect more current information, revised assumptions or actual results that differ materially from those set forth in the forecasts. (g) The Company shall use its best efforts to cause the Securities to be designated for quotation on the NASDAQ and the BSE and maintain such listing for as long as the Securities are qualified for inclusion in NASDAQ and BSE. (h) Until such time as the Securities or the Common Stock are listed for trading on the New York Stock Exchange, the American Stock Exchange or NASDAQ-NMS, the Company shall cause its legal counsel to provide the Representative with a list, to be updated at least annually, of those states in which non-issuer transactions in the Securities or Common Stock are exempt from registration under the Blue Sky laws of the several states. (i) The Company will use the proceeds of the offering only as set forth in the Registration Statement. 11. UNDERWRITERS' WARRANTS. (a) In order to induce the Underwriters to enter into this Agreement, the Company, for consideration of $0.001 per warrant, shall execute and deliver to the Representative 80,000 five-year warrants (the "Underwriters' Warrants") to purchase 80,000 shares of Preferred Stock at an exercise price per Underwriters' Warrant equal to 120% of the public offering price of the Firm Stock. The Underwriters' Warrants shall be in the form of Exhibit _____ to the Registration Statement. Execution and delivery of the Underwriters' Warrants shall be made to the Representative at the Closing on the Closing Date. The Underwriters' Warrants shall be registered in the name of any underwriter or any officer thereof or any member of the selling group as specified by the Representative in writing to the Company at least two days before the Closing Date. The cost of original issue tax stamps, if any, in connection with the execution and delivery of the Underwriters' Warrants shall be borne by the Company. (b) The Underwriters' Warrants shall not be redeemable by the Company and shall provide for adjustments in the number of shares of Preferred Stock into which such warrants may be exercised and to the exercise price thereof in order to prevent dilution in the event of subsequent splits, consolidations, mergers or other actions affecting the Preferred Stock. The Company shall reserve and at all times have available a sufficient number of 21 shares of its Preferred Stock to be issued upon the exercise of the Underwriters' Warrants (the "Underwriters' Underlying Securities"). The Company shall not call for redemption or redeem any of the Underwriters' Underlying Securities prior to commencement of the Warrant Exercise Term, as defined herein, and then only upon such terms and provisions for notice as are applicable to redemption of the Securities sold in the offering. (c) The Company and the Representative agree that the Representative may designate that the Underwriters' Warrants be issued in varying amounts directly to itself, other underwriters, their respective officers or to members of the selling group. However, such designation will only be made by the Representative if it determines and substantiates to the Company that such issuance will not violate the applicable rules of the NASD. The Representative and the Company agree that any transfers of the Underwriters' Warrants will only be made if they do not violate the registration provisions of the Act. (d) The Underwriters' Warrants may not be exercised or transferred (except as set forth in section (c) above) during the 12-month period following the Effective Date. Thereafter, until the fifth anniversary of the Effective Date (the "Warrant Exercise Term"), the Underwriters' Warrants shall be exercisable at the exercise price set forth in Section 11(a) in accordance with the terms of the form of Underwriters' Warrants included as Exhibit _____ of the Registration Statement. If any of the Underwriters' Warrants are not exercised by 5:00 p.m. EST on the fifth anniversary of the Effective Date, all such Underwriters' Warrants remaining unexercised shall expire. (e) At any time during the Warrant Exercise Term, the Representative or the holders of a majority of the Underwriters' Warrants, acting together, shall have the right to demand on one occasion that the Company (and the Company shall) prepare and file one Post-Effective Amendment to the Registration Statement or prepare and file a new registration statement, if then required under the Act, registering or qualifying for distribution to the public the Underwriters' Warrants, Underwriters' Underlying Securities and Common Stock issued or issuable upon conversion thereof. The Company shall bear all expenses incurred in preparation and filing of any Post-Effective Amendment to the Registration Statement or new registration statement to be filed pursuant to this Section 11(e) including, without limitation, attorneys' fees, accounting and auditing fees, and printing and mailing expenses. The Company shall cause any such filing to remain effective for not less than ninety (90) days. (f) If at any time before the seventh anniversary of the Effective Date, the Company shall prepare and file one or more Post-Effective Amendments to the Registration Statement (which for purposes of this Section 11 shall include filings on Form 1-A under the 1934 Act) or any new registration statement under the Act, in connection with any actual or planned distribution of equity or debt securities of the Company (including "shelf registrations" pursuant to Rule 415 of the Act), or in connection with actual or planned distributions of equity or debt securities previously issued by the Company to be sold by holders thereof, the Company shall include or cause to be included therein for registration or qualification for distribution the Underwriters' Warrants, all issued and unissued Underwriters' Underlying Securities and all Common Stock issued or issuable upon conversion thereof. (g) Not less than thirty (30) days prior to the earlier of the proposed or actual filing date of any Post-Effective Amendment to the Registration Statement or any new registration statement as to which holders of Underwriters' Warrants, Underwriters' Underlying Securities or Common Stock issued upon conversion thereof have piggyback registration rights pursuant to Section 11(f), the Company shall give written notice of such filing to each holder thereof. The Company's obligation to provide such written notice shall 22 continue until the later of (i) registration of all Underwriters' Warrants, Underwriters' Underlying Securities and Common Stock issued or issuable upon conversion thereof, or (ii) the seventh anniversary of the Effective Date. Within not more than twenty (20) days following receipt of any such notice from the Company, holders of Underwriters' Warrants and Underwriters' Underlying Securities shall give written notice to the Company of the quantity and description of securities that such holder wishes to be registered or qualified for distribution under the proposed Post-Effective Amendment to the Registration Statement or new registration statement. The Company shall bear all expenses and fees incurred in connection with the preparation and filing of any Post-Effective Amendment to the Registration Statement or any new registration statement. The Company shall cause any such filing to remain effective for not less than ninety (90) days. 12. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. If the Registration Statement has not been declared effective prior to the date of this Agreement, this Agreement shall become effective at such time, after notification of the effectiveness of the Registration Statement has been released by the Commission, as you and the Company shall agree upon the public offering price and the Stock Purchase Price. If the public offering price and the Stock Purchase Price shall not have been determined prior to 6:00 P.M. New York time, on the seventh full business day after the Registration Statement shall have become effective, this Agreement shall thereupon terminate without liability on the part of the Underwriters or the Company, except as set forth herein. If the Registration Statement has been declared effective prior to the date of this Agreement, this Agreement shall become effective upon execution and delivery by you and the Company. This Agreement may be terminated at any time prior to the Closing Date by you by written notice to the Company if any of the following has occurred or in your opinion is likely to occur: (a) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any adverse change or development involving a prospective adverse change in or affecting particularly the condition, financial or otherwise, of the Company or any of its subsidiaries, or the earnings, business affairs or business prospects of the Company or any of its subsidiaries taken as a whole, whether or not arising in the ordinary course of business, as would, in your judgment, make the offering or delivery of the Securities impracticable; (b) any outbreak of hostilities or other national or international calamity or crisis or material change in economic conditions, if the effect of such outbreak, calamity, crisis or change on the financial markets of the United States or elsewhere would, in your judgment, make the offering or delivery of the Securities impracticable; (c) suspension of trading in securities on any United States stock exchange or system or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on any such exchange or system; (d) the enactment, publication, decree or other promulgation of any Federal or state statute, regulation, rule or order of any court or other governmental authority that in your opinion materially and adversely affects, or will materially and adversely affect, the business or operations of the Company or any of its subsidiaries; (e) declaration of a banking moratorium by either federal, provincial, state or local U.S. or Canadian authorities; or 23 (f) the taking of any action by any federal, provincial, state or local U.S. or Canadian government or agency in respect of its monetary or fiscal affairs that in your opinion has a material adverse effect on the financial or securities markets in the United States or upon the Company's ability to utilize the offering proceeds in the manner described in the Registration Statement. If on the Closing Date or on any Option Closing Date, any one or more of the Underwriters shall fail or refuse to purchase the Firm Stock or Additional Stock which it or they have agreed to purchase hereunder on such date, and the aggregate number of shares of Firm Stock or Additional Stock which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the total number of shares to be purchased on such date, each non-defaulting Underwriter shall be obligated severally, in the proportion which the number of shares of Firm Stock set forth opposite its name in Schedule I bears to the total shares of Firm Securities that all the non-defaulting Underwriters have agreed to purchase, or in such other proportion as you may specify, to purchase the Firm Stock or Additional Stock that such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of shares of Firm Stock or Additional Stock which any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased pursuant to this Section 12 by an amount in excess of one-ninth of such number of shares of Firm Stock or Additional Stock, as the case may be, without the written consent of such Underwriter. If on the Closing Date or on any Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Stock or Additional Stock and the aggregate number shares of Firm Stock or Additional Stock with respect to which such default occurs is more than one-tenth of the aggregate number of shares to be purchased on such date, and arrangements satisfactory to you and the Company for purchase of such shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any nondefaulting Underwriter or the Company. In any such case that does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date or any Option Closing Date but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this section shall not relieve any defaulting Underwriter from liability in respect of any default of any such Underwriter under this Agreement. 13. MISCELLANEOUS. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (a) if to the Company, c/o Law Office of William M. Curtis, 25241 Buckskin Drive, Laguna Hills, California 92653- 5736, Attention: William B. Curtis, and (b) if to any Underwriter or to you, c/o Dickinson & Co. at 110 Wall Street, 23rd Floor, New York, NY 10005, Attention: T. Marshall Swartwood or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, agreements, covenants, warranties and other statements of the Company, its officers and directors, and the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Securities, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter or by or on behalf of the Company, its officers or directors, any controlling person of the Company, (ii) acceptance of the Securities and payment for them hereunder and (iii) termination of this Agreement. 24 If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any of the conditions to this Agreement have not been fulfilled, the Company will reimburse the several Underwriters for all out-of-pocket expenses (including the fees and expenses of counsel) reasonably incurred by them in connection with this Agreement and the transactions contemplated hereby. Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Underwriters, any controlling persons referred to herein and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other persons shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Securities from any of the several Underwriters merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. Please confirm that the foregoing correctly sets forth the agreement among the Company and the several Underwriters. Very truly yours, VISTA LASER CENTERS OF MICHIGAN, INC. By:__________________________________ Ghassan Barazi, President Confirmed in New York, New York on the date first above written, on behalf of themselves and the other several Underwriters named in Schedule I. DICKINSON & CO. By:___________________________________ T. Marshall Swartwood 25 SCHEDULE I
Underwriters Shares of Firm Stock To Be Purchased Dickinson & Co. . . . . . . . . . . . . . . . . . . . [co-underwriter]. . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . 800,000 =======
26 SCHEDULE II Rights, Warrants and Options to Acquire Securities 1. 270,000 outstanding Class A common stock purchase warrants exercisable at $1.00 per share as described in the Registration Statement. 2. 50,000 outstanding stock options granted under the Company's 1995 Stock Option Plan exercisable at $1.00 per share as described in the Registration Statement. Convertible Instruments A. 100,000 outstanding shares of Series A Convertible Preferred Stock as described in the Registration Statement. B. 200,000 outstanding shares of Series B Convertible Preferred Stock as described in the Registration Statement. 27 SCHEDULE III Registration Rights EX-3.1.1 3 ARTICLES OF INCORPORATION OF THE REGISTRANT 1 EXHIBIT 3.1.1 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA JUN 30 1995 DEAN HELLER, SECRETARY OF STATE /s/ Dean Heller --------------- No. 11178-95 ARTICLES OF INCORPORATION OF THE PRK LASER CENTERS OF MICHIGAN, INC. I, the person hereinafter named as incorporator, for the purpose of associating to establish a corporation, under the provisions and subject to the requirements of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts amendatory thereof, and hereinafter sometimes referred to as the General Corporation Law of the State of Nevada, do hereby adopt and make the following Articles of Incorporation: FIRST: The name of the corporation (hereinafter called the corporation) is THE PRK LASER CENTERS OF MICHIGAN, INC. SECOND: The name of the corporation's resident agent in the State of Nevada is The Prentice-Hall Corporation System, Nevada, Inc., and the street address of the said resident agent where process may be served on the corporation is 502 East John Street, Carson City 89706. The mailing address and the street address of the said resident agent are identical. THIRD: The aggregate number of shares which the corporation shall have authority to issue is twenty-five million, which are divided into five million Preferred shares of a par value of one cent each and twenty million Common shares of a par value of one cent each. Subject to the provisions of Section 502 of the Business Corporation Law, the Board of Directors of the corporation is authorized to issue the Preferred shares of the corporation, from time to time, in one or more series with variations as to the number of shares to be included in each series, as to the distinctive serial designation, as to the rate or rates of preferential cumulative, non-participating dividends payable in cash annually, semi-annually, or quarterly, as to the times of payment of and the dates from which such dividends shall be cumulative, as to the price or prices at which the same may be redeemed, which shall be not less than the par value thereof, plus arrearages, if any, as to the notice of redemption, as to the amount and terms of any sinking or purchase fund, if any, for the purchase or redemption thereof, provided such sinking fund is payable only out of funds legally available therefor, as to the terms, conditions, rights, privileges, and other provisions, if any, respecting the conversion of any or all series of Preferred shares into Common shares, and as to the preferential amount or amounts which shall be paid to the holders thereof in the event of the liquidation, dissolution, or winding up of the corporation, whether voluntary or involuntary, which shall be not less than the par value thereof, plus arrearages, if any. 2 Whenever full dividends as aforesaid upon all shares of all series of Preferred shares which are issued and outstanding for all past annual dividend periods shall have been paid, without interest, and whenever full dividends upon said shares as aforesaid for the then current annual dividend period shall have been declared and either paid or a sum sufficient for the payment thereof set aside in full, without interest, the Board of Directors may declare, set aside, or pay additional cash dividends, and/or may make share distributions of the authorized but unissued Common shares of the corporation and/or its treasury Common shares, if any, and/or may make distributions of bonds or property of the corporation, including the shares or bonds of other corporations. The holders of record of the issued and outstanding Common shares shall be entitled in respect of said Common shares exclusively to receive any such additional cash dividends which may be declared and/or any such distributions which may be made, each issued and outstanding Common share entitling the holder of record thereof to receive an equal proportion of said dividends and/or distributions. Any reference to "distributions" in this paragraph contained shall not be deemed to include any distributions made in connection with any liquidation, dissolution, or winding up of the corporation, whether voluntary or involuntary; nor shall any such reference to "distributions" in relation to issued and outstanding shares be deemed to limit, curtail, or divest the authority of the Board of Directors to make any proper distributions, including distributions of authorized but unissued Common shares, in relation to its treasury Common shares, if any. Each issued and outstanding Common share shall entitle the holder thereof to full voting power. Except as any provision of law may otherwise require, no share of any series of Preferred shares shall entitle the holder thereof to any voting power, to participate in any meeting of shareholders, or to have notice of any meeting of shareholders. Each share of stock of the corporation shall entitle the holder thereof to a preemptive right, for a period of thirty days, to subscribe for, purchase, or otherwise acquire any shares of stock of the same class of the corporation or any equity and/or voting shares of stock of any class of the corporation which the corporation proposes to issue or any rights or options which the corporation proposes to grant for the purchase of shares of stock of the same class of the corporation or of equity and/or voting shares of any class of stock of the corporation or for the purchase of any shares of stock, bonds, securities, or obligations of the corporation which are convertible into or exchangeable for, or which carry any rights, to subscribe for, purchase, or otherwise acquire shares of stock of the same class of the corporation or equity and/or voting shares of stock of any class of the corporation, whether now or hereafter authorized or created, whether having unissued or treasury status, and whether the proposed issue, reissue, transfer, or grant is for cash, property, or any other lawful consideration; and after the expiration of said thirty days, any and all of such shares of stock, rights, options, bonds, securities, or obligations of the corporation may be issued, reissued, transferred, or granted by the Board of Directors, as the case may be, to such persons, firms, corporations, and associations, and for such lawful consideration, and on such terms, as the Board of Directors in its discretion may determine. As used herein, the terms "equity shares" and "voting shares" shall mean, respectively, shares of stock which confer unlimited dividend 3 rights and shares of stock which confer unlimited voting rights in the election of one or more directors. FOURTH: The governing board of the corporation shall be styled as a "Board of Directors", and any member of said Board shall be styled as a "Director." The number of members constituting the first Board of Directors of the corporation is one; and the name and the post office box or street address, either residence or business, of each of said members are as follows: -
NAME ADDRESS ---- ------- Ted Shoneck 126 East 56th Street New York, NY 10022
The number of directors of the corporation may be increased or decreased in the manner provided in the Bylaws of the corporation; provided, that the number of directors shall never be less than one. In the interim between elections of directors by stockholders entitled to vote, all vacancies, including vacancies caused by an increase in the number of directors and including vacancies resulting from the removal of directors by the stockholders entitled to vote which are not filled by said stockholders, may be filled by the remaining directors, though less than a quorum, FIFTH: The name and the post office box or street address, either residence or business, of the incorporator signing these Articles of Incorporation are as follows:
NAME ADDRESS ---- ------- LEIF TONNESSEN 375 Hudson Street New York, NY 10014
SIXTH: The corporation shall have perpetual existence. SEVENTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. EIGHTH: The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Law, 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, 4 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 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. NINTH: The provisions of Section 78.3791, Nevada Revised Statutes, authorizing a resolution of the stockholders granting voting rights to the control shares acquired by an acquiring person shall have no application to the corporation. TENTH: The corporation may engage in any lawful activity. ELEVENTH: The corporation reserves the right to amend, alter, change, or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation on June 29, 1995. /s/ Leif Tonnessen ------------------- LEIF TONNESSEN STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this 29th day of June, 1995, personally appeared before me, a Notary Public in and for the State and County aforesaid, LEIF TONNESSEN, known to me to be the person described in and who executed the foregoing Articles of Incorporation, and who acknowledged to me that he executed the same freely and voluntarily and for the uses and purposes therein mentioned. WITNESS my hand and official seal, the day and year first above written. /s/ Irene Chen ------------------- Notary Public [Notary Stamp] IRENE CHEN NOTARY PUBLIC, State of New York No. 01CH5024895 Qualified in Queens County Commission Expires March 21, 1996 EX-3.1.2 4 CERT. OF AMEND TO ARTICLES OF INCORP.-11/2/95 1 EXHIBIT 3.1.2 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA NOV 02 1995 No. 11178-95 Dean Heller, Secretary of State /s/ DEAN HELLER --------------- CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF THE PRK LASER CENTERS OF MICHIGAN, INC. We the undersigned, GHASSAN BARRAZI, the duly elected President, and THEODORE MAYER, the duly elected Secretary, of THE PRK LASER CENTERS OF MICHIGAN, INC. do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held on the 1st day of September, 1995, adopted a resolution to amend the original articles of incorporation of the corporation as follows: Article FIRST is hereby amended in its entirety to read as follows: "FIRST: The name of the corporation (hereinafter called the corporation) is THE LASER EYE SITES OF MICHIGAN, INC." Article THIRD is hereby amended in its entirety to read as follows: "THIRD: (a) The aggregate number of shares which the corporation shall have authority to issue is twenty-five million (25,000,000), which are divided into five million (5,000,000) Preferred shares of a par value of one cent ($0.01) each and twenty million (20,000,000) Common shares of a par value of one cent each. No holder of shares of stock of the corporation shall be entitled to preemptive rights to subscribe for, purchase or otherwise acquire any shares of stock which the corporation proposes to issue. (b) Subject to the General Corporation Law of the State of Nevada, the designations, powers, preferences, rights, and the qualifications or restrictions of each class of capital stock are as follows: (1) Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have such 2 distinctive serial designation or title and number of shares as shall be fixed and stated by resolution or resolutions of the Board of Directors prior to the issuance of any shares thereof. All the Preferred Stock of any one series shall be identical with each other in such series in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative; and all Preferred Stock shall be of equal rank, regardless of series, and shall be identical in all respects, except as to the particulars fixed by the Board as hereinbelow provided. Each such series may differ from every other series already outstanding as may be determined from time to time by the Board of Directors prior to the issuance of any shares thereof, in any or all of the following, but in no other respects: (i) The rate of dividend, if any, which the Preferred Stock of any such series shall be entitled to receive, whether the dividends of such series shall be cumulative or noncumulative and, if such dividends shall be cumulative, the date from which they shall be cumulative. (ii) The right or obligation, if any, of the corporation to redeem shares of Preferred Stock of any series and the amount per share which the Preferred Stock of any such series shall be entitled to receive in case of the redemption thereof, which shall be no event be less than the par value thereof, and the right of the corporation, if any to reissue any such shares after the same shall have been redeemed. (iii) The amount per share, if any, which the Preferred Stock of any such series shall be entitled to receive in case of the voluntary liquidation, distribution, or sale of assets, dissolution or winding up of the corporation, or in case of the involuntary liquidation, distribution or sale of assets, dissolution or winding up of the corporation, which shall in no event be less than the par value thereof. (iv) The right, if any, of the holders of Preferred Stock of any such series to convert the same into other classes or series of stock or other securities, and the terms and conditions of such conversion, including without limitation any provisions for the subsequent adjustment of such conversion rights. (v) The voting power, if any, of the holders of Preferred Stock of any series, and the terms and conditions under which they may exercise such voting power in addition to any voting power expressly required by law. (vi) The terms of the sinking fund or fund of a similar nature, if any, to be provided for the retirement or redemption of Preferred Stock of any such series. 3 The description and terms of the Preferred Stock of each series in respect of the foregoing particulars shall be fixed and determined by the board of directors by appropriate resolution or resolutions at or prior to the time of the authorization of the issue of the original shares of each such series, which resolution or resolutions shall be set forth in a certificate filed with the Secretary of State of Nevada. The board of directors is further authorized, within the limitations and restrictions set forth in these articles or stated in any resolution or resolutions of the board originally fixing the number of shares constituting any series of Preferred Stock, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. (2) The authority of the board of directors to determine the powers, preferences and privileges of each such series of Preferred Stock shall be subject to the qualifications, limitations and restrictions set forth in subsections (3) through (6) inclusive of this Article THIRD. (3) In case the stated dividends and the amounts payable on liquidation, distribution or sale of assets, dissolution or winding up of the corporation are not paid in full, the stockholders of all series of the Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full and in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable on such distribution if all sums payable were discharged and paid in full. (4) The holders of the Preferred Stock shall be entitled to receive, when and as declared by the board of directors, out of funds legally available therefor, preferential dividends in cash or other property at, but not exceeding, the rate, if any, fixed for each particular series. The holders of the Preferred Stock shall not be entitled to receive any dividends thereon other than dividends referred to in this subsection (4). (5) So long as any of the Preferred Stock remains outstanding, in no event shall any dividend whatever, whether in cash or other property (other than in shares of Common Stock), be paid or declared or any distribution be made on the Common Stock, nor shall any shares of the Common Stock be purchased, retired or otherwise acquired for a consideration by the corporation (A) unless the full dividends of the Preferred Stock for all past dividend periods from the respective date or dates on which they became cumulative, if such dividends are cumulative, shall have 4 been paid and the full dividend thereon for the then current quarter-yearly dividend period shall have been paid or declared and a sum set apart sufficient for the payment thereof; and (B) unless, if at any time the corporation is obligated to retire shares of any series of the Preferred Stock pursuant to a sinking fund or a fund of a similar nature, all arrears, if any, in respect of the retirement of the Preferred Stock of all such series shall have been made good. Subject to the foregoing provisions and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the board of directors may be declared and paid on the Common Stock from time to time out of the remaining funds of the corporation legally available therefor, and the Preferred Stock shall not be entitled to participate in any such dividend, whether payable in cash, stock or otherwise. (6) In the event of any liquidation, distribution or sale of assets, dissolution or winding up of the corporation, whether voluntary of involuntary, then before any distribution or payment shall be made to the holders of the Common Stock, the holders of the Preferred Stock of each series shall be entitled to be paid in cash the applicable liquidation price per share fixed at the time of the original authorization of issuance of shares of such respective series, together with a sum, in the case of each share of the Preferred Stock, computed at the annual dividend rate for the series of which the particular share is a part from the date on which dividends on such share became cumulative, if such dividends are cumulative, to the date fixed for such distribution or payment less the aggregate amount of all dividends theretofore and on such distribution or payment date paid thereon. If such payment shall have been made in full to the holder of the Preferred Stock, the remaining assets and funds of the corporation shall be distributed among the holders of the Common Stock according to their respective shares. (7) Subject to the powers, preferences, rights and the qualifications, limitations and restrictions thereof, with respect to each class of capital stock of the corporation having any preference or priority over the Common Stock, the holders of the Common Stock shall have and possess all rights appertaining to capital stock of the corporation. The holders of the Common shares shall be entitled to vote in all matters requiring stockholder approval including the election of directors and all other matters." The number of shares of the corporation outstanding and entitled to vote on an amendment to the Articles of Incorporation is 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock; that no shares of Common Stock have yet been issued and that no other series of Preferred Stock has yet been designated or issued; that the said changes and amendments have been consented to an approved by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. 5 /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary Province of Ontario } } s. County of Essex } On October 25th, 1995, personally appeared before me, a Notary Public, GHASSAN BARAZI, who acknowledged that he executed the above instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary Gabriel Joseph Courey State of New York } } s. County of New York } On Oct. 30, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument. /s/ PATRICIA MURRAY --------------------------- Signature of Notary [Notary Stamp] PATRICIA MURRAY Notary Public, State of New York No. 31-4793355 Qualified in New York County Commission Expires 11-30 1996 EX-3.1.3 5 CERT. OF AMEND. TO ARTICLES OF INCORP.-4/12/96 1 EXHIBIT 3.1.3 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA APR 12 1996 11178-95 Dean Heller, Secretary of State /s/ DEAN HELLER --------------- CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF THE LASER EYE SITES OF MICHIGAN, INC. We the undersigned, GHASSAN BARAZI, the duly elected President, and THEODORE J. MAYER, the duly elected Secretary, of THE LASER EYE SITES OF MICHIGAN, INC. do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held on the 5th day of January, 1996, adopted a resolution to amend the original articles of incorporation of the corporation as follows: Article FIRST is hereby amended in its entirety to read as follows: "FIRST: The name of the corporation (hereinafter called the corporation) is VISTA LASER CENTERS OF MICHIGAN, INC." The number of shares of the corporation outstanding and entitled to vote on an amendment to the Articles of Incorporation is 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock, 200,000 shares of 5% Series B Cumulative Convertible Preferred Stock and 205,000 shares of Common Stock, and that no other series of Preferred Stock has yet been designated or issued; that the said changes and amendments have been consented to and approved by a majority vote of the shares outstanding and entitled to vote thereon. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ----------------------------- Theodore J. Mayer, Secretary 2 Province of Ontario } } s. County of Essex } On April 4th, 1996, personally appeared before me, a Notary Public, GHASSAN BARAZI, who acknowledged that he executed the above instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary State of New York } } s. County of New York } On JAN 5, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument. /s/ JOSE M. YENKO --------------------------- Signature of Notary [Notary Stamp] JOSE M. YENKO NOTARY PUBLIC, State of New York No. 31-4677999 Qualified in New York County Commission Expires July 31, 1996 EX-3.2.1 6 CERTIFICATE OF DESIGNATION OF 10% SERIES A 1 EXHIBIT 3.2.1 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA NOV 02 1995 DEAN HELLER, SECRETARY OF STATE /s/ DEAN HELLER --------------- CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK THE PRK LASER CENTERS OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARRAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of THE PRK LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation, by unanimous consent in writing effective as of September 1, 1995, has duly adopted the following recitals and resolutions: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has not previously designated any series of its Preferred Stock; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to determine and fix the rights, preferences, privileges and restrictions relating to a first series of said Preferred Stock, and to fix the number of shares constituting and the designation of such series; 2 "NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series of Preferred Stock on the terms and with the provisions herein set forth: Section 1. Designation, Number and Restrictions on Issuance. The designation of the series of Preferred Stock authorized by these resolutions shall be "10% Series A Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"). The authorized number of shares constituting the Series A Preferred Stock shall be Seven Hundred Ninety Thousand (790,000) shares. The Board of Directors is further authorized, within the limitations and restrictions set forth in the Articles of Incorporation or stated in any resolution or resolutions of the Board of Directors, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of Series A Preferred Stock subsequent to the issuance of shares of such series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of these or any subsequent resolutions originally fixing the number of shares of such series. Section 2. Conversion Rights. 2.1. As used herein, the term "Common Stock" shall mean and include the Corporation's Common Stock, no par value, as constituted on September 1, 1995, and as the same shall be constituted thereafter including adjustments required for any capital reorganization or reclassification thereof subsequent to September 1, 1995. At any time hereafter and up to the close of business on the second business day immediately preceding a date fixed for redemption of Series A Preferred Stock in accordance with Section 7 below, at the election of the respective holders of Series A Preferred Stock and subject to the terms and conditions set forth herein, issued and outstanding shares of the Series A Preferred Stock may be converted into fully paid and nonassessable shares of Common Stock of the Corporation at the conversion ratio of One (1) share of Common Stock for each share of Series A Preferred Stock, subject to adjustment from time to time as provided in Section 2.4 below (herein called the "Conversion Ratio"). 2.2. In order to exercise the conversion privilege, a holder of outstanding shares of Series A Preferred Stock shall surrender certificates for the Series A Preferred Stock to be converted and exchanged at the principal office of the Corporation, and shall give written notice to the Corporation at said office that the holder elects to convert such Series A Preferred Stock into shares of the Corporation's Common Stock. Such notice shall also state the name or names (with addresses) in which certificates for shares of Common Stock issuable on such conversion shall be issued, subject to compliance with applicable securities laws. No payment or adjustment shall be made upon any conversion on account of any accrued and unpaid dividends on the Series A Preferred Stock surrendered for conversion, and the right to payment of any such accrued and unpaid dividends shall be waived and forfeited by conversion into Common Stock. 3 2.3. The Corporation shall not issue fractions of shares of Common Stock upon conversions of shares of Series A Preferred Stock. If more than one certificate representing shares of the Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. If any fractional interest in a share of Common Stock would otherwise be deliverable upon the conversion of any shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the current market value of such fractional interest. Any such current market value shall be computed on the basis of the last reported sale price of Common Stock on any securities exchange or as reported by the National Association of Securities Dealers Automated Quotation System (or the quoted closing bid price if there be no sales on such date) at the close of business on the date of conversion (or, if such day is not a trading day, on the next preceding trading day). So long as there is outstanding any Series A Preferred Stock, there shall be reserved unissued, out of the authorized but unissued shares of Common Stock, a number of shares sufficient to provide for conversion of Series A Preferred Stock in accordance with the provisions of this Section 2. 2.4. The Conversion Ratio shall be subject to adjustment from time to time hereafter as follows: (A) In case the Corporation at any time after September 1, 1995 shall issue a stock dividend on its outstanding shares of Common Stock or shall subdivide or combine the outstanding shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Conversion Ratio and number of shares issuable upon conversion of the Series A Preferred Stock shall be proportionately and equitably adjusted as if the holder of record of Series A Preferred Stock had converted shares of Series A Preferred Stock into Common Stock immediately prior to such event. Any such adjustment shall become effective at the close of business on the date that such stock dividend, subdivision or combination relating to the Common Stock shall become effective. For the purposes of such adjustment, the Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination shall forthwith be changed to a Conversion Ratio determined by: (i) dividing the total number of shares of Common Stock outstanding immediately after the stock dividend, subdivision or combination, by an amount equal to the total number of shares of Common Stock outstanding immediately prior to such stock dividend, subdivision or combination; and (ii) multiplying the result of clause (i) above by the actual Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination. and the total of shares of Common Stock thereafter issuable and deliverable on conversion of the Series A Preferred Stock shall be the number of shares obtained by applying the Conversion Ratio as so adjusted. 4 (B) In case of any capital reorganization or any reclassification of the shares of Common Stock of the Corporation (other than as a result of a stock dividend, subdivision or combination, as aforesaid), or in case of any consolidation with or merger of the Corporation into or with another corporation, or the sale, lease or other disposition of the properties of the Corporation as an entirety or substantially as an entirety, then as a part of such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, as the case may be, lawful provision shall be made so that the holders of record of the Series A Preferred Stock shall have the right thereafter to receive upon conversion thereof the kind and amount of shares of stock or other securities or property which such holders would have been entitled to receive if, immediately prior to such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, such holders had held the number of shares of Common Stock which were then issuable upon the conversion of the Series A Preferred Stock then held by them. In any such case, appropriate adjustment shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the holders of record of the Series A Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to adjustments of the Conversion Ratio) 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 such Series A Preferred Stock. 2.5. Upon any conversion of Series A Preferred Stock in accordance with the foregoing, all of such shares of Series A Preferred Stock shall be cancelled and revert to the status of authorized and unissued shares of Preferred Stock. Section 3. Voting Rights. The holders of Series A Preferred Stock shall be entitled to one vote per share on all matters on which stockholders of the Corporation are entitled to vote, in addition to any voting rights required by law; provided, however, that in the event there shall be an adjustment in the Conversion Ratio pursuant to the provisions of Section 2.4 above, the number of votes per share for Series A Preferred Stock shall be similarly adjusted so that the votes per share of Series A Preferred Stock shall at all times be equal to the number of full shares of Common Stock into which such shares of Series A Preferred Stock may be converted. Section 4. Rank and Preference. Shares of Series A Preferred Stock shall, with respect to dividend rights, rights on redemption and rights on liquidation, winding up and dissolution, have preference over and rank prior to all classes of Common Stock and shall rank pari passu with all other series of Preferred Stock. In case the stated dividends and the amounts payable on liquidation, distribution or sale of assets, dissolution or winding up of the Corporation are not paid in full, the shareholders of all series of Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full and in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable on such distribution if all sums payable were discharged and paid in full. 5 Section 5. Dividends and Restrictions on Certain Repurchases. 5.1. The holders of the shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative dividends at the annual rate of 10% per annum ($0.50 per share). Each of such annual dividends shall be fully cumulative and shall accrue (whether or not declared or permitted to be paid), from the first day such shares were first issued. 5.2. If declared by the Board of Directors, dividends shall be payable quarterly-annually on the last days of March, June, September and December of each year. In the event any shares of Series A Preferred Stock shall be outstanding for less than the period covered by such dividend year, the amount of the dividend shall be prorated for such period. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared; provided, however, that such record date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date. 5.3. All dividends paid with respect to shares of the Series A Preferred Stock shall be paid pro rata to the holders entitled thereto. 5.4. No dividends, other than dividends payable solely in Common Stock, shall be declared by the Board of Directors on any class or series of equity securities of the Corporation unless and until such time as all accrued and unpaid dividends on the Series A Preferred Stock have been paid in full or unless the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. The Corporation may not pay or set apart for payment, other than dividends or other distributions or payments payable solely in Common Stock, any other distributions on any shares of the Corporation's Common Stock, and may not purchase or otherwise redeem for cash or other tangible property, other than in shares of Common Stock, any shares of the Corporation's Common Stock or any warrants, rights or options exercisable for or convertible into any shares of Common Stock unless and until such time as the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. Section 6. Liquidation, Dissolution or Winding-Up. 6.1. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of Series A Preferred Stock then outstanding shall be entitled to receive ratably, prior and in preference to any distribution of any of the assets of the Corporation to the holders of any other equity securities of the Corporation other than Preferred Stock, by reason of their ownership thereof, the sum of FIVE DOLLARS ($5.00) per share outstanding plus all accrued and unpaid dividends thereon, each payable in cash (which may be payable from either capital or surplus) or, if cash is not then available, in property of the Corporation. In the event it is necessary 6 or advisable for the Corporation to determine the value of property for any purpose hereunder, the value of such property so received by holders of Series A Preferred Stock will be deemed to be its fair market value as determined in good faith by the Board of Directors of the Corporation unless a majority in interest of the holders of issued and outstanding Series A Preferred Stock shall demand an independent appraisal of such property. If, upon the occurrence of any such event, the assets thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount due to them hereunder, then the entire assets of this Corporation legally available for distribution shall be distributed ratably among the holders of all series of the Preferred Stock. Except as provided above, holders of the Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. 6.2. For the purposes of this Section 6, a sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity, shall not be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of Section 6.1 unless no provision has been made for the exchange of securities for Series A Preferred Stock in connection with the consummation of any such sale of assets or merger. 6.3. The liquidation payment with respect to each outstanding fractional share of Series A Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series A Preferred Stock. Section 7. Redemption. 7.1. NO MANDATORY REDEMPTION. The Corporation shall have no mandatory obligation to redeem shares of Series A Preferred Stock; provided, however, in the event of any liquidation, dissolution or winding-up of the Corporation, either voluntary or involuntary, or in the event or sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity and in which no provision has been made for the exchange of securities for Series A Preferred Stock, each share of Series A Preferred Stock then outstanding shall be entitled to receive the consideration specified in Section 6.1 above. 7.2. OPTIONAL REDEMPTION. The Corporation at its option, at any time and from time to time, may redeem all or any portion of the Series A Preferred Stock (and if only a portion, in an amount equal to an even multiple of 10,000 shares) then outstanding at a redemption price of SEVEN DOLLARS AND FIFTY CENTS ($7.50) per share plus the payment of all accrued and unpaid dividends on the shares so redeemed. 7.3. Upon any redemption of Series A Preferred Stock, written notice shall be given to the holders of the Series A Preferred Stock for shares to be purchased or redeemed at least thirty (30) days prior to the date fixed for redemption. The notice shall be addressed to each such 7 stockholder at the address of such holder appearing on the books of the Corporation or given by such holder to the Corporation for the purpose of notice, or, if no such address appears or is so given, at the last known address of such shareholder. Such notice shall specify the date fixed for redemption, shall state that all shares of Series A Preferred Stock outstanding are to be redeemed and the number of shares of Series A Preferred Stock to be so redeemed, and shall call upon such holder to surrender to the Corporation on said date, at the place designated in the notice, such holder's certificate or certificates representing the shares to be redeemed on the date fixed for redemption stated in such notice. Unless such person shall elect to convert the same into Common Stock in accordance with Section 2 above, each holder of shares of Series A Preferred Stock called for redemption shall surrender the certificate or certificates evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price on the date fixed for redemption. 7.4. If, on or prior to any date fixed for redemption, the Corporation deposits, with any bank or trust company in the State of New York, as a trust fund, a sum sufficient to redeem all shares of Series A Preferred Stock called for redemption which have not theretofore been surrendered for conversion, with irrevocable instructions and authority to the bank or trust company to pay, on or after the date fixed for redemption, the redemption price of the shares to their respective holders upon the surrender of their share certificates, then from and after the date of redemption the shares to be redeemed shall be redeemed and dividends and other distributions on those shares shall cease to accrue after the date such shares were called for redemption. The deposit shall constitute full payment for the shares of Series A Preferred Stock to their holders and from and after the date of the deposit the shares of Series A Preferred Stock shall no longer be outstanding, and the holders thereof shall cease to be shareholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company payment of the redemption price of the shares without interest upon surrender of their certificates therefor and the right to receive from the Corporation any accrued dividends thereon through the date such shares were called for redemption. Any interest accrued on any funds so deposited shall be the property of, and paid to, the Corporation. 7.5. In the event that fewer than all the outstanding shares of Series A Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected by lot or pro rata as may be determined by the Board of Directors. In case it shall designate by lot the shares so to be redeemed, the Board of Directors shall have full power and authority to prescribe the manner in which the drawings by lot shall be conducted. 7.6. Notwithstanding anything contained herein to the contrary, the Corporation may not redeem any shares of Series A Preferred Stock and no sums therefor shall be paid or set aside for payment by the Corporation if, at the time and after giving effect to such payment, the same is prohibited by the laws of the State of Nevada. 8 7.7. Upon any redemption of Series A Preferred Stock in accordance with the foregoing, all of such shares of Series A Preferred Stock shall be cancelled and revert to the status of authorized and unissued shares of Preferred Stock. Section 8. Required Notices. In case at any time: (a) the Corporation shall declare or pay any dividend payable in stock or other consideration or make any distribution to the holders of its Common Stock; or (b) the Corporation shall offer to the holders of its Common Stock any additional shares of stock of any class or other rights; (c) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or any consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation; or (d) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Corporation; then, in any one or more of such cases, the Corporation shall cause to be mailed to the holders of record of then outstanding shares of Series A Preferred Stock (i) at least 30 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, as the case may be. Section 9. Amendments and Additional Covenants. 9.1. So long as any Series A Preferred Stock shall be outstanding, this Corporation shall not, without the prior approval of the holders of not less than a majority of the then issued and outstanding shares of Series A Preferred Stock voting as a class, permit the Corporation to amend or repeal any provision of, or add any provision to, this Certificate or the Corporation's Articles of Incorporation or bylaws, if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock. 9.2. So long as any Series A Preferred Stock shall be outstanding, 9 the Corporation shall: 9.2.1 maintain its books of account and financial statements and records in accordance with generally accepted accounting principles, and all determinations hereunder, if any, which are dependent upon a calculation of the Corporation's financial condition shall be determined in accordance with generally accepted accounting principles; 9.2.2 promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property, or business of the Corporation or any subsidiary, except where the Corporation is contesting any of the foregoing in good faith by appropriate proceedings; and 9.2.3 keep its properties in good repair, working order, and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions, and improvements thereto, and the Corporation shall at all times comply with the provisions of all material leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder. 9.3. So long as any Series A Preferred Stock shall be outstanding, the Corporation shall furnish to each holder of record of the Series A Preferred Stock as soon as practicable, but in any event within 150 days after the end of each fiscal year of the Corporation, an income statement, statement of cash flow and statement of changes in stockholders' equity for such fiscal year, and a balance sheet of the Corporation as of the end of such year, such year-end financial statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants selected by the Board of Directors of the Corporation. RESOLVED FURTHER, that the President or any Vice President of this Corporation and the Secretary or any Assistant Secretary of the Corporation are hereby authorized and directed to prepare, sign, and file with the Secretary of the State of Nevada a Certificate of Designation of Series A Preferred Stock of the Corporation in accordance with the resolutions set forth herein." (3) We further certify that the authorized number of shares of Preferred Stock of this Corporation is 5,000,000 shares; and that the number of shares constituting the first series of Preferred Stock established by the foregoing resolutions, none of which have been issued, is 790,000 shares. 10 IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary Province of Ontario } } s. County of Essex } On October 25th, 1995, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary Gabriel Joseph Courey State of New York } } s. County of New York } On Oct. 30, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ PATRICIA MURRAY --------------------------- Signature of Notary [Notary Stamp] PATRICIA MURRAY Notary Public, State of New York No. 31-4793355 Qualified in New York County Commission Expires 11-30 1996 EX-3.2.2 7 CERT. OF AMEND. TO CERT. OF DESIG. 10% SERIES A 1 EXHIBIT 3.2.2 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA APR 12 1996 DEAN HELLER, SECRETARY OF STATE /s/ DEAN HELLER --------------- CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK THE LASER EYE SITES OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of THE LASER EYE SITES OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of December 12, 1995 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 10% Series A Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 790,000 shares of its Preferred Stock as 10% Series A Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the number and designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and 2 "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of Section 5.2 of the Certificate of Designation to increase the authorized number of shares of 10% Series A Cumulative Convertible Preferred Stock to 1,100,000 shares, to change dividend payment dates on its 10% Series A Cumulative Convertible Preferred Stock from quarter-annually in each year to one annual payment date, and to add certain adjustment provisions to prevent dilution in the event common stock is hereafter sold by the Corporation as a price less than the conversion price applicable hereunder; "NOW, THEREFORE, BE IT RESOLVED, that Section 1 of the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "Section 1. Designation, Number and Restrictions on Issuance. The designation of the series of Preferred Stock authorized by these resolutions shall be "10% Series A Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"). The authorized number of shares constituting the Series A Preferred Stock shall be One Million One Hundred Thousand (1,100,000) shares. The Board of Directors is further authorized, within the limitations and restrictions set forth in the Articles of Incorporation or stated in any resolution or resolutions of the Board of Directors, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of Series A Preferred Stock subsequent to the issuance of shares of such series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of these or any subsequent resolutions originally fixing the number of shares of such series." "BE IT FURTHER RESOLVED, that Section 2.4 of the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is hereby amended be adding a new subsection (C) thereto to read as follows: "(C) In addition to any adjustment required by the provisions of subsections (A) and (B) of this Section 2.4, the Conversion Ratio shall also be adjusted from time to time in accordance with the provisions of this subsection (C): C-1. Certain Definitions. For the purposes of this subsection (C), the following terms and provisions shall apply: (i) "Conversion Price" shall initially mean $5.00 per share of Common Stock, representing the conversion price applicable to the purchase of Common Stock upon conversion of Series A Preferred at the initial Conversion Ratio in effect hereunder and taking the initial value of each share of Series A Preferred for such purpose at $5.00 per share; provided, that in the event of any adjustment of the Conversion Ratio under 3 subsections (A) or (B) above, or in the event of any adjustment to the Conversion Price required by the provisions of this subsection (C), the Conversion Price in effect thereafter shall be proportionately and equitably adjusted. (ii) "Convertible Securities" shall include any options, rights or warrants to subscribe for or purchase Common Stock in the Corporation or any securities convertible into or exchangeable for Common Stock without the payment of any further consideration other than cash, if any. C-2. Certain Events Not Requiring Adjustment. (a) No adjustment of the Conversion Price and Conversion Rate shall be made under the provisions of this subsection (C) unless such adjustment would require an increase or decrease of at least $.05 in the Conversion Price per share of Common Stock (it being understood that the such Conversion Price is initially $5.00 per share of Common Stock, as aforesaid); provided that any adjustment(s) which by reason of this clause (a) are not required to be made shall be carried forward and shall be made at the time of, and together with, the next subsequent adjustment hereunder which, together with any adjustment(s) so carried forward, shall require an increase or decrease of at least $.05 in the Conversion Price then in effect hereunder. (b) Nothwithstanding anything to the contrary hereinafter set forth, no adjustment to the Conversion Price or to the number of shares of Common Stock issuable upon conversion of Series A Preferred shares hereunder will be required: (i) upon the exercise of any options or warrants to purchase securities granted or issued by the Corporation prior to its initial public offering of securities or upon the conversion into Common Stock of any shares of the Company's preferred stock issued in connection with the Corporation's initial public offering of securities or oustanding prior to such initial public offering; or (ii) upon the grant or exercise or any other options to officers, directors, employees or consultants which may hereafter be granted or exercised under the Company's stock option plan or under any other employee benefit plan of the Corporation; or (iii) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, whether or not any adjustment in the Conversion Price was made or required to be made upon the issuance or sale of such Convertible Securities. C-3. Adjustments. Except as provided above, in case of the issuance or sale by the Corporation for cash or other 4 consideration of any Common Stock or Convertible Securities (and whether or not the right of conversion or exchange thereunder is immediately exercisable), in which the price per share for which Common Stock is issuable, either in such transaction or upon the conversion or exchange of such Convertible Securities, shall be less than the Conversion Price then in effect, then the Conversion Price to be in effect after any such transaction shall be reduced to a Conversion Price (calculated to the nearest cent) determining by dividing (i) an amount equal to (a) the sum of the number of shares of Common Stock outstanding and issuable upon the conversion or exchange of all Convertible Securities outstanding immediately prior to the transaction, said sum to be multiplied by the Conversion Price then in effect, plus (b) the aggregate consideration to be received for the Common Stock and/or Convertible Securities issuable in the transaction (including any proceeds receivable upon the exercise of any right of conversion or exchange thereunder), by (ii) the the sum of the number of shares of Common Stock outstanding and issuable upon the conversion or exchange of all Convertible Securities outstanding immediately after the transaction. Whenever any adjustment to the Conversion Price is required hereunder, a proportionate adjustment to the Conversion Ratio and number of shares of Common Stock issuable upon conversion of the Series A Preferred shall be made. Such adjustment shall become effective as of the date upon which an transaction requiring an adjustment hereunder shall take effect. On the expiration of any right, warrant or option or the termination of any right to convert or exchange any Convertible Securities which required an adjustment hereunder, the Conversion Price then in effect hereunder shall forthwith be readjusted to such Conversion Price as would have obtained (a) had the adjustments made upon the issuance or sale of such rights, warrants, options or Convertible Securities been made upon the basis of the issuance of only the number of shares of Common Stock theretofore actually delivered (and the total consideration received therefor) upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities and (b) had adjustments been made on the basis of the Conversion Price as adjusted under clause (a) of this paragraph for all transactions (which would have affected such adjusted Conversion Price) made after the issuance or sale of such rights, warrants, options or Convertible Securities. In case the Corporation shall modify the rights of conversion, exchange or exercise of any Convertible Securities, other than the Series A Preferred stock, for any reason other than an event that would require adjustment to prevent dilution, such that the consideration per share to be received by the Corporation after 5 such modification is less than the Conversion Price in effect prior to such modification, the Conversion Price to be in effect after such modification shall be determined by multiplying the Conversion Price in effect immediately prior to such event by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding and issuable upon the conversion or exchange of all Convertible Securities outstanding immediately prior to the transaction multiplied by the Conversion Price on the date prior to the modification plus the number of shares of Common Stock which the aggregate consideration receivable by the Corporation for the securities affected by the modification would purchase at the then current market price, and of which the denominator shall be the number of shares of Common Stock outstanding and issuable upon the conversion or exchange of all Convertible Securities outstanding immediately after such modification plus the number of shares of Common Stock to be issued upon conversion, exchange or exercise of the modified securities at the modified rate. Such adjustment shall become effective as of the date upon which any such modification shall take effect. In case of the sale of any shares of Common Stock, any Convertible Securities, any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities requiring an adjustment to the Conversion Price hereunder, the consideration received by the Corporation therefor shall be deemed to be: (i) if sold for cash, the gross sales price therefor without deducting therefrom any expense paid or incurred by the Corporation or any underwriting discounts or commissions or concessions paid or allowed by the Corporation in connection therewith; and (ii) if sold for property other than cash, the current fair market value thereof as determined in good faith by the Board of Directors of the Corporation." "BE IT FURTHER RESOLVED, that Section 5.2 of the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "5.2. If declared by the Board of Directors, dividends shall be payable annually on the last day of the month in which the corporation shall sucessfully complete an initial public offering of its securities with the first dividend payment date to be in the year 1997. In the event any shares of Series A Preferred Stock shall be outstanding for more or less than the period covered by such dividend year, the amount of the dividend shall be prorated for such periods. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared; provided, however, that such record date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date." 6 (3) We further certify that the number of shares constituting the series of 10% Series A Cumulative Convertible Preferred Stock, of which 100,000 shares have been issued, is 790,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 10% Series A Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary 7 Province of Ontario } } s. County of Essex } On April 4th, 1996, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary State of New York } } s. County of New York } On 12/15, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ JOSE M. YENKO --------------------------- Signature of Notary [Notary Stamp] JOSE M. YENKO NOTARY PUBLIC, State of New York No. 31-4677999 Qualified in New York County Commission Expires July 31, 1996 EX-3.2.3 8 CERT. OF AMEND. TO CERT. OF DESIG.-MAY 22, 1996 1 EXHIBIT 3.2.3 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA MAY 22, 1996 No. 11178-95 /s/ DEAN HELLER --------------- Dean Heller, Secretary of State CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK VISTA LASER CENTERS OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of VISTA LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of April 30, 1996 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 10% Series A Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 1,100,000 shares of its Preferred Stock as 10% Series A Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995 as amended by a Certificate of Amendment filed on April 12, 1996; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the number and designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and 2 "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of Section 5 of the Certificate of Designation; "NOW, THEREFORE, BE IT RESOLVED, that Section 5 of the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "Section 5. Dividends and Restrictions on Certain Repurchases. "5.1. The holders of the shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends or as dividends payable in Common Stock in accordance with the provisions of this Section 5, cumulative dividends at the annual rate of 10% per annum ($0.50 per share). Each of such annual dividends shall be fully cumulative and shall accrue (whether or not declared or permitted to be paid), from the first day such shares were first issued. "5.2. If declared by the Board of Directors, dividends shall be payable annually on the last day of the month in which the corporation shall successfully complete an initial public offering of its securities with the first dividend payment date to be the last day of the month in which the first anniversary of such initial public offering shall occur. In the event any shares of Series A Preferred Stock shall be outstanding for more or less than the period covered by such dividend year, the amount of the dividend shall be prorated for such periods. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared (the "Record Date"); provided, however, that such Record Date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date. "5.3. All dividends paid with respect to shares of the Series A Preferred Stock shall be paid pro rata to the holders entitled thereto. "5.4. No dividends, other than dividends payable solely in securities of the Corporation, shall be declared by the Board of Directors on any class or series of equity securities of the Corporation unless and until such time as all accrued and unpaid dividends on the Series A Preferred Stock have been paid in full or unless the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. The Corporation may not pay or set apart for payment, other than dividends or other distributions or payments payable solely in Common Stock, any other distributions on any shares of the Corporation's Common Stock, and may not purchase or otherwise redeem for cash or other tangible property, other than in shares of Common Stock, any shares of the Corporation's Common Stock or any warrants, rights or options exercisable for or convertible into any shares of Common Stock unless and until such time as the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. 3 "5.5(a). In the event the Corporation shall have accrued the payment of dividends beyond a date on which dividends would otherwise be declared hereunder due to the fact that the Corporation is not legally permitted to pay dividends in cash on all outstanding shares of Series A Preferred stock under the laws of the State of Nevada, the Corporation, at the election of its Board of Directors made at any time thereafter (so long as such dividends may not be paid in cash from funds legally available therefor), may elect to pay all cumulative accrued dividends otherwise due and payable in shares of Common Stock or Series A Preferred Stock in lieu of cash. In such event, the Corporation shall advise each holder of record of Series A Preferred Stock in writing on the Record Date, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Corporation's election to make such interest payment in shares of the Corporation's Common Stock or Series A Preferred Stock. For the purposes of this Certificate, "Common Stock" shall mean the Corporation's Common Stock as constituted on the Record Date. "5.5(b) For any dividend payment to be made in Common Stock or Series A Preferred Stock as herein provided, the number of shares issuable for such dividend payment shall be determined by dividing the cumulative accrued dividend payments due on said dividend payment date by the Dividend Stock Value. "Dividend Stock Value" shall mean 100% of the Fair Market Value per share of the class or series of securities to be paid as dividends determined as of the applicable Record Date for the payment of such accrued dividends. For this purpose "Fair Market Value" as of any specific Record Date shall be determined by reference to the unweighted average closing sale prices for the class or series of securities to be paid as dividends during the ten days on which such shares are actually traded in the NASDAQ system or on a national securities exchange immediately prior to the Record Date upon which Fair Market Value is to be determined. (If for any reason closing sale prices are not quoted by the NASDAQ system on any such day, then the closing market price for such day shall be deemed the closing bid price for such day as reported by the National Quotation Bureau). In the event the class or series of securities to be paid as dividends is not actively quoted and traded in any securities market, the Fair Market Value thereof shall be determined in the exclusive discretion of the Corporation's Board of Directors acting in good faith." (3) We further certify that the number of shares constituting the series of 10% Series A Cumulative Convertible Preferred Stock, of which 100,000 shares have been issued, is 1,100,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 10% Series A Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. 4 IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary Province of Ontario } } s. County of Essex } On May 12, 1996, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary State of New York } } s. County of ____________ } On 3rd day of May, 1996, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ MOHAN K. DANSINGHANI --------------------------- Signature of Notary [Notary Stamp] DANSINGHANI MOHAN K. Notary Public, State of New York No. 01DA5039674 Qualified in Nassau County Commission Expires Feb. 21, 1997 EX-3.3.1 9 CERTIFICATE OF DESIGNATION 5% SERIES B 1 EXHIBIT 3.3.1 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA NOV 02 1995 DEAN HELLER, SECRETARY OF STATE /s/ DEAN HELLER --------------- No. 11178-95 CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 5% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK THE LASER EYE SITES OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARRAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of THE LASER EYE SITES OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation, by unanimous consent in writing effective as of October 16, 1995, has duly adopted the following recitals and resolutions: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 790,000 shares of its Preferred Stock as 10% Series A Cumulative Convertible Preferred Stock, of which 100,000 shares are issued and outstanding; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and 2 "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to determine and fix the rights, preferences, privileges and restrictions relating to a second series of said Preferred Stock, and to fix the number of shares constituting and the designation of such series; "NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series of Preferred Stock on the terms and with the provisions herein set forth: Section 1. Designation, Number and Restrictions on Issuance. The designation of the series of Preferred Stock authorized by these resolutions shall be "5% Series B Cumulative Convertible Preferred Stock" (the "Series B Preferred Stock"). The authorized number of shares constituting the Series B Preferred Stock shall be Two Hundred Thousand (200,000) shares. The Board of Directors is further authorized, within the limitations and restrictions set forth in the Articles of Incorporation or stated in any resolution or resolutions of the Board of Directors, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of Series B Preferred Stock subsequent to the issuance of shares of such series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of these or any subsequent resolutions originally fixing the number of shares of such series. Section 2. Conversion Rights. 2.1. As used herein, the term "Common Stock" shall mean and include the Corporation's Common Stock, no par value, as constituted on September 1, 1995, and as the same shall be constituted thereafter including adjustments required for any capital reorganization or reclassification thereof subsequent to September 1, 1995. At any time hereafter and up to the close of business on the second business day immediately preceding a date fixed for redemption of Series B Preferred Stock in accordance with Section 7 below, at the election of the respective holders of Series B Preferred Stock and subject to the terms and conditions set forth herein, issued and outstanding shares of the Series B Preferred Stock may be converted into fully paid and nonassessable shares of Common Stock of the Corporation at the conversion ratio of One (1) share of Common Stock for each share of Series B Preferred Stock, subject to adjustment from time to time as provided in Section 2.4 below (herein called the "Conversion Ratio"). 2.2. In order to exercise the conversion privilege, a holder of outstanding shares of Series B Preferred Stock shall surrender certificates for the Series B Preferred Stock to be converted and exchanged at the principal office of the Corporation, and shall give written notice to the Corporation at said office that the holder elects to convert such Series B Preferred Stock into shares of the Corporation's Common Stock. Such notice shall also state the name or names (with addresses) in which certificates for shares of Common Stock issuable on such conversion shall be issued, subject to compliance with applicable securities laws. No payment or adjustment shall be made upon any 3 conversion on account of any accrued and unpaid dividends on the Series B Preferred Stock surrendered for conversion, and the right to payment of any such accrued and unpaid dividends shall be waived and forfeited by conversion into Common Stock. 2.3. The Corporation shall not issue fractions of shares of Common Stock upon conversions of shares of Series B Preferred Stock. If more than one certificate representing shares of the Series B Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered. If any fractional interest in a share of Common Stock would otherwise be deliverable upon the conversion of any shares of Series B Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the current market value of such fractional interest. Any such current market value shall be computed on the basis of the last reported sale price of Common Stock on any securities exchange or as reported by the National Association of Securities Dealers Automated Quotation System (or the quoted closing bid price if there be no sales on such date) at the close of business on the date of conversion (or, if such day is not a trading day, on the next preceding trading day). So long as there is outstanding any Series B Preferred Stock, there shall be reserved unissued, out of the authorized but unissued shares of Common Stock, a number of shares sufficient to provide for conversion of Series B Preferred Stock in accordance with the provisions of this Section 2. 2.4. The Conversion Ratio shall be subject to adjustment from time to time hereafter as follows: (A) In case the Corporation at any time after September 1, 1995 shall issue a stock dividend on its outstanding shares of Common Stock or shall subdivide or combine the outstanding shares of Common Stock issuable upon conversion of the Series B Preferred Stock, the Conversion Ratio and number of shares issuable upon conversion of the Series B Preferred Stock shall be proportionately and equitably adjusted as if the holder of record of Series B Preferred Stock had converted shares of Series B Preferred Stock into Common Stock immediately prior to such event. Any such adjustment shall become effective at the close of business on the date that such stock dividend, subdivision or combination relating to the Common Stock shall become effective. For the purposes of such adjustment, the Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination shall forthwith be changed to a Conversion Ratio determined by: (i) dividing the total number of shares of Common Stock outstanding immediately after the stock dividend, subdivision or combination, by an amount equal to the total number of shares of Common Stock outstanding immediately prior to such stock dividend, subdivision or combination; and (ii) multiplying the result of clause (i) above by the actual Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination. 4 and the total of shares of Common Stock thereafter issuable and deliverable on conversion of the Series B Preferred Stock shall be the number of shares obtained by applying the Conversion Ratio as so adjusted. (B) In case of any capital reorganization or any reclassification of the shares of Common Stock of the Corporation (other than as a result of a stock dividend, subdivision or combination, as aforesaid), or in case of any consolidation with or merger of the Corporation into or with another corporation, or the sale, lease or other disposition of the properties of the Corporation as an entirety or substantially as an entirety, then as a part of such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, as the case may be, lawful provision shall be made so that the holders of record of the Series B Preferred Stock shall have the right thereafter to receive upon conversion thereof the kind and amount of shares of stock or other securities or property which such holders would have been entitled to receive if, immediately prior to such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, such holders had held the number of shares of Common Stock which were then issuable upon the conversion of the Series B Preferred Stock then held by them. In any such case, appropriate adjustment shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the holders of record of the Series B Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to adjustments of the Conversion Ratio) 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 such Series B Preferred Stock. 2.5. Upon any conversion of Series B Preferred Stock in accordance with the foregoing, all of such shares of Series B Preferred Stock shall be cancelled and revert to the status of authorized and unissued shares of Preferred Stock. Section 3. Voting Rights. The holders of Series B Preferred Stock shall be entitled to one vote per share on all matters on which stockholders of the Corporation are entitled to vote, in addition to any voting rights required by law; provided, however, that in the event there shall be an adjustment in the Conversion Ratio pursuant to the provisions of Section 2.4 above, the number of votes per share for Series B Preferred Stock shall be similarly adjusted so that the votes per share of Series B Preferred Stock shall at all times be equal to the number of full shares of Common Stock into which such shares of Series B Preferred Stock may be converted. Section 4. Rank and Preference. Shares of Series B Preferred Stock shall, with respect to dividend rights, rights on redemption and rights on liquidation, winding up and dissolution, have preference over and rank prior to all classes of Common Stock and shall rank pari passu with all other series of Preferred Stock. In case the stated dividends and the amounts payable on liquidation, distribution or sale of assets, dissolution or winding up of the Corporation are not paid in full, the shareholders of all series of Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with 5 the sums which would be payable on such shares if all dividends were declared and paid in full and in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable on such distribution if all sums payable were discharged and paid in full. Section 5. Dividends and Restrictions on Certain Repurchases. 5.1. The holders of the shares of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative dividends at the annual rate of 5% per annum ($0.125 per share). Each of such annual dividends shall be fully cumulative and shall accrue (whether or not declared or permitted to be paid), from the first day such shares were first issued. 5.2. If declared by the Board of Directors, dividends shall be payable quarterly-annually on the last days of March, June, September and December of each year. In the event any shares of Series B Preferred Stock shall be outstanding for less than the period covered by such dividend year, the amount of the dividend shall be prorated for such period. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared; provided, however, that such record date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date. 5.3. All dividends paid with respect to shares of the Series B Preferred Stock shall be paid pro rata to the holders entitled thereto. 5.4. No dividends, other than dividends payable solely in Common Stock, shall be declared by the Board of Directors on any class or series of equity securities of the Corporation other than its 10% Series A Cumulative Convertible Preferred Stock unless and until such time as all accrued and unpaid dividends on the Series B Preferred Stock have been paid in full or unless the Series B Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. The Corporation may not pay or set apart for payment, other than dividends or other distributions or payments payable solely in Common Stock, any other distributions on any shares of the Corporation's Common Stock, and may not purchase or otherwise redeem for cash or other tangible property, other than in shares of Common Stock, any shares of the Corporation's Common Stock or any warrants, rights or options exercisable for or convertible into any shares of Common Stock unless and until such time as the Series B Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. Section 6. Liquidation, Dissolution or Winding-Up. 6.1. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of Series B Preferred Stock then outstanding shall be entitled to receive ratably, prior and in preference to any distribution of any of the assets of the 6 Corporation to the holders of any other equity securities of the Corporation other than Preferred Stock, by reason of their ownership thereof, the sum of TWO DOLLARS AND FIFTY CENTS ($2.50) per share outstanding plus all accrued and unpaid dividends thereon, each payable in cash (which may be payable from either capital or surplus) or, if cash is not then available, in property of the Corporation. In the event it is necessary or advisable for the Corporation to determine the value of property for any purpose hereunder, the value of such property so received by holders of Series B Preferred Stock will be deemed to be its fair market value as determined in good faith by the Board of Directors of the Corporation unless a majority in interest of the holders of issued and outstanding Series B Preferred Stock shall demand an independent appraisal of such property. If, upon the occurrence of any such event, the assets thus distributed among the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount due to them hereunder, then the entire assets of this Corporation legally available for distribution shall be distributed ratably among the holders of all series of the Preferred Stock. Except as provided above, holders of the Series B Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. 6.2. For the purposes of this Section 6, a sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity, shall not be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of Section 6.1 unless no provision has been made for the exchange of securities for Series B Preferred Stock in connection with the consummation of any such sale of assets or merger. 6.3. The liquidation payment with respect to each outstanding fractional share of Series B Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series B Preferred Stock. Section 7. Redemption. 7.1. NO MANDATORY REDEMPTION. The Corporation shall have no mandatory obligation to redeem shares of Series B Preferred Stock; provided, however, in the event of any liquidation, dissolution or winding-up of the Corporation, either voluntary or involuntary, or in the event or sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity and in which no provision has been made for the exchange of securities for Series B Preferred Stock, each share of Series B Preferred Stock then outstanding shall be entitled to receive the consideration specified in Section 6.1 above. 7.2. OPTIONAL REDEMPTION. The Corporation at its option, at any time and from time to time, may redeem all or any portion of the Series B Preferred Stock (and if only a portion, in an amount equal to an even multiple of 10,000 shares) then outstanding at a redemption price of FIVE DOLLARS ($5.00) per share plus the payment of all accrued and unpaid 7 dividends on the shares so redeemed. 7.3. Upon any redemption of Series B Preferred Stock, written notice shall be given to the holders of the Series B Preferred Stock for shares to be purchased or redeemed at least thirty (30) days prior to the date fixed for redemption. The notice shall be addressed to each such stockholder at the address of such holder appearing on the books of the Corporation or given by such holder to the Corporation for the purpose of notice, or, if no such address appears or is so given, at the last known address of such shareholder. Such notice shall specify the date fixed for redemption, shall state that all shares of Series B Preferred Stock outstanding are to be redeemed and the number of shares of Series B Preferred Stock to be so redeemed, and shall call upon such holder to surrender to the Corporation on said date, at the place designated in the notice, such holder's certificate or certificates representing the shares to be redeemed on the date fixed for redemption stated in such notice. Unless such person shall elect to convert the same into Common Stock in accordance with Section 2 above, each holder of shares of Series B Preferred Stock called for redemption shall surrender the certificate or certificates evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price on the date fixed for redemption. 7.4. If, on or prior to any date fixed for redemption, the Corporation deposits, with any bank or trust company in the State of New York, as a trust fund, a sum sufficient to redeem all shares of Series B Preferred Stock called for redemption which have not theretofore been surrendered for conversion, with irrevocable instructions and authority to the bank or trust company to pay, on or after the date fixed for redemption, the redemption price of the shares to their respective holders upon the surrender of their share certificates, then from and after the date of redemption the shares to be redeemed shall be redeemed and dividends and other distributions on those shares shall cease to accrue after the date such shares were called for redemption. The deposit shall constitute full payment for the shares of Series B Preferred Stock to their holders and from and after the date of the deposit the shares of Series B Preferred Stock shall no longer be outstanding, and the holders thereof shall cease to be shareholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company payment of the redemption price of the shares without interest upon surrender of their certificates therefor and the right to receive from the Corporation any accrued dividends thereon through the date such shares were called for redemption. Any interest accrued on any funds so deposited shall be the property of, and paid to, the Corporation. 7.5. In the event that fewer than all the outstanding shares of Series B Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected by lot or pro rata as may be determined by the Board of Directors. In case it shall designate by lot the shares so to be redeemed, the Board of Directors shall have full power and authority to prescribe the manner in which the drawings by lot shall be conducted. 8 7.6. Notwithstanding anything contained herein to the contrary, the Corporation may not redeem any shares of Series B Preferred Stock and no sums therefor shall be paid or set aside for payment by the Corporation if, at the time and after giving effect to such payment, the same is prohibited by the laws of the State of Nevada. 7.7. Upon any redemption of Series B Preferred Stock in accordance with the foregoing, all of such shares of Series B Preferred Stock shall be cancelled and revert to the status of authorized and unissued shares of Preferred Stock. Section 8. Required Notices. In case at any time: (a) the Corporation shall declare or pay any dividend payable in stock or other consideration or make any distribution to the holders of its Common Stock; or (b) the Corporation shall offer to the holders of its Common Stock any additional shares of stock of any class or other rights; (c) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or any consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation; or (d) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Corporation; then, in any one or more of such cases, the Corporation shall cause to be mailed to the holders of record of then outstanding shares of Series B Preferred Stock (i) at least 30 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, as the case may be. Section 9. Amendments and Additional Covenants. 9.1. So long as any Series B Preferred Stock shall be outstanding, this Corporation shall not, without the prior approval of the holders of not less than a majority of the then issued and outstanding shares of Series B Preferred Stock voting as a class, permit the Corporation to amend or repeal any provision of, or add any provision to, this Certificate or the Corporation's Articles of Incorporation or bylaws, if 9 such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series B Preferred Stock. 9.2. So long as any Series B Preferred Stock shall be outstanding, the Corporation shall: 9.2.1 maintain its books of account and financial statements and records in accordance with generally accepted accounting principles, and all determinations hereunder, if any, which are dependent upon a calculation of the Corporation's financial condition shall be determined in accordance with generally accepted accounting principles; 9.2.2 promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property, or business of the Corporation or any subsidiary, except where the Corporation is contesting any of the foregoing in good faith by appropriate proceedings; and 9.2.3 keep its properties in good repair, working order, and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions, and improvements thereto, and the Corporation shall at all times comply with the provisions of all material leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder. 9.3. So long as any Series B Preferred Stock shall be outstanding, the Corporation shall furnish to each holder of record of the Series B Preferred Stock as soon as practicable, but in any event within 150 days after the end of each fiscal year of the Corporation, an income statement, statement of cash flow and statement of changes in stockholders' equity for such fiscal year, and a balance sheet of the Corporation as of the end of such year, such year-end financial statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants selected by the Board of Directors of the Corporation. RESOLVED FURTHER, that the President or any Vice President of this Corporation and the Secretary or any Assistant Secretary of the Corporation are hereby authorized and directed to prepare, sign, and file with the Secretary of the State of Nevada a Certificate of Designation of Series B Preferred Stock of the Corporation in accordance with the resolutions set forth herein." (3) We further certify that the authorized number of shares of Preferred Stock of this Corporation is 5,000,000 shares; that the number of shares constituting the first series of Preferred Stock, of which 100,000 shares have been issued, is 790,000 shares, and that the number of shares constituting the second series of Preferred Stock established by the foregoing resolutions, none of which have been issued, is 200,000 shares. 10 IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary Province of Ontario } } s. County of Essex } On October 25th, 1995, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary Gabriel Joseph Courey State of New York } } s. County of New York } On Oct. 30, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ PATRICIA MURRAY --------------------------- Signature of Notary [Notary Stamp] PATRICIA MURRAY Notary Public, State of New York No. 31-4793355 Qualified in New York County Commission Expires 11-30 1996 EX-3.3.2 10 CERT. OF AMEND. TO CERT. OF DESIG. 5% SERIES B 1 EXHIBIT 3.3.2 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA JAN 08 1996 No. 11178-95 /s/ DEAN HELLER --------------- DEAN HELLER, SECRETARY OF STATE CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 5% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK THE LASER EYE SITES OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of THE LASER EYE SITES OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of December 12, 1995 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 5% Series B Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 200,000 shares of its Preferred Stock as 5% Series B Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and 2 "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of Section 5.2 of the Certificate of Designation to change dividend payment dates on its 5% Series B Cumulative Convertible Preferred Stock from quarter-annually in each year to one annual payment date; "NOW, THEREFORE, BE IT RESOLVED, that Section 5.2 of the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "5.2. If declared by the Board of Directors, dividends shall be payable annually on the last day of the month in which the corporation shall sucessfully complete an initial public offering of its securities with the first dividend payment date to be in the year 1997. In the event any shares of Series B Preferred Stock shall be outstanding for more or less than the period covered by such dividend year, the amount of the dividend shall be prorated for such periods. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared; provided, however, that such record date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date." (3) We further certify that the number of shares constituting the series of 5% Series B Cumulative Convertible Preferred Stock, of which 200,000 shares have been issued, is 200,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is 200,000 shares of 5% Series B Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 5% Series B Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary 3 Province of Ontario } } s. County of Essex } On DEC. 19, 1995, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary State of New York } } s. County of New York } On 12/15, 1995, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of THE LASER EYE SITES OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ JOSE M. YENKO --------------------------- Signature of Notary [Notary Stamp] JOSE M. YENKO NOTARY PUBLIC, State of New York No. 31-4677999 Qualified in New York County Commission Expires July 31, 1996 EX-3.3.3 11 CERT. OF AMEND. TO CERT. OF DESIG.-MAY 22, 1996 1 EXHIBIT 3.3.3 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA MAY 22, 1996 No. 11178-95 /s/ DEAN HELLER --------------- Dean Heller, Secretary of State CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 5% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK VISTA LASER CENTERS OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of VISTA LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of April 30, 1996 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 5% Series B Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 200,000 shares of its Preferred Stock as 5% Series B Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995 as amended by a Certificate of Amendment filed on January 8, 1996; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and 2 "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of Section 5 of the Certificate of Designation; "NOW, THEREFORE, BE IT RESOLVED, that Section 5 of the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "Section 5. Dividends and Restrictions on Certain Repurchases. "5.1. The holders of the shares of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends or as dividends payable in Common Stock in accordance with the provisions of this Section 5, cumulative dividends at the annual rate of 5% per annum ($0.125 per share). Each of such annual dividends shall be fully cumulative and shall accrue (whether or not declared or permitted to be paid), from the first day such shares were first issued. "5.2. If declared by the Board of Directors, dividends shall be payable annually on the last day of the month in which the corporation shall successfully complete an initial public offering of its securities with the first dividend payment date to be the last day of the month in which the first anniversary of such initial public offering shall occur. In the event any shares of Series B Preferred Stock shall be outstanding for more or less than the period covered by such dividend year, the amount of the dividend shall be prorated for such periods. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared (the "Record Date"); provided, however, that such Record Date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date. "5.3. All dividends paid with respect to shares of the Series B Preferred Stock shall be paid pro rata to the holders entitled thereto. "5.4. No dividends, other than dividends payable solely in securities of the Corporation, shall be declared by the Board of Directors on any class or series of equity securities of the Corporation unless and until such time as all accrued and unpaid dividends on the Series B Preferred Stock have been paid in full or unless the Series B Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. The Corporation may not pay or set apart for payment, other than dividends or other distributions or payments payable solely in Common Stock, any other distributions on any shares of the Corporation's Common Stock, and may not purchase or otherwise redeem for cash or other tangible property, other than in shares of Common Stock, any shares of the Corporation's Common Stock or any warrants, rights or options exercisable for or convertible into any shares of Common Stock unless and until such time as the Series B Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. 3 "5.5(a). In the event the Corporation shall have accrued the payment of dividends beyond a date on which dividends would otherwise be declared hereunder due to the fact that the Corporation is not legally permitted to pay dividends in cash on all outstanding shares of Series B Preferred stock under the laws of the State of Nevada, the Corporation, at the election of its Board of Directors made at any time thereafter (so long as such dividends may not be paid in cash from funds legally available therefor), may elect to pay all cumulative accrued dividends otherwise due and payable in shares of Common Stock or Series B Preferred Stock in lieu of cash. In such event, the Corporation shall advise each holder of record of Series B Preferred Stock in writing on the Record Date, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Corporation's election to make such interest payment in shares of the Corporation's Common Stock or Series B Preferred Stock. For the purposes of this Certificate, "Common Stock" shall mean the Corporation's Common Stock as constituted on the Record Date. "5.5(b) For any dividend payment to be made in Common Stock or Series B Preferred Stock as herein provided, the number of shares issuable for such dividend payment shall be determined by dividing the cumulative accrued dividend payments due on said dividend payment date by the Dividend Stock Value. "Dividend Stock Value" shall mean 100% of the Fair Market Value per share of the class or series of securities to be paid as dividends determined as of the applicable Record Date for the payment of such accrued dividends. For this purpose "Fair Market Value" as of any specific Record Date shall be determined by reference to the unweighted average closing sale prices for the class or series of securities to be paid as dividends during the ten days on which such shares are actually traded in the NASDAQ system or on a national securities exchange immediately prior to the Record Date upon which Fair Market Value is to be determined. (If for any reason closing sale prices are not quoted by the NASDAQ system on any such day, then the closing market price for such day shall be deemed the closing bid price for such day as reported by the National Quotation Bureau). In the event the class or series of securities to be paid as dividends is not actively quoted and traded in any securities market, the Fair Market Value thereof shall be determined in the exclusive discretion of the Corporation's Board of Directors acting in good faith." (3) We further certify that the number of shares constituting the series of 5% Series B Cumulative Convertible Preferred Stock, of which 200,000 shares have been issued, is 200,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is 200,000 shares of 5% Series B Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 5% Series B Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. 4 IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. /s/ GHASSAN BARAZI ---------------------------- Ghassan Barazi, President /s/ THEODORE J. MAYER ---------------------------- Theodore J. Mayer, Secretary Province of Ontario } } s. County of Essex } On May 12, 1996, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. [Notary Seal] /s/ G. F. COUREY --------------------------- Signature of Notary State of New York } } s. County of ____________ } On 3rd day of May, 1996, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. /s/ MOHAN K. DANSINGHANI --------------------------- Signature of Notary [Notary Stamp] DANSINGHANI MOHAN K. Notary Public, State of New York No. 01DA5039674 Qualified in Nassau County Commission Expires Feb. 21, 1997 EX-3.4 12 BY-LAWS OF THE REGISTRANT 1 EXHIBIT 3.4 VISTA LASER CENTERS OF MICHIGAN, INC. formerly named "The PRK Laser Centers of Michigan, Inc." and "The Laser Eye Sites of Michigan, Inc." BY-LAWS As adopted September 1, 1995 2 BY-LAWS for the regulation, except as otherwise provided by statute or its Articles of Incorporation, of VISTA LASER CENTERS OF MICHIGAN, INC. (a Nevada corporation incorporated June 30, 1995) ARTICLE I -- MEETING OF STOCKHOLDERS Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders of the corporation shall be held once each year at such place within or without the State of Nevada as shall be designated by the Board of Directors, and if not designated by the Board, then as designated by the Chairman of the Board or the President, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may be properly brought before the annual meeting. The annual meeting of stockholders shall be held during the fifth or sixth month following the conclusion of the corporation's fiscal year on such date which is not a weekend or legal holiday, and at such time, as shall be designated by the Board of Directors, and if not designated by the Board, then as designated by the Chairman of the Board or the President, for the purpose. Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may be held at the principal office of the corporation, within or without the State of Nevada, whenever called by the Board of Directors, by the Chairman of the Board, or by the President of the corporation, only for the purpose of transacting such business as shall be specified in the notice of such special meeting which may provide, however, for the transaction of other matters as may be properly brought before the special meeting. Section 3. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of each annual or special meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote thereat. Such notice shall state the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, the election of directors and those other matters which the Board, at the time of the mailing of the notice, intends to present for action by the stockholders, but subject to the provisions of applicable law, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by management for election. Notice of a stockholders' meeting shall be given either personally or by mail or by other means of written communication, addressed to the stockholder at the address of such stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice, or, if no such address appears or is given, at the place where the principal office of the corporation is located, either within or without the State of Nevada, or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mails, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. 3 Section 4. QUORUM. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of stockholders. If a quorum is present, the affirmative vote of a majority of the shares represented and voting at the meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by law or by the Articles, except as provided in the following sentence and in Section 5 of this Article I. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy, but in the absence of a quorum (except as provided in Section 4 of this Article) no other business may be transacted at such meeting. It shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken; provided, however, when any stockholders meeting is adjourned for more than 45 days or, if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Section 6. VOTING. The stockholders entitled to notice of any meeting or to vote at any such meeting shall be only persons in whose names shares stand on the stock records of the corporation on the record date determined in accordance with Section 7 of this Article. Elections of directors and other voting on proposal presented to stockholders meeting need not be by ballot if dispensed by the meeting; provided, however, that all elections for directors and other proposals to be voted upon must be by ballot upon demand made by any stockholder at the meeting and before the voting begins. In any election of directors, the slate of candidates receiving a plurality of votes cast of the shares entitled to be voted for directors shall be elected. Voting shall in all cases be subject to the provisions of Section 78.355 of the Nevada General Corporation Law and to the following provisions: (a) Subject to clause (g), shares held by an administrator, executor, guardian, conservator or custodian may be voted by such holder either in person or by proxy, without a transfer of such shares into the holder's name; and shares standing in the name of a trustee may be voted by the trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the trustee's name. (b) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver's name if authority to do so is contained in the order of the court by which such receiver was appointed. (c) Except where otherwise agreed in writing between the parties with a copy furnished to the corporation, a stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the 4 shares so transferred. (d) Shares standing in the name of a minor may be voted and the corporation may treat all rights incident thereto as exercisable by the minor, in person or by proxy, whether or not the corporation has notice, actual or constructive, of the nonage, unless a guardian of the minor's property has been appointed and written notice of such appointment given to the corporation. (e) Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxyholder as the by-laws of such other corporation may prescribe or, in the absence of such provision, as the Board of Directors of such other corporation may determine or, in the absence of such determination, by the chairman of the board, president or any vice president of such other corporation, or by any other person authorized to do so by the chairman of the board, president or any vice president of such other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of this clause, unless the contrary is shown. (f) Shares of the corporation owned by any subsidiary shall not be entitled to vote on any matter. (g) Shares held by the corporation in a fiduciary capacity, and shares of the issuing corporation held in a fiduciary capacity by any subsidiary, shall not be entitled to vote on any matter, except to the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give the corporation binding instructions as to how to vote such shares. (h) If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a stockholder voting agreement or otherwise, or if two or more persons (including proxyholders) have the same fiduciary relationship respecting the same shares, unless the Secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) If only one votes, such acts binds all; (ii) If more than one vote, the act of the majority so voting binds all; (iii) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately. If the instrument so filed or the registration of the shares shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of this Section shall be a majority or even split in interest. Section 7. RECORD DATE. The Board may fix, in advance, a record date for the determination of the stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution, or any allotment of rights, or to exercise rights in respect of any other lawful action. The record date so fixed shall be not more than 60 days nor less than 10 days prior to the date of the meeting nor more than 60 days prior to any other action. When a record date is so fixed, only stockholders of record on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise of 5 the rights, as the case may be, notwithstanding any transfer of shares on the books of the corporation after the record date. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting. The Board shall fix a new record date if the meeting is adjourned for more than forty-five (45) days. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. The record date for determining stockholders for any purpose other than set forth in this Section 7 or Section 9 of this Article I shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth day prior to the date of such other action, whichever is later. Section 8. CONSENT OF ABSENTEES. The transactions of any meeting of stockholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Nevada General Corporation Law to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof. Section 9. ACTION WITHOUT MEETING. Subject to Section 78-320 of the Nevada General Corporation Law, any action which, under any provision of these Bylaws of the Nevada General Corporation Law, may be taken at any annual or special meeting of stockholders, may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Unless a record date for voting purposes be fixed as provided in Section 7 of this Article, the record date for determining stockholders entitled to give consent pursuant to this Section 7, when no prior action by the Board has been taken, shall be the day on which the first written consent is given. In no instance where action is authorized by written consent need a meeting of stockholders be called or notice given. The written consent must be filed with the minutes of proceedings of the stockholders of the corporation. Section 10. PROXIES. Every person entitled to vote shares has the right to do so either in person or by one or more persons authorized by a written proxy executed by such stockholder and filed with the Secretary. Any proxy duly executed is not revoked and continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto. Such revocation may be effected either, (i) by a writing delivered to the Secretary of the Corporation stating that the proxy is revoked, (ii) by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or (iii) by attendance at the meeting and voting in person by the person executing the prior proxy and presented to the meeting, or (iii) by 6 attendance at the meeting and voting in person by the person executing the proxy; provided, however, that no proxy shall be valid after the expiration of eleven months from the date of its execution unless otherwise provided in the proxy. Section 11. INSPECTORS OF ELECTION. In advance of or at the commencement of any meeting of stockholders, the Board or the Chairman of the Board may appoint inspectors of election to act at such meeting and any adjournment thereof. If inspectors of election be not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any such meeting may, and on the request of any stockholder or stockholder's proxy shall, make such appointment at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more stockholders or proxies, the majority of shares present shall determine whether one or three inspectors are to be appointed. The duties of such inspectors shall include: determining the number of shares outstanding and the voting power of each; determining the shares represented at the meeting; determining the existence of a quorum; determining the authenticity, validity and effect of proxies; receiving votes, ballots or consents; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all votes or consents; determining when the polls shall close; determining the result; and doing such acts as may be proper to conduct the election or vote with fairness to all stockholders. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Section 12. STOCKHOLDERS LIST. At each meeting of the stockholders, a full, true and complete list, in alphabetical order, of all the stockholders entitled to vote at such meeting, and indicating the number of shares held by each, certified by the Secretary of the corporation or by any employee of a Transfer Agent duly appointed to act as such by the Board, shall be furnished. Only the persons in whose names shares of stock are registered on the books of the corporation on the record date for the meeting, as evidenced by the list of stockholders so furnished, shall be entitled to attend and vote at such meeting. Proxies and powers of attorney to vote must be filed with the Secretary of the corporation before an election or a meeting of the stockholders, or they cannot be used at such election or meeting. Section 13. CONDUCT OF MEETINGS. The Chairman of the Board, if there be such an officer, or the President shall preside as chairman at all meetings of the stockholders. The chairman shall conduct each such meeting in a businesslike and fair manner, but shall not be obligated to follow any technical, formal or parliamentary rules or principles of procedure. The chairman's rulings on procedural matters shall be conclusive and binding on all stockholders, unless at the time of a ruling a request for a vote is made to the stockholders holding shares entitled to vote and which are represented in person or by proxy at the meeting, in which case the decision of a majority of such shares shall be conclusive and binding on all stockholders. Without limiting the generality of the foregoing, the chairman shall have all of the powers usually vested in the chairman of a meeting of stockholders. ARTICLE II -- DIRECTORS Section 1. (a) NUMBER AND TERM. The Board of Directors of the corporation shall consist of not less than three (3) nor more than fifteen (15) persons who shall be elected by the stockholders annually, at the annual 7 meeting of the corporation's stockholders, and who shall hold office for approximately one (1) year until the next annual meeting of stockholders and until their successors are elected and shall qualify. The number of authorized directors within such limitations shall be fixed from time to time by resolution of the Board of Directors, except that no act of the Board of Directors in decreasing the number of authorized directors may shorten the term of office of any Director then duly elected and serving as a director. (b) QUALIFICATIONS. Directors shall be natural persons age 18 or older. Directors need not be stockholders of the corporation, and need not be citizens of the United States. Section 2. AUTHORITY. The Board of Directors is vested with the complete and unrestrained authority in the management of all the affairs of the corporation, and is authorized to exercise for such purpose as the general agent of the corporation, its entire corporate authority. Section 3. FILLING VACANCIES. When any vacancy occurs among the Directors by death, resignation, disqualification, an increase in the authorized number of directors, or other cause, the stockholders, at any regular or special meeting, or at any adjourned meeting thereof, or the remaining Directors, by the affirmative vote of a majority thereof, shall elect a successor to hold office for the unexpired portion of the term of the Director whose place shall have become vacant and until his or her successor shall have been elected and shall qualify. Section 4. PLACE AND TIME OF MEETINGS. Meetings of the Directors may be held at the principal office of the corporation designated by the Board of Directors, whether within or without the State of Nevada or the United States, at any time set forth in a notice of meeting given as provided in these ByLaws. Meetings of the Directors may also be held elsewhere at such place or places and at such time or time as the Board of Directors may from time to time determine, or as shall be set forth in a notice of meeting given as provided in these ByLaws, unless by special resolution the Board shall restrict or limit the place or dates and time at which meetings of the Board are to be held. Section 5. ANNUAL, REGULAR AND SPECIAL MEETINGS; NOTICE. (a) Without notice or call, the Board of Directors shall hold its first annual meeting for the year immediately after the annual meeting of the stockholders or immediately after the election of Directors at such annual meeting. (b) Regular meetings of the Board of Directors, not more frequently than once each month, may be held at the principal office of the corporation, or elsewhere, as scheduled by action of the Board of Directors or its Chairman of the Board or its President. Notice of such regular meetings shall be given by regular mail, by telephone if the person is successfully contacted, by telegraph, by facsimile telephone written communication, or by delivery in person via courier service, to each Director by the President, the Secretary or any Assistant Secretary at least ten (10) business days prior to the day fixed for such meetings; but no regular meeting or any action taken thereat shall be held void or invalid if such notice is not given to any Director that (i) was in attendance at a meeting of the Board of Directors which fixed the time, date and place of such regular meeting of the Board of Directors; or (ii) waives notice of the regular meeting; or (iii) attends the regular meeting in person or by telephone conference call; or (iv) executes a consent to action taken at the meeting after having received the minutes of such regular meeting. 8 (c) Special meetings of the Board of Directors may be held on the call of the Chairman of the Board, if there be such an officer, the President, the Secretary or any Assistant Secretary on at least forty-eight (48) hours prior written notice to Directors resident in the country at which the special meeting is to be held, and on at least seventy-two (72) hours prior written notice to Directors not resident in the country at which the special meeting is to be held. Notice of such special meetings shall be given by regular mail (but only if mailed at least five business days prior to such special meeting), by telephone if the person is successfully contacted, by telegraph, by facsimile telephone written communication, or by delivery in person via courier service, to each Director by the President, the Secretary or any Assistant Secretary; but no regular meeting or any action taken thereat shall be held void or invalid if such notice is not given to any Director that (i) was in attendance at a meeting of the Board of Directors which fixed the time, date and place of such special meeting of the Board of Directors; or (ii) waives notice of the special meeting; or (iii) attends the special meeting in person or by telephone conference call; or (iv) executes a consent to action taken at the meeting after having received the minutes of such special meeting. (d) Provided a quorum shall be present, any meeting of the Board of Directors, no matter where held, at which all of the members shall be present, even though without notice, or of which notice shall have been waived by all absentees, shall be valid for all purposes unless otherwise indicated in the notice calling the meeting or in the waiver of notice. Any and all business may be transacted by any meeting of the Board of Directors, either regular or special. Section 6. ADJOURNMENT. A majority of the directors present, whether or not a quorum is present, may adjourn any directors meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned, except as provided in the next sentence. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. Section 7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear and speak to one another. Section 8. WAIVER OF NOTICE. Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting. All such waivers, consents and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Section 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such consent or consents shall have the same effect as a unanimous vote of the Board and shall be filed with the minutes of the proceedings of the Board. Section 10. QUORUM. A majority of the Board of Directors in office shall constitute a quorum for the transaction of business, but at any meeting of the Board where be less than a quorum present, a majority of those present may adjourn such meeting from time to time, until a quorum shall be present, and no notice of such adjournment shall be required except as provided by 9 Section 6 of this Article II The Board of Directors may prescribe rules not in conflict with these By-Laws for the conduct of its business. Section 11. AGENDA. Unless otherwise agreed by the Board of Directors, the regular order of business at meetings of the Board of Directors shall be as follows: (a) Reading and approval of the minutes of any previous meeting or meetings, unless such minutes have been previously circulated in written form to all members of the Board; provided that notwithstanding prior circulation, the Board may correct any obvious errors in such minutes. (b) Reports of officers and committeemen; (c) Election of officers, if an annual meeting or it proposed by the chairman of the meeting; (d) Unfinished business; (e) New business; (f) Adjournment. Section 12. PRESUMPTION OF ASSENT. A director of the corporation present at a meeting of the directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken as reflected in the minutes of the meeting, unless his abstention from voting or dissenting vote is entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof. Such right to dissent shall not apply to any director who voted in favor of such action. Section 13. EXECUTIVE COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole Board, designate an Executive Committee consisting of members of the Board. The Executive Committee shall consist of three (3) or more members, one of whom shall be either the Chairman of the Board or the President of the corporation, which officer by virtue of his or her office, shall be a member and the chairman thereof. The Executive Committee shall, in the interim between the meetings of the Board, exercise all powers of the Board of Directors in accordance with the general policy of the corporation and as authorized by resolution of, and under the direction of, the Board of Directors; provided, however, that the Executive Committee shall not have the authority or power without prior authorization of the Board on matters which: (a) authorize the issuance of shares of this corporation's capital stock; (b) designate the rights, preferences, powers and limitations of any class or series of capital stock; (c) authorize this corporation to incur indebtedness or to execute any agreement, contract, lease, note, bond, debenture or other obligation (other than checks in payment of indebtedness incurred by authority of the Board of Directors) involving the payment of money or the credit of the corporation for more than One Million Dollars ($1,0000,000) except by prior authority conferred by the Board of Directors; (d) approve of any action for which the Nevada General Corporation Law also 10 requires stockholders approval or approval of the outstanding shares; (e) elects officers of the corporation; (f) fills vacancies in the Board or on any committee of the Board; (g) fixes compensation of directors for serving on the Board or on any committee of the Board; (h) amends or repeals ByLaws or adopts new ByLaws of the corporation; (i) amends or repeals any resolution of the Board except to the extent such resolutions shall permit the amendment thereof by the Executive Committee; (j) provides for a distribution to the stockholders of the corporation except at a rate or in a periodic amount or within a range determined by the Board; or (k) appoints other committees of the Board or the members thereof. The Executive Committee shall also attend to and supervise the financial operations of the corporation, and shall examine and cause to be audited all the corporation's accounts at the close of each fiscal year, and at such other times as it may deem necessary. Any member of such Executive Committee designated by it, or the Secretary or any Assistant Secretary of the corporation, shall be the Secretary of the Executive Committee and shall attend its meetings, and its meetings shall be held on the call of the chairman of the Executive Committee. All members of the Executive Committee must be given notice of meetings of the Executive Committee in the same manner as is provided for special meetings of the Board of Directors provided by Section 5(c) of this Article II. A majority of the members of the Executive Committee shall constitute a quorum. The Executive Committee shall keep due records of all meetings and actions of the Executive Committee, and such records shall at all times be open to the inspection of any Director. Section 14. OTHER COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more other committees of the Board including, without limitation, an Audit Committee and/or a Compensation Committee, which committees, to the extent provided in the resolution or resolutions of the Board or in the Bylaws of the corporation as then in effect, shall have and may exercise the powers of the Board of Directors in the business and affairs of the corporation, and may have the power to authorize the seal of the corporation to be affixed to all papers on which the corporation desires to place its corporate seal, if such a corporate seal shall exist. Any such committee or committees must have such name or names as shall be stated in the ByLaws of the corporation then in effect or as may be determined from time to time by resolution adopted by the Board. Each such committee must include at least one (1) member of the Board of Directors, and the Board of Directors by resolution may appoint natural persons who are not Directors to serve as regular or alternate members on one or more of such committees; provided, however, that any committee authorized to administer stock option or stock plans of the corporation shall consist only of persons who are members of the Board of Directors. The Board shall have the power to prescribe the manner in which proceedings of any such committee shall be conducted. In the absence of any such prescription, such committee shall have the power to prescribe the manner in which its proceedings shall be conducted. Unless the Board or such 11 committee shall otherwise provide, the regular and special meetings and other actions of any such committee shall be governed by the provisions of this Article applicable to meetings and actions of the Board. Minutes shall be kept of each meeting of each committee. If the Board of Directors shall designate an Audit Committee, such Audit Committee shall meet independently with the corporation's internal auditing staff, with representatives of the corporation's independent accountants, and with representatives of senior management, in each instance not less frequently than once each fiscal year. The Audit Committee shall also be responsible for reviewing the general scope of the audit, the fee charged by independent accountants, and matters relating to internal control systems and procedures. If the Board of Directors shall designate a Compensation Committee, the Compensation Committee shall be responsible for reviewing and reporting to the Board on the recommended annual compensation for all officers and for preparing any reports on compensation policies required by rules and regulations of the Securities and Exchange Commission to which the corporation is subject. Section 15. EXPENSES AND COMPENSATION. (a) The Directors shall be allowed and paid all reasonable and necessary expenses incurred in attending any meeting of the Board. In determining whether specific items of expense are reasonable in amount, the Board may from time to time establish policies as the type of airline travel and hotel accommodations for which reimbursement of expenses will be paid by the corporation. (b) The Board of Directors may fix the compensation of directors for services to the corporation as directors, as members of a committee of the Board, or in any other capacity. Provided, however, that Directors shall not receive compensation for their services as Directors except as authorized and approved at a meeting of the Board of Directors at which at least two-third (2/3) of the then duly elected and acting Directors shall be in attendance, and only with the affirmative vote and approval at such meeting of at least a majority of the Directors then duly elected and acting. Section 16. REPORT TO STOCKHOLDERS AND RATIFICATION BY STOCKHOLDERS. (a) The Board of Directors, acting through a representative of the Board or by the Chairman of the Board or the President, if such person shall be a Director, shall make a report to the stockholders at annual meetings of the stockholders of the condition of the corporation, and shall, on request, furnish each of the stockholders with a true copy thereof. The requirement of furnishing a copy of a statement of the condition of the corporation shall be satisfied if annual report with financial statements for the last fiscal year of the corporation is provided to stockholders of record at or prior to the annual meeting. (b) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual or special meeting of the stockholders called for the purpose of considering any such contract or act, which, if approved, or ratified by the vote of the holders of a majority of the capital stock represented in person or by proxy at such meeting, provided that a lawful quorum of stockholders be there represented in person or by proxy, shall be valid and binding upon the corporation and upon all the stockholders thereof, as if it had been approved or ratified by every stockholder of the corporation. 12 Section 17. RIGHTS OF INSPECTION. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and also of its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and includes the right to copy and obtain extracts. ARTICLE III -- OFFICERS AND THEIR DUTIES Section 1. DESIGNATION AND ELECTION OF OFFICERS AND AGENTS. The Board of Directors, at its first meeting after the annual meeting of stockholders, shall elect a President, a Secretary and a Treasurer, to hold office at the pleasure of the Board and, unless removed without or without cause by the Board, for a period of approximately one (1) year until the next annual meeting of the Board and until their successors are elected and qualify. The Board of Directors may from time to time, by resolution, appoint such additional officers and agents, including without limitation a Chairman of the Board, Vice Presidents, Assistant Secretaries, Assistant Treasurers and transfer agents as it may deem advisable. The Board shall have authority to prescribe the duties of all officers and to fix their compensation, and all such appointed officers shall be subject to removal at any time by the Board of Directors. All officers, agents and factors shall be chosen and appointed in such manner and shall hold their office for such terms as the Board of Directors may by resolution prescribe. No officer other than the Chairman of the Board, if such officer is elected, shall be required to be a member of the Board of Directors. Any person may hold more than two or more offices. All officers shall serve at the pleasure of the Board of Directors and any person may be removed from office by action of the Board of Directors at any time, either with or without cause. Any vacancy in any of said offices may be filled by the Board of Directors or, at the discretion of the Board, may be left vacant except that the corporation shall at all times have a President, a Secretary and a Treasurer. Section 2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer shall be designated and elected by the Board, shall act as chairman of the Board and shall preside at all meetings of the Board of Directors and the stockholders. The Chairman of the Board shall have authority to sign the Certificates of Stock issued by the corporation, bills of exchange and promissory notes of the corporation, and shall perform such other duties as shall be prescribed by the Board of Directors. If so designated by resolution of the Board of Directors, the Chairman of the Board shall also be the chief executive officer of the corporation and shall have the supervision and, subject to the control of the Board of Directors, the direction of the corporation's affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the corporation. Section 3. PRESIDENT. Unless such duties are assigned by resolution of the Board to a Chairman of the Board, if there be such an officer, the President shall be the chief executive officer of the corporation and shall have the supervision and, subject to the control of the Board of Directors, the direction of the corporation's affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the corporation. If there shall not be a Chairman of 13 the Board, the President shall also preside at all meetings of the Board of Directors and stockholders. If the Chairman of the Board shall be appointed as the corporation's chief executive officer, then the President shall be the chief operating officer of the corporation and shall have the supervision and, subject to the control of the Chairman of the Board and the Board of Directors, the direction of the corporation's day-to-day business affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the corporation. The President shall have authority to sign the Certificates of Stock issued by the corporation, bills of exchange and promissory notes of the corporation, and shall perform such other duties as shall be prescribed by the Board of Directors. Section 4. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board or, if not so ranked, any such Vice President, shall perform all the duties of the President and, when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board. The Board may designate specific functions or areas of responsibility for any Vice President by resolution of the Board and/or by specifying at the time of his or her election that such person's Vice President title and office include a designation of such function or general area of responsibility; the authority of any such person in said designated functions and areas of responsibility shall be subject to the control of the Board of Directors and to right of supervision conferred upon the Chairman of the Board and the President of the corporation. In the absence or inability to act of the Chairman of the Board and the President, any Vice President shall have authority to sign the Certificates of Stock issued by the corporation. Section 5. TREASURER. The Treasurer shall have the responsibility for depositing all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board and otherwise protecting the custody of all the funds and securities of the corporation. The Treasurer shall have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities, and such other property belonging to the corporation as the Board of Directors shall designate. When necessary or proper, he or she shall endorse on behalf of the corporation for collection checks, notes, and other obligations. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board. In the absence of the Chairman of the Board and the President, the Treasurer shall sign of behalf of the corporation all bills of exchange and promissory notes of the corporation; he or she shall sign all papers required by law or by these By-Laws or the Board of Directors to be signed by the Treasurer, and shall perform such other duties as shall be prescribed by the Board of Directors. Whenever required by the Board of Directors or the President, the Treasurer shall render a statement of the corporation's cash account, an account of all transactions as Treasurer, and of the financial condition of the corporation. The Treasurer shall enter regularly in the books of the corporation to be kept by him or her for the purpose, full and accurate accounts of all monies received and paid by him or her on account of the corporation. The Treasurer shall at all reasonable times exhibit the books of account to any Director or the President of the corporation during business hours, and shall perform all acts incident to the position of Treasurer subject to the control of the Board of Directors. The Treasurer shall, if required by the Board of Directors, give bond to 14 the corporation conditioned for the faithful performance of all his or her duties as Treasurer in such sum, and with such security as shall be approved by the Board of Directors, the expense of such bond to be borne by the corporation. Section 6. ASSISTANT TREASURERS. The Board of Directors may appoint one or more Assistant Treasurers who shall have such powers and perform such duties as may be prescribed by the Treasurer of the corporation or by the Board of Directors or the President of the corporation. Any Assistant Treasurer shall, if required by the Board of Directors, give bond to the corporation conditioned for the faithful performance of all his or her duties as Assistant Treasurer in such sum, and with such security as shall be approved by the Board of Directors, the expense of such bond to be borne by the corporation. Section 7. SECRETARY. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the stockholders and of the Executive Committee in books provided for that purpose. The Secretary shall attend to the giving and serving of all notices of the corporation; he or she may sign with the Chairman of the Board, the President or any Vice President, in the name of the corporation, all contracts authorized by the Board of Directors or Executive Committee; he or she shall have the custody of the corporate seal of the corporation, if there be a corporate seal; he or she shall affix the such corporate seal, if there be one, to all certificates of stock duly issued by the corporation; he or she shall have charge of the stock certificate books, stock transfer books and stock ledgers, and such other books and papers as the Board of Directors or the Executive Committee may direct, all of which shall at all reasonable times be open to the examination of any Director upon application at the office of the corporation during business hours; and he or she shall, in general, perform all the duties incident to the office of Secretary and such other duties as shall be prescribed by the Board of Directors. Section 8. ASSISTANT SECRETARIES. The Board of Directors may appoint one or more Assistant Secretaries who shall have such powers and perform such duties as may be prescribed by the Secretary or by the Board of Directors. Section 9. REPRESENTATION OF THE CORPORATION. Unless otherwise ordered by the Board of Directors, the Chairman of the Board or the President shall have full power and authority in behalf of the corporation to attend and to act and to vote at any meetings of the stockholders or holders of indebtedness of any corporation in which the corporation may hold stock or evidences of indebtedness, and at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock or evidences of indebtedness which the corporation might have possessed and exercised if present. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the Chairman of the Board of the President to represent the corporation for the purposes in this section mentioned. ARTICLE IV -- CAPITAL STOCK Section 1. AUTHORITY OF THE BOARD. The capital stock of the corporation shall be issued in such manner and at such times and upon such conditions as shall be prescribed by the Board of Directors. Section 2. STOCK CERTIFICATES. 15 (a) Every holder of shares of the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman of the Board, the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares and the class or series of shares owned by the stockholder. Any or all of the signatures on the certificate may be facsimile if the stock certificate is imprinted with the corporate seal. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. (b) Certificates for shares may be issued prior to full payment under such restrictions and for such purposes as the Board may provide, provided, however, that on any certificate issued to represent any partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated or incorporated by reference to a document setting forth the same. (c) Except as provided in this Section, no new certificate for shares shall be issued in lieu of an old one unless the latter is surrendered and cancelled at the same time. The Board may, however, if any certificate for shares is alleged to have been lost, stolen or destroyed, authorize the issuance of a new certificate in lieu thereof, and the corporation may require that the corporation be given a bond or other adequate security and an indemnification agreement sufficient to indemnify it against any claim that may be made against the corporation (including expense or liability) on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. The Board of Directors may, in its discretion, refuse to issue such new or duplicate certificates save upon the order of a court of competent jurisdiction in such matter, anything herein to the contrary notwithstanding. (d) All certificates evidencing stock in this corporation of any class or series shall be consecutively numbered; the name of the person owning the shares represented thereby with the number of such shares and the date of issue shall be entered on the corporation's books. (e) The Board of Directors may appoint a transfer agent and a registrar of transfers and may require all stock certificates to bear the signature of each transfer agent and such registrar of transfer. (f) The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. Section 3. CLOSING OF STOCK TRANSFER BOOKS FOR VOTING AND DISTRIBUTIONS. The Stock Transfer Books shall be closed for all meetings of the stockholders for the a period specified by the Board of Directors or by any authorized officer of the corporation acting pursuant to authority of the Board of Directors, for a period of not less than ten (10) and not more than sixty (60) days prior to such meetings, and shall be closed for the payment of dividends or other distributions by the corporation to its stockholders during such periods as from time to time may be fixed by the Board of Directors. Section 4. NO PREEMPTIVE RIGHTS. No stockholder or subscriber to 16 shares of this corporation shall be entitled to any preemptive or preferential rights to purchase and/or subscribe for any part of any shares which may be issued at any time by this corporation. ARTICLE V -- OFFICES AND BOOKS Section 1. RESIDENT AGENT; REGISTERED OFFICE IN NEVADA; OTHER OFFICES. (a) The corporation shall appoint and maintain a resident agent for the corporation in accordance with the provisions of Section 78.090 of the Nevada General Corporation Law, who may be either a natural person or a corporation, resident or located in the State of Nevada. The resident agent may be changed from time to time by action of the Board of Directors. The street address of the resident agent where such agent maintains an office for the service of process upon this corporation shall be the registered office of this corporation in the State of Nevada (the "registered office"). (b) The corporation may have a principal office and such other offices in the State of Nevada or any other state or territory as the Board of Directors may designate from time to time. Section 2. BOOKS AND RECORDS. (a) A copy of the Articles of Incorporation of the corporation, certified by the secretary of state of Nevada, a copy of the ByLaws of the corporation, certified by an officer of this corporation, and a statement setting out the name of the custodian of the stock ledger or a duplicate stock ledger of this corporation, and the present and complete post office address, including street and number, where the stock ledger or duplicate stock ledger is kept, shall be kept and maintained at the registered office of the corporation in the State of Nevada. All such documents maintained at the registered office of the corporation shall be subject to inspection by any of the stockholders of the corporation upon reasonable notice during customary business hours for a proper purpose. (b) The stock ledger and stock transfer books of the corporation shall be kept at its principal office, either within or without the State of Nevada, or at the offices of a stock transfer agent duly authorized to act as such by resolutions adopted by the Board of Directors. The stock ledger shall be available for the inspection of all who are authorized or have the right to see the same in accordance with the Nevada General Corporation Law, and for the transfer of stock. (c) Any person who has been a stockholder of record of the corporation for at least six (6) months immediately preceding his or her demand, or any person holding, thereunto authorized in writing by the holders of, at least five percent (5%) of all of the corporation's outstanding shares entitled to vote, upon at least five (5) days' written demand is entitled to inspect in person or by agent or attorney, during usual business hours, the stock ledger or duplicate stock ledger of the corporation, whether kept in the registered office of the corporation in the State of Nevada or elsewhere in accordance with paragraph (a) of this Section 2, and to make extracts therefrom. An inspection authorized by this paragraph (c) may be denied to a stockholder or other person upon such person's refusal to furnish to the corporation an affidavit that such inspection is not desired for a purpose which is in the interest of a business or object other than the business of the corporation and that such person has not at any time sold or offered for sale any list of 17 stockholders or any domestic or foreign corporation or aided or abetted any person in procuring any such record of stockholders for any such purpose. In every instance where an attorney or other agent of a stockholder seeks the right of inspection, the demand must be accompanied by a power of attorney as provided by Section 78.105-9 of the Nevada General Corporation Law. (d) All other books and records of the corporation shall be kept at such places as may be prescribed by the Board of Directors or by the President of the Corporation acting pursuant to authority conferred by the Board of Directors. ARTICLE VI -- INDEMNIFICATION Section 1. DEFINITIONS. For the purposes of this Article, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent or another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes without limitation attorneys' fees and any expenses of establishing a right to indemnification under Sections 4 or 5(c) of this Article. Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in a manner such persons reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of the corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action if such person acted in good faith, in a manner such person believed to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an agent of the corporation has been successful on the merits in defense of any 18 proceeding referred to in Sections 2 or 3 of this Article or in defense of any claim, issue or matter therein, and as otherwise provided by authorization of the Board of Directors or stockholders of this corporation, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. Section 5. REQUIRED DETERMINATIONS. Any indemnification under this Article shall be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of this Article, by: (a) A majority vote of a quorum consisting of directors who are not parties to such proceeding; or (b) Approval of the stockholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or (c) The court in which such proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney or other person is opposed by the corporation. Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article. Section 7. OTHER INDEMNIFICATION. No provision made by the corporation to indemnify it or its subsidiary's directors or officers for the defense of any proceeding, whether contained in the Articles, By-laws, a resolution of stockholders or directors, an agreement or otherwise, shall be valid unless consistent with this Article and approved by a majority of the Directors; provided, however, that any such agreement approved by a majority of the shares of capital stock voted at any meeting called to consider the same or by written consent of a majority of the shares entitled to vote for the election of directors shall supercede the provision of this Article to the extent of any inconsistencies. Nothing contained in this Article shall affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise. Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No indemnification or advance shall be made under this Article, except as provided in Sections 4 or 5(c), in any circumstances where it appears: (a) That it would be inconsistent with a provision of the Articles, these By-laws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnifications; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. Section 9. INSURANCE. The corporation shall have power to purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising 19 out of the agent's status as such whether or not the corporation would have the power to indemnify the agent against such liability under the provisions of this Article. Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT PLANS. This Article does not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an agent of the corporation as defined in Section 1 of this Article. The corporation shall have power to indemnify such trustee, investment manager or other fiduciary to the extent permitted by applicable law. ARTICLE VII -- OTHER PROVISIONS Section 1. AUTHORITY REQUIRED FOR COMMITMENTS IN EXCESS OF $250,000. No agreement, contract, lease, note, bond, debenture or other obligation (other than checks in payment of indebtedness incurred by authority of the Board of Directors) involving the payment of money or the credit of the corporation for more than Two Hundred Fifty Thousand Dollars ($250,000) shall be made without the authority of the Board of Directors or of the Executive Committee acting as such. The authority of the Executive Committee in authorizing any such transaction shall be subject to the limitations set forth in Section 13 of Articles II of these ByLaws. Section 2. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the provisions of applicable law, any note, mortgage, evidence of indebtedness, contract, option or warrants to purchase stock in this corporation, conveyance or other instrument in writing and any assignment or endorsements thereof executed or entered into between the corporation and any other person, when signed by the Chairman of the Board, the President or any Vice President and the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the corporation shall be valid and binding on the corporation in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the same. Any such instruments may be signed by any other person or persons and in such manner as from time to time shall be determined by the Board, and, unless so authorized by the Board, no other officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or amount. Section 3. STOCK PURCHASE PLANS. The corporation may adopt and carry out one or more stock purchase plans or agreements or stock option plans or agreements providing for the issue and sale of capital stock for such consideration as may be fixed of its unissued shares, or of issued shares acquired or to be acquired, to one or more of the employees, officer or directors of, or consultants to, the corporation or of a subsidiary or to a trustee on their behalf, and for the payment of such shares in installments or at one time, and may provide for aiding any such persons in paying for such shares by compensation for services rendered, promissory notes or otherwise. Any such stock purchase plan or agreement or stock option plan or other stock agreement may include, among other features, the fixing of eligibility for participation therein, the class and price of shares to be issued or sold under the plan or agreement, the number of shares which may be subscribed for, the method of payment therefor, the reservation of title until full payment therefor, the effect of the termination of employment, an option or obligation on the part of the corporation to repurchase the shares upon termination of 20 employment, restrictions upon transfer of the shares, the time limits of and termination of the plan, and any other matters, not in violation of applicable law, as may be included in the plan as approved or authorized by the Board or any committee of the Board. Section 4. RESERVES AND DIVIDENDS. The Board of Directors shall have power to reserve over and above the capital stock paid in, such amount, in its discretion, as it may deem advisable to fix as a reserve fund, and may, from time to time, declare dividends in excess of the amounts so reserved subject to the provisions of the Nevada General Corporation Law, and pay the same to the stockholders of the corporation, and may also, if it deems the same advisable, declare stock dividends of the unissued capital stock. Section 5. DEPOSIT OF FUNDS. Except for funds held in trust by third-party fiduciaries, all monies of the corporation shall be deposited when and as received by the Treasurer or any other employee or agent of the corporation in such bank or banks or other depositary as may from time to time be designated by the Board of Directors, and such deposits shall be made in the name of the corporation. Section 6. BOARD APPROVAL REQUIRED FOR LOANS TO OFFICERS OR STOCKHOLDERS. No loan or advance of money shall be made by the corporation to any stockholder or officer of the corporation, unless the Board of Directors shall otherwise authorize; the foregoing provision shall not apply to advances for business expenses made in the ordinary course of business to employees or agents of the corporation who coincidentally are stockholders or officers of the corporation. Section 7. BOARD APPROVAL REQUIRED FOR COMPENSATION TO EXECUTIVE OFFICERS. No executive officer shall be entitled to any salary or compensation for any services performed for the corporation, unless such salary or compensation shall be fixed by resolution of the Board of Directors or by a committee thereof or the Chairman of the Board or the President of the Corporation under authority conferred by the Board. For the purposes hereof, an executive officer shall be deemed to include the Chairman of the Board, the President, any Vice President, the Secretary and the Treasurer of the corporation. Section 8. POWER TO DEAL IN SECURITIES. The corporation may take, acquire, hold, mortgage, sell, or otherwise deal in stocks or bonds or securities of any other corporation, partnership, association or other business entity, if and as often as the Board of Directors shall so elect. Section 9. POWER TO CREATE SECURITY INTERESTS; STOCKHOLDER APPROVAL REQUIRE TO DISPOSE OF ALL ASSETS. The Directors shall have power to authorize and cause to be executed, mortgages and liens without limit as to amount upon the property and franchise of this corporation, and pursuant to the affirmative vote, either in person or by proxy, of the holders of a majority of the capital stock issued and outstanding; the Directors shall have authority to dispose in any manner of the whole property of this corporation. Section 10. CORPORATE SEAL. The corporation may have a corporate seal if so authorized by resolution of the Board, the design thereof being established by the Board. Section 11. FISCAL YEAR. The fiscal year of the corporation shall end on December 31 of each year, subject to the right of the Board to change the 21 fiscal year if determined by the Board to be appropriate. ARTICLE VIII -- AMENDMENT OF BY-LAWS Section 1. Amendments and changes of these By-Laws may be made at any regular or special meeting of the Board of Directors at which a quorum is present and acting, by a vote of not less than two-thirds of the entire Board of Directors, or may be made by a vote of, or a consent in writing signed by, the holders of a majority of the issued and outstanding capital stock entitled to vote for the election of directors. EX-23.2 13 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.2 The Board of Directors Vista Laser Centers of Michigan, Inc.: Our report dated April 26, 1996, contains an explanatory paragraph that states that the Company is currently a development stage enterprise and dependent on raising additional financing through a public offering or private placement to meet its current obligations and commitments, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. We consent to the use of our report included herein and to the references to our firm under the headings "Selected Financial Data" and "Experts" in the prospectus. /s/ KPMG PEAT MARWICK LLP -------------------------- KPMG Peat Marwick LLP New York, New York June 5, 1996 -----END PRIVACY-ENHANCED MESSAGE-----