FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
MEDCARE TECHNOLOGIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
UTAH 87-0429962B
---- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1408 -- 400 Burrard Street, Vancouver, BC, Canada V6C 3G2
- ------------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 643-1765
--------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock None
$0.001 par value
Securities to be registered pursuant to Section 12(g) of the Act:
100,000,000 Shares of Common Stock,
including 800,000 options
1,000,000 Shares of Preferred Stock
<PAGE>
TABLE OF CONTENTS
PAGE
COVER PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . .2
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . 5
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 5
REMUNERATION OF DIRECTORS AND OFFICERS. . . . . . . . . . 6
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS. . . . . . . . . . . . . . . . . . . . . 6
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . 7
SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . 7
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS. . . . .. . . 8
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . .. 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. . . . . .. 9
RECENT SALES OF UNREGISTERED SECURITIES. . . . . . . . . .9
INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . .9
PART F/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 10
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INDEX TO EXHIBITS. . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE>
PART I
The issuer has elected to follow Form 10-SB, Disclosure Alternative 2.
ITEM 6. DESCRIPTION OF BUSINESS
MedCare Technologies, Inc. (the "Company"), formerly known as Multi-
Spectrum Group, Inc., was incorporated under the name Santa Lucia Funding,
Inc., in the State of Utah on January 17, 1986, with an authorized capital
of 50,000,000 common shares with a par value of $0.001. On February 8,
1990, the Company adopted a plan of merger with Multi-Spectrum Group, Inc.,
a Delaware corporation. According to the terms of this plan, Multi-
Spectrum Group, Inc., a Delaware corporation, and Santa Lucia Funding,
Inc., a Utah corporation, merged into Santa Lucia Funding, Inc., a Utah
corporation, which then changed its name to Multi-Spectrum Group, Inc. The
outstanding shares of Multi-Spectrum Group, Inc. were converted into common
shares of Santa Lucia Funding, Inc. at the exchange rate of 55,305 shares
of Santa Lucia for each common share of Multi-Spectrum then issued and
outstanding. In addition, the number of common shares authorized was
increased from 50,000,000 to 100,000,000 with the par value remaining at
$0.001.
On August 11, 1995, a reverse split of the common stock by a ratio of
one new for 1,200 old was effected, with the par value remaining at $0.001.
This reduced the total number of shares issued and outstanding to 58,519.
On August 14, 1995, the Company acquired MedCare Technologies Corporation
as a wholly-owned subsidiary in exchange for 2,000,000 shares of the
Company's common stock, for a total value of $300,000. This transaction
was completed in order to acquire the MedCare UI System, a method for
treating urinary incontinence without the use of drugs or surgery. On
August 25, 1995, the Company approved an increase in the authorized capital
to 101,000,000 shares of stock, comprised of 100,000,000 common shares with
a par value of $0.0001 per share and 1,000,000 preferred shares with a par
value of $0.25 per share, and approved a name change to MedCare
Technologies, Inc.
On August 15, 1995, the Company authorized in a Private Placement
Memorandum, pursuant to Regulation D, Rule 504, 4,200,000 shares of its
common stock at an offering price of $0.15. This offering was conducted in
order to raise money for research and development on the MedCare UI System
and was broken down as follows: $300,000 for public relations and
advertising, $155,000 for market research and development, $45,000 for
consulting, $25,000 for miscellaneous expenses and $75,000 as a cash
reserve. On September 20, 1995, the offering was completed with all shares
being issued for a total value of $630,000, less offering costs of $30,000.
On October 1, 1995, the Company's wholly owned subsidiary, MedCare
Technologies Corporation, acquired 100% of Manon Consulting Ltd., an
Alberta, Canada, corporation, for a nominal value from its owners, Diane
Nunzianto, a MedCare Technologies, Inc. director and Philip Tolley and Mel
Tolley. On December 31, 1995, the Company issued 16,666 shares of its
common
3
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stock for $50,000 cash and 25,000 shares of its common stock in exchange
for consulting services for a total value of $75,000.
The Company offered for sale a Private Placement Memorandum pursuant
to Regulation D, Rule 504 which was completed on August 15, 1996. This
offering was for 50,000 shares of common stock at $4.75 per share for a
total offering of $237,500. The proceeds from this offering were arketing,
and working capital.
The Company has developed the MedCare UI System as a non-invasive
(i.e., no catheters or other internally implanted devices), non-surgical,
non-drug, cost effective way to significantly reduce or potentially
eliminate many symptoms of urinary incontinence (UI). Compliance with
Federal, Provincial and local environmental provisions will have no
material effect upon the Company. To date, the Company has spent $155,000
on the development of medical protocols, advertising, equipment, and other
research and development costs.
At present, there are only a few small incontinence clinics scattered
across North America that use a combination of currently available non-
invasive alternative treatment options to treat UI patients. Most, if not
all, of these clinics have limited financial strength for adequate
marketing and advertising, and operate only locally. The Company plans to
market its own UI clinics through a combination of radio, TV, print, direct
mail, seminars, doctor referral and guest interviews by Company
representatives in the local media.
There are two characteristics of the Company's operation which may
have a material impact upon the Company's future financial performance: its
reliance on insurance coverage for payment and referrals from
gynaecologists, urologists, urogynaecologists and other medical
professionals. Because the MedCare UI System is primarily based on EMG
(electromyography) biofeedback, which is an approved service by Medicare,
Medicaid and most commercial insurance companies, insurance is expected to
cover approximately $200 per patient treatment, with the average patient
requiring 6 to 8 visits. Payments from HMOs such as Aetna, Cigna and
Humana are expected to range from 50% to 100% of the treatment costs.
There can be no assurance, however, that such payments will be received by
the Company. Due to the fact that the Company's treatment process is non-
surgical and non-drug, however, it offers a lower cost treatment
alternative and it is unlikely, therefore, that insurance coverage will
change. Many medical professionals, moreover, advocate drugs or surgery as
their preferred method of treatment for incontinent patients, primarily
because they have been trained to do so and are financially motivated to
offer surgery, drugs or other invasive treatment options. There is no
guarantee that this will change in the future.
The Company and its subsidiaries have a total of 6 employees, of whom
4 are full-time.
4
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ITEM 7. DESCRIPTION OF PROPERTY
The Company currently has the use of approximately 500 square feet of
office space, the use of 2 board rooms, and all office equipment, including
a photocopier and telephone equipment, on a shared basis with one of the
Company's directors. The offices are located at Suite 1408 - 400 Burrard
Street, Vancouver, British Columbia, Canada, and are used primarily as the
Company's executive offices. No rent is paid by the Company and there is
no lease agreement in place. A second office is located at 2443
Warrenville Road, Suite 600, Lisle, Illinois, 60532. These offices are
rented on a month-to-month basis for $160 per month.
The Company also maintains a clinic currently being utilized as a
developmental facility for the MedCare UI System at 1133 Seventh Avenue,
S.W., Calgary, Alberta, Canada. This clinic is 200 square feet in size and
is located within a senior citizens' health facility at the Kerby Center
for Seniors. The rent on this facility is approximately Canadian $400 per
month.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company and
biographical information.
HARMEL S. RAYAT (AGE 35) PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Rayat
is one of the co-developers of the MedCare UI System. Mr. Rayat has been
in the venture capital industry since 1981 and is the president of Hartford
Capital Corporation, a company which specializes in providing early stage
funding and investment banking services to emerging growth corporations.
He has been a director of the Company since September 1995 and the
President since June 18, 1996. Mr. Rayat is also a director of Far West
Resources, Inc., a non-reporting company trading on the NASDAQ OTC Bulletin
Board.
VALERIE BOELDT-UMBRIGHT (AGE 31) DIRECTOR. Mrs. Boeldt-Umbright is a
registered nurse, with a Bachelors of Science degree in community health
education from Northern Illinois University. With over two years of actual
management experience in the day-to-day operation of the Incontinence
Clinic in Chicago, Mrs. Boeldt-Umbright has supervised personnel, dealt
with insurance and reimbursement matters, marketing and physician
interaction and referrals. She has instructed patients in biofeedback for
their pelvic floor muscles, established individualized neuromuscular
reeducation programs, written new clinical protocols and articles for
publication and has worked as a member of a university team to provide
excellent care and medical treatment for patients. She has been a director
of the Company since March 1996.
NARINDER THOULI (AGE 32) DIRECTOR. Mr. Thouli has five years of experience
with medical technology companies, primarily as a consultant to emerging
market product developers. He is experienced in marketing, human
resources, research and development and clinical and regulatory affairs.
Mr. Thouli has been the treasurer and a director of the Company since
October 1995. He
5
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is also a director of MIS Multimedia Interactive Services, Inc., a public
company listed on the Vancouver Stock Exchange.
DIANE NUNZIATO (AGE 42) DIRECTOR. Ms. Nunziato has a Bachelors of Science
and a Masters of Clinical Science from the University of Western Ontario,
as well as numerous certifications in courses ranging from adult learning,
clinical supervision and instruction, group dynamics, learning theories,
and management. Ms. Nunziato has been instrumental in developing and
refining the clinical protocols for the MedCare UI System and has in-depth
knowledge of every aspect of establishing a clinical system, including
marketing, billing, medical products and equipment, patient and physician
interaction, and the training and supervision of personnel. Ms. Nunziato
has been a director of the Company since November 1995.
KUNDAN S. RAYAT (AGE 68) DIRECTOR/SECRETARY. Mr. Rayat has over 45 years
of experience as an entrepreneur and owner of a diverse spectrum of
businesses, ranging from automotive to heavy construction, on three
different continents. Since 1985, Mr. Rayat has primarily devoted his time
to venture capital, investing in numerous start up ventures, and provides
seasoned senior management advice to emerging market companies as a
consultant. Mr. Rayat has been a director and the secretary of the Company
since August 1995. He is also a director of Far West Resources, Inc., a
non-reporting company trading on the NASDAQ OTC Bulletin Board. He is the
father of Harmel S. Rayat, president of the Company.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth certain information as to the Company's
five highest paid executive officers and directors for the fiscal year
ended December 31, 1995 and for the fiscal year which will end on December
31, 1996. No other compensation was paid or will be paid to any such
officers other than the cash compensation set forth below.
Summary Compensation Table
_______________________________________________________________________
Name and principal position Year Salary
_______________________________________________________________________
Harmel S. Rayat, President & CEO 1995 $2,500.00
Valerie Boeldt-Umbright, Director 1995 $43,500.00
Harmel S. Rayat, President & CEO 1996 $0.00
Valerie Boeldt-Umbright, Director 1996 $43,500.00
_______________________________________________________________________
In fiscal 1995, the aggregate amount of compensation paid to all
executive officers and directors as a group for services in all capacities
was approximately $46,000.00. Compensation of $43,500 will be paid
executive officers and directors for services in fiscal 1996.
6
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ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth, as of June 26, 1996, the beneficial
ownership of the Company's Common Stock by each person known by the Company
to beneficially own more than 5% of the Company's Common Stock outstanding
as of such date and by the officers and directors of the Company as a
group. Except as otherwise indicated, all shares are owned directly.
________________________________________________________________________
(1) (2) (3) (4)
Name and address of Amount and Nature Percent
Title of Class beneficial owner of beneficial owner of class
________________________________________________________________________
Common stock Harmel S. Rayat 2,000,000 31.7%
5131 Highgate Street
Vancouver, B.C., V5R 3G9
Common stock Directors and Officers 2,000,000 31.7%
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company maintains its executive offices on a shared basis with its
President and Chief Executive Officer.
On October 1, 1995, the Company acquired 100% of Manon Consulting Ltd.
for nominal value. Diane Nunziato, a director of the Company, was a
director and minority shareholder of Manon Consulting at the time of the
transaction, which was approved by both boards after disclosure.
ITEM 12. SECURITIES BEING OFFERED
PREFERRED STOCK
The Company has 1,000,000 preferred shares authorized, with none
issued at this time. The Board of Directors may issue the preferred shares
from time to time in one or more series, each series to have voting rights,
preference in dividends and in liquidation and such other rights,
preferences and conditions as the Board of Directors may designate by an
amendment to the Company's Articles of Incorporation by action duly adopted
without shareholder action and shareholder action shall not be required
thereof.
7
<PAGE>
COMMON STOCK
The Company has 100,000,000 common shares authorized. The Company has
500,000 shares reserved under its 1995 Stock Option Plan for issuance at
$3.00 per share until December 31, 2001. The optionees and numbers of
shares optioned are as follows:
Harmel S. Rayat 150,000
Bhupinder Mann* 100,000
Ranijit Bhogal* 100,000
Herdev S. Rayat* 100,000
Frank Mueller 10,000
Sarbjit Thouli 10,000
Grant Mackney 10,000
Todd Weaver 10,000
Dave Gamache 10,000
* As of June 30, 1996, each of these optinees have exercised options on
11,666 of their shares at $3.00 each.
The Company has 300,000 shares reserved under its 1996 Stock Option
Plan for issuance at $4.50 per share until June 20, 2001. None of these
shares have been exercised. The optionees are as follows:
Harmel S. Rayat 160,000
Terry Johnston 60,000
Valerie J. Boeldt-Umbright 40,000
Dr. Michael M. Blue 40,000*
* These shares are for issuance at $5.00 per share until August 15, 2001.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
The shares of the Company's stock are traded on the OTC Bulletin Board
and the following have been the average High and Low prices for the times
indicated:
8
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High Low
---- ---
April-June 1996 $5.625 $4.75
January-March 1996 $4.875 $4.75
October-December 1995 $6.00 $3.785
July-September 1995 $6.00 $5.375
Prior to this period, the Company traded as Multi Spectrum Group, Inc. and
traded between $0.02 and $0.03 per share for many years.
There are no outstanding warrants or convertible securities other than
stock options currently outstanding.
As of June 30, 1996 there were 143 registered shareholders in the
Company. To the best of the Company's knowledge, all of these people were
accredited investors. There are no dividend restrictions in the Company.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against the
Corporation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On August 21, 1995, the accounting firm of Jones, Thomas, Jenson and
Associates was replaced by William L. Clancy, CPA, as the Company's
independent accounting firm. There were and are no disagreements with
Jones, Thomas, Jensen and Associates.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On August 14, 1995, the Company acquired the MedCare UI system assets
for 2,000,000 shares of the Company's common stock for a total value of
$300,000. On August 15, 1995, the Company authorized in a Regulation D,
Rule 504 Disclosure Memorandum the sale of 4,200,000 shares of its common
stock at an offering price of $0.15. On September 20, 1995, the offering
was completed with all shares being issued for a total value of $630,000,
less offering costs of $30,000. These sales were made to Canadian and
American citizens and a Form D was filed. On December 31, 1995, the
Company issued 16,666 shares of its common stock for $50,000 cash and
25,000 shares of its common stock in exchange for consulting services to
Cambridge Capital Corporation of Grand Turk, Turks & Caicos Islands,
British West Indies, for a total value of $75,000.
9
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The Company has just completed, on August 15, 1996, an offering via a
Private Placement Memorandum pursuant to Regulation D, Rule 504. This
offering was for a total of 50,000 shares of common stock at an offering
price of $4.75 per share for a total offering of $237,500.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The officers and directors of the Company are indemnified as provided
under Nevada Statutes. No additional indemnification has been authorized.
PART F/S
FINANCIAL STATEMENTS
The Company's audited Financial Statements are attached hereto.
PART III
INDEX TO EXHIBITS
PAGE
Exhibit 1: Articles of Incorporation and Amendments E-2
Exhibit 2: Bylaws E-22
Exhibit 3: Plan of Merger with Multi-Spectrum Group E-52
Exhibit 4: Board Meeting Minutes for Reverse Stock
Split of 8/11/95 E-117
Exhibit 5: Board Meeting Minutes for Increase in
Capital of 8/25/95 E-120
Exhibit 6: Acquisition Agreement for Assets of
MedCare Corporation E-122
Exhibit 7: 504 Memorandum of 8/31/95 E-125
Exhibit 8: 504 Memorandum of 6/22/96 E-140
10
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FINANCIAL STATEMENTS
<PAGE>
CONTENTS
Independent Auditor's Report - - - - - - - - - - - - - - - 1
Consolidated Balance Sheets at December 31, 1995 - - - - - 2-3
Consolidated Statements of Operations - - - - - - - - - - - 4
Consolidated Statements of Stockholders' Equity - - - - - - 5-8
Consolidated Statement of Cash Flows -- - - - - -- - - - - - 9-10
Notes to Consolidated Financial Statements - - - - - - - - - 11-14
F-2
<PAGE>
WILLIAM L. CLANCY
CERTIFIED PUBLIC ACCOUNTANTS
CENTRAL PLAZA
SUITE 890
4041 NORTH CENTRAL AVENUE (602) 266-2646
P.O. BOX 16627 (85011-6627) Fax: (602) 266-2402
PHOENIX, ARIZONA 85012
INDEPENDENT AUDITOR'S REPORT
Board of Directors
MedCare Technologies, Inc.
Vancouver, B.C.
I have audited the accompanying consolidated balance sheets of MedCare
Technologies, Inc. (A Development Stage Company) as of December 31, 1995
and 1994 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 consolidated
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. I believe that my
audit of the financial statements provides a reasonable basis for my
opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MedCare
Technologies, Inc. (A Development Stage Company) as of December 31, 1995
and 1994. in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a Development Stage Company as defined
in Financial Accounting Standards Board Statement No. 7. The Company is
devoting substantially all of its present efforts in establishing a new
business and although planned principal operations have commenced, there
have been no significant revenues. In addition, the Company does not
presently have adequate financing to carry out its business plan. These
factors raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ William L. Clancy
William L. Clancy, CPA
March 31, 1996
F-3
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
Current Assets
Cash $ 44,975 $ 0
Accounts Receivable 640 0
------- -------
Total Current Assets 45,615 0
Property and Equipment, at Cost -- Note 2
Office Equipment 4,103 0
Medical Equipment 16,799 0
------- -------
20,902 0
Less Accumulated Depreciation 8,575 0
------- -------
Net Book Value 12,327 0
Other Assets
Organization Costs (Net of
Amortization) 188 50
Deferred Charges --
Start Up Costs - Note 2 542,706 0
Intangible Assets --
MedCare UI System - Note 3 300,000 0
------- -------
Total Other Assets 842,894 50
------- -------
Total Assets $ 900,836 $ 50
======= =======
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
Current Liabilities
Accounts Payable $ 979 $ 0
Notes Payable - Officers - Note 4 & 5 23,135 0
------- -------
Total Current Liabilities 24,114 0
Total Liabilities 24,114 0
Stockholders' Equity
Preferred Stock, $.25 Par Value
1,000,000 Authorized; Issued
And Outstanding, none 0 0
Common Stock, Par Value $.001
Authorized 100,000,000 shares;
Issued and Outstanding, 6,300,185
At December 31, 1995, and
70,222,800 at December 31, 1994 6,300 70,223
Additional Paid In Capital 1,040,713 ( 36,919)
Deficit Accumulated During The
Development Stage (170,291) ( 33,254)
------- -------
Total Stockholders' Equity 876,722 50
------- -------
Total Liabilities and
Stockholders' Equity $ 900,836 $ 50
========== ========
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995 and 1994
And From Inception (January 17, 1986)
Through December 31, 1995
Deficit
Year Year Accumulated
Ended Ended During The
December December Development
31, 1995 31, 1994 Stage
Revenues $ 1,729 $ 0 $ 1,729
Expenses
General and
Administrative 138,766 0 174,807
-------- -------- --------
Total Expenses 138,766 0 174,807
-------- -------- --------
Net Operating (Loss) (137,037) 0 (173,078)
Other Income
Interest Income 0 0 2,787
-------- -------- --------
Net Loss $(137,037) $ 0 $(170,291)
======== ======== ========
Net Loss Per Share $ NIL $ NIL $ NIL
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
From Inception (January 17, 1986)
Through December 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During The
Common Stock Paid In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balance --
January 17,
1986 0 $ 0 $ 0 $ 0
Issued to
officers and
directors
at $.002
per share 2,500,000 2,500 2,500
Issued
pursuant to
a public
offering
at $.01 3,645,000 3,645 32,805
Cost of
offering (7,946)
Net loss from
Inception on
January 17,
1986 through
December 31,
1987 (316)
-------- -------- -------- --------
Balance -
December 31,
1987 6,145,000 6,145 27,359 ( 316)
Escrow fee
for public
offering (200)
Net loss year
ended
December 31,
1988 (1,030)
-------- -------- -------- --------
Balance -
December 31,
1988 6,145,000 6,145 27,159 (1, 346)
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-7
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
From Inception (January 17, 1986)
Through December 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During The
Common Stock Paid In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Net loss year
ended
December 31,
1989 (21,707)
-------- -------- -------- --------
Balance --
December 31,
1989 6,145,000 6,145 27,159 (23,053)
Issuance in
accordance
with plan of
merger with
Multi-
Spectrum
Group, Inc.
February 28,
1990 55,305,000 55,305 (55,305)
Net loss year
ended
December 31,
1990 (10,201)
-------- --------- -------- --------
Balance --
December 31,
1990 61,450,000 61,450 (28,146) (33,254)
Net loss year
ended
December 31,
1991 0
-------- -------- -------- -------
Balance -
December 31,
1991 61,450,000 61,450 (28,146) (33,254)
Issued to
Group of
Five, Inc.
November 13,
1992 8,772,800 8,773 (8,773) 0
-------- -------- -------- --------
Net loss year
Ended
December 31,
1992 0
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-8
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
From Inception (January 17, 1986)
Through December 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During The
Common Stock Paid In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balance --
December 31,
1992 70,222,800 70,223 (36,919) (33,254)
Net loss year
ended
December 31,
0
-------- -------- -------- --------
Balance --
December 31,
1993 70,222,800 70,223 (36,919) (33,254)
Net loss year
ended
December 31,
1994 0
-------- -------- -------- --------
Balance
December 31,
1994 70,222,800 70,223 (36,919) (33,254)
Reverse Split
1200:1
August 11,
1995 (70,164,281) (70,164) 70,164
Acquisition of
MedCare UI
System
Assets
August 14,
1995 2,000,000 2,000 298,000
Issued
pursuant to
a public
offering
at $.001
September
20, 1995 4,200,000 4,200 625,800
Cost of
offering (30,000)
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-9
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
From Inception (January 17, 1986)
Through December 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During The
Common Stock Paid In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Purchase of
100% of the
outstanding
stock of
Manon
Consulting, Ltd.
on October 1,
1995 (11,290)
Issued for cash
December 31,
1995 16,666 17 49,983
Issued for
services
December 31,
1995 25,000 25 74,975
Net loss year
ended
December 31,
1995 (137,037)
-------- -------- -------- --------
Balance --
December 31,
1995 6,300,185 $ 6,301 $1,040,713 $(170,291)
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-10
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Year Ended December 31, 1995 and 1994 and
From Inception (January 17, 1986)
Through December 31, 1995
Deficit
Year Year Accumulated
Ended Ended During The
December December Development
31, 1995 31, 1994 Stage
Cash Flows From Operating
Activities:
Net Loss $ (137,037) $ 0 $ (170,291)
Adjustments to Reconcile
Net Loss to Net Cash
Used In Operating Activities
Depreciation 8,575 0 8,575
Changes in Assets and
Liabilities
Accounts Receivable (640) 0 (640)
Organization Costs (138) 0 (188)
Start Up Costs (542,706) 0 (542,706)
Accounts Payable 979 979
-------- -------- ---------
Total Adjustments (533,930) 0 (533,980)
-------- -------- ---------
Net Cash Flows from
Operating Activities (670,967) 0 (704,271)
Cash Flows From Investing
Activities
Purchase of Property and
Equipment (20,902) 0 (20,902)
Purchase of Subsidiary (11,291) 0 (11,291)
-------- -------- --------
Net Cash Provided for
Investing Activities (32,193) 0 (32,193)
Cash Flows From Financing
Activities
Issuance of Common Stock 755,000 0 796,450
Offering Costs (30,000) 0 (38,146)
Notes Payable 23,135 0 23,135
-------- -------- --------
Net Cash Flows from
Financing Activities 748,135 0 781,439
Net Increase in Cash 44,975 0 44,975
Cash and Cash Equivalents
Beginning of Period 0 0 0
Cash and Cash Equivalents
End of Period $ 44,975 $ 0 $ 44,975
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
F-11
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Year Ended December 31, 1995 and 1994 and
From Inception (January 17, 1986)
Through December 31, 1995
Supplemental Information
Non-Cash Financing
Intangible Assets Purchased
With Common Stock $300,000 $ 0 $300,000
======== ======== ========
Interest Paid $ 0 0 0
======== ======== ========
Income Taxes Paid $ 0 0 0
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
F-12
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 1 - ORGANIZATION
------------
MedCare Technologies, Inc. (The Company), formerly known as Multi-
Spectrum Group, Inc., was incorporated under the name of Santa Lucia
Funding, Inc., under the laws of the State of Utah on January 17,1986
with a authorized capital of 50,000,000 common shares with a par value
of $.001. On February 8, 1990, the Company adopted a plan of merger
with Multi-Spectrum Group, Inc., a Delaware Corporation, in which
Multi-Spectrum Group, Inc. would be dissolved and the name of Santa
Lucia Funding, Inc. would be changed to Multi-Spectrum Group, Inc.
The Company authorized a reverse split of 1200:1 to be effective
August 11, 1995. On August 28, 1995, the Company approved an increase
in the authorized capital to 101,000,000 of which 100,000,000 shares
shall be Common Stock with a par value of $.001 and 1,000,000 shares
shall be Preferred Stock with a par value of $.25 per share, and a
name change to MedCare Technologies, Inc. The Company has been
inactive since January 1, 1990. The Company has had no revenues nor
incurred any operating expenses during the inactive period.
On August 11, 1995, the Stockholders authorized a reverse split of
1200:1 reducing the outstanding common shares to 58,519.
On August 14, 1995, the Company acquired the MedCare UI System assets
in exchange for 2,000,000 shares of Company's common stock for a total
value of $300,000.
On September 20, 1995, the Company authorized in a 504D Disclosure
Memorandum, 4,200,000 shares of it's common stock at a offering price
of $.15. On September 20, 1995, the offering was completed with all
shares being issued for a total value of $630,000, less offering costs
of $30,000.
On October 1, 1995, the Company purchased 100% of the outstanding
shares of Manon Consulting, Ltd. Manon Consulting, Ltd. will be a
wholly owned subsidiary of the Company.
On December 31, 1995, the Company issued 16,666 shares of it's common
stock for $50,000 cash.
On December 31, 1995, the Company issued 25,000 shares of it's common
stock in exchange for consulting services for a total value of
$75,000.
The Company is a development stage company, as defined in Financial
Accounting Standards Board No. 7. The Company is devoting
substantially all of it's present efforts in securing and establishing
a new business, and its planned principal operations have not
commenced and, accordingly, no revenue has been derived therefrom
during the inactive period. In addition, the Company does not
presently have adequate
F-13
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 1 - ORGANIZATION (CONTINUED)
------------------------
financing to carry out it's business plan. These factors raise
substantial doubt abut it's ability to continue as going concern.
The financial statements have been prepared on the basis of accounting
principles applicable to a going concern. Accordingly, they do not
purport to give effect to adjustments, if any, that may be necessary
should the Company be unable to continue as a going concern, is
dependent upon a successful purchase and financing of a business and
its ability to establish itself as a profitable business. The
Company's ability to achieve these objectives cannot be determined at
this time.
Note 2 - Significant Accounting Policies
-------------------------------
A. Method of Accounting
--------------------
The Company maintains its books and prepares its financial
statements on the accrual basis of accounting.
B. Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash and cash equivalents.
C. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Company and it's wholly owned subsidiary, Manon
Consulting, Ltd. Intercompany transactions have been eliminated
in consolidation.
D. Equity Method
-------------
Investments in companies have been included in the financial
report using the equity method of accounting. The Company's only
wholly owned subsidiary, Manon Consulting, Ltd., is engaged in
the business of medical consulting and services in Canada.
D. Deferred Charges
----------------
The Company has deferred all start up costs from January 1, 1991
to September 30, 1995 amounting to $542,706. The Company intends
to amortize these costs over 5 years beginning with the first
year in which commercial sales occur. Such amortization schedule
will result in charges against earnings of $108,541 per year for
each of the years.
F-14
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-------------------------------------------
E. Organizational Expenses
-----------------------
Organizational expenses represent legal and filing fees. Upon
commencement of planned principal operations, the Company will
amortize its organization costs over sixty (60) months using the
straight line method.
F. Property and Equipment
----------------------
Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives as
follows:
Office Equipment 3 to 5 years
Medical Equipment 3 to 5 years
Depreciation charged to expense during the period was $718.
G. Income Taxes
------------
There has been no provision for income taxes, because of the
losses that the Company has incurred to date. The Company has
net operating losses that will expire beginning with the year
2002 through 2005, in the amount of $33,254, unless utilized by
the Company. The current year loss has been incurred entirely in
Canada.
H. Earnings or (Loss) Per Share
----------------------------
Earnings or loss per share is computed using the weighted average
number of shares of common stock outstanding.
NOTE 3 - MEDCARE UI SYSTEM
-----------------
On August 14, 1995, the Company acquired The MedCare UI System in
exchange for 2,000,000 shares of common stock of MedCare
Technologies, Inc. The transaction was accounted for in
accordance with the process for valuation of intangible assets as
described in Statement No. 17 of the Accounting Principles Board.
The Company has developed The MedCare UI System (Urinary
Incontinence) that significantly reduces or completely eliminates
the majority of UI cases using a program that takes into account
the clinical, cognitive, functional and residential status of the
patient. The Company intends to amortize the cost of the
F-15
<PAGE>
MEDCARE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 3 - MedCare UI Systems (Continued)
------------------------------
system over 15 years beginning with the first year in which
commercial sales occur. Such amortization will result in charges
against earnings of $20,000 per year of each of the years.
Note 4 - NOTES PAYABLE
-------------
The Company has loans payable to officers of related companies
that are paid back as cash flows allow. The notes are demand
notes with no interest rates currently applicable.
Note 5 - TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Notes payable represent advance from related officers that are
paid back as cash flows allow. The notes are demand notes with
no interest rates currently applicable.
F-16
<PAGE>
SIGNATURES
The issuer has duly caused this offering statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Vancouver, Province of British Columbia, Canada, on _____________________,
19____.
MEDCARE TECHNOLOGIES, INC.
By __________________________________
Harmel S. Rayat, President
This offering statement has been signed by the following persons in
the capacities andon the dates indicated.
- --------------------------------------- ---------------------------
Narinder Thouli, Treasurer and Director Date
- --------------------------------------- ---------------------------
Kundan S. Rayat, Secretary and Director Date
- --------------------------------------- ---------------------------
Valerie Boeldt-Umbright, Director Date
- --------------------------------------- ---------------------------
Diane Nunziato, Director Date
11
<PAGE>
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT 1:
ARTICLES OF INCORPORATION
AND AMENDMENTS
<PAGE>
ARTICLES OF INCORPORATION
OF
SANTA LUCIA FUNDING, INC.
We, the undersigned, natural persons of the age of eighteen years or
more, acting as incorporators of a corporation under the Utah Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation:
ARTICLE I - NAME
The name of this corporation is Santa Lucia Funding, Inc.
ARTICLE II - DURATION
The period of its duration is perpetual.
ARTICLE III - PURPOSES
The corporation is primarily organized for the purpose of being
a blind pool and conducting a blind pool offering of its securities, and
establishing, acquiring, merging with or into, or being acquired by,
another business in the field of high
E-3
<PAGE>
technology, manufacturing and marketing, or another type of industry, and
to transact any or all lawful business for which corporations may be
incorporated under the Utah Business Corporation Act and, in aid thereof,
the corporation shall have unlimited power to engage in and to do any
lawful act concerning any or all business for which corporations my be
organized under the said Act, including but not limited to the following:
(a) To enter into any lawful arrangement for sharing profits,
a union of interests, reciprocal association or cooperative association
with any corporation, association, partnership, individual or other legal
entity for the carrying on of any business and to enter into any general
or limited partnership for the carrying on of any business;
(b) To lease, sell, exchange and trade real and personal
property, either tangible or intangible;
(c) To conduct business anywhere in the world;
(d) To guarantee the obligations of others' with or without
consideration.
E-4
<PAGE>
ARTICLE IV - STOCK
The aggregate number of shares which the corporation shall be
authorized to issue is 50,000,000 shares of the par value of $0.001 per
share. All stock of this corporation shall be of the same class, common,
and shall have the same rights and preferences. Fully paid stock of this
corporation shall not be liable to any call and is non-assessable.
ARTICLE V - PREEMPTIVE RIGHTS
A shareholder shall have no preemptive rights to acquire any
securities of this corporation.
ARTICLE VI - INITIAL CAPITALIZATION
This corporation will not commence business until consideration
of a balance of at least $1,000.00 has been received for the issuance of
shares.
ARTICLE VII - INITIAL OFFICE AND AGENT
The address of this corporation's initial registered office and
the name of its initial registered agent at such address is:
E-5
<PAGE>
Name of Agent Address of Registered Office
- ------------- ----------------------------
Fredrick L. Elliott 2055 Greenbriar Circle
Salt Lake City, Utah 84109
ARTICLE VIII - DIRECTORS
The number of directors constituting the initial Board of
Directors of this corporation is three. The names and addresses of
persons who are to serve as directors until the first annual meeting of
stockholders, or until their successors are elected and qualify, are:
Name Address
- ---- -------
Fredrick L. Elliott 2055 Greenbriar Circle
Salt Lake City, Utah 84109
Wayne D. Smith 720 Terrace Hills Drive
Salt Lake City, Utah 84103
Donald Allan Bostrom 5256 Spring Gate Drive
Holladay, Utah 84117
The number of directors may be changed from time to time by
amendment of the By-Laws, but there shall be not more than 25 not less
than three directors.
E-6
<PAGE>
ARTICLE IX - INCORPORATORS
The name and address of each incorporator is :
Name Address
- ---- -------
Fredrick L. Elliott 2055 Greenbriar Circle
Salt Lake City, Utah 84109
Wayne D. Smith 720 Terrace Hills Drive
Salt Lake City, Utah 84103
Donald Allan Bostrom 5256 Spring Gate Drive
Holladay, Utah 84117
DATED this 17th day of January, 1986.
INCORPORATORS:
/s/ FREDRICK L. ELLIOTT
------------------------------
Fredrick L. Elliott
/s/ WAYNE D. SMITH
------------------------------
Wayne D. Smith
/s/ DONALD ALLAN BOSTROM
------------------------------
Donald Allan Bostrom
E-7
<PAGE>
REGISTERED AGENT:
/s/ FREDRICK L. ELLIOTT
------------------------------
Fredrick L. Elliott
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On the 17th day of January, 1986, Fredrick L. Elliott, Wayne D.
Smith and Donald Allan Bostrom personally appeared before me who, being
by me first duly sworn, severally declared that they are the persons who
signed the foregoing document as incorporators, and Fredrick L. Elliott
who signed as registered agent, and that the statements therein contained
are true.
DATED this 17th day of January, 1986.
/s/
------------------------------
NOTARY PUBLIC
My Commission Expires: Residing At:
July 7, 1988 Salt Lake City, Utah
- ---------------------- ------------------------------
E-8
<PAGE>
CERTIFICATE OF INCORPORATION OF
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, hereby certify as follows:
1. The name of the corporation is: Multi-Spectrum Group,
Incorporated
2. The address of the registered office of the corporation in the
State of Delaware is: 710 Yorklyn Road
Hockessin, Delaware
County of New Castle
The registered agent in charge thereof is:
Registered Agents, Ltd.
3. The purpose of the corporation is:
To develop a Print/Diversified Business Center with the intent of
establishing Franchises.
4. The corporation is authorized to issue capital stock to the
extent of 1000 Shares of no par value.
5. The Board of Directors is authorized and empowered to make,
alter, amend and rescind the By-Laws of the corporation, but
By-Laws made by the Board may be altered or repealed, and new
By-Laws made, by the stockholders.
E-9
<PAGE>
The name and address of the incorporator(s) is (are) as follows:
NAME Patrick J. Ellis ADDRESS 1055 W. Germantown Pike
Norristown, PA 19403
IN WITNESS WHEREOF, the incorporator(s) has (have) hereunto set his
hand and seal this 30th day of March, A.D. 1989.
/s/
------------------------------
E-10
<PAGE>
State of Delaware
Office of Secretary of State
_________________________
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY MULTI SPECTRUM GROUP, INC. IS DULY INCORPORATED UNDER THE
LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL
CORPORATE EXISTENCE SO FAR AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE
DATE SHOWN BELOW.
/s/ MICHAEL HARKINS
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 2122752
679089006 DATE: 03/30/1989
E-12
<PAGE>
ARTICLES OF MERGER
OF DOMESTIC AND FOREIGN CORPORATIONS
INTO
SANTA LUCIA FUNDING, INC.
Pursuant to the provisions of S. 16-10-72 of the Utah Business
Corporation Act, the undersigned domestic and foreign corporations adopt
the following Articles of Merger for the purpose of merging them into one
of such corporations:
FIRST: Then names of the undersigned corporations and the states
under the laws of which they are respectively organized are:
Name of Corporation State
------------------- -----
Santa Lucia Funding, Inc. Utah
Multi-Spectrum Group, Inc. Delaware
SECOND: The laws of the state under which such foreign corporation is
organized permit such merger.
THIRD: The name of the surviving corporation is Multi-Spectrum Group,
Inc. The surviving corporation is to be governed by the laws of the State
of Utah.
FOURTH: The following Agreement and Plan of Merger ("Plan") was
approved by the shareholders of the undersigned domestic corporation in the
manner prescribed by the Utah Business Corporation Act, and was approved by
the undersigned foreign corporation in the manner prescribed by the laws of
the state under which it is organized:
See attached Exhibit "A"."
FIFTH: As to each of the undersigned corporations, the number of
shares outstanding, and the designation and number of outstanding shares of
each class entitled to vote as a class on such Plan, are as follows:
Entitled to Vote as a Class
Number of ---------------------------
Shares Designation Number
Name of Corporation Outstanding of Class of Shares
------------------- ----------- -------- ---------
Santa Lucia Funding, Inc. 6,145,000 Common 6,145,000
Multi-Spectrum Group, Inc. 1,000 Common 1,000
SIXTH: As to each of the undersigned corporations, the total number of
shares voted for and against such Plan, respectively, and, as to each class
entitled to vote thereon as a class, the number of shares of such class
voted for and against such Plan, respectively, are as follows:
Number of Shares
----------------
Entitled to Vote as a Class
Total Total ----------------------------
Name of Voted Voted Voted Voted
Corporation For Against Class For Against
- ----------- --- ------- ----- --- -------
Santa Lucia
Funding, Inc. 3,452,500 -0- Common 3,452,500 -0-
Multi-Spectrum
Group, Inc 1,000 -0- Common 1,000 -0-
E-13
<PAGE>
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
On the 24th day of January, 1990, personally appeared before me
Fredrick L. Elliot, XXX XXXXXXXXXXX, who being by me duly sworn did say
that they are the President XXX XXXXXXXXX of Santa Lucia Funding, Inc., the
corporation that executed the above and foregoing instrument and that said
instrument was signed on behalf of said corporation by authority of its
bylaws and said Fredrick L. Elliott XXX XXXXXXXXXXXXX acknowledged to me
that said corporation executed the same.
/S/ Shana L. Wahl
-----------------------------------
Notary Public
Residing at Salt Lake City
My Commission Expires:
_________________________
STATE OF PENNSYLVANIA )
:ss.
COUNTY OF MONTGOMERY )
Be it remembered, that on this 18th day of January, A.D. 1990,
personally came before me, Barbara A. Kring, a notary public in an for the
county and state aforesaid, David E. Taylor and Charles Cannon, the
President and Secretary of Multi-Spectrum Group, Inc., a corporation of the
State of Delaware, the corporation described in and which executed the
foregoing certificate, know to me personally to be such, and they, they,
the said David E. Taylor and Charles Cannon, as such President an
Secretary, duly executed said certificate before me and acknowledged the
said certificate to be their acts and deeds and the act and deed of said
corporation to said foregoing certificate are in the handwriting of the
said President and Secretary of said corporation, respectively.
In witness whereof, I have hereunto set my hand and seal of office
that day and year aforesaid.
/s/ BARBARA A. KRING
-----------------------------------
Notary Public
Residing at 165 W. Ridge Pk,
Limerick, PA
My Commission Expires: 5-27-91
________________________________
E-14
<PAGE>
SEVENTH: If the surviving corporation is to be governed by the laws
of any other state, such surviving corporation hereby: (a) agrees that is
may be served with process in the State of Utah in any proceeding for the
enforcement of any obligation of the undersigned domestic corporation and
in any proceeding for the enforcement of the rights of a dissenting
shareholder of such domestic corporation against the surviving corporation;
(b) irrevocable appoints the Secretary of State of Utah as its agent to
accept service of process in any such proceeding and (c) agrees that it
will promptly pay to the dissenting shareholders of such domestic
corporation the amount, if any, to which they shall be entitled under the
provisions of the Utah Business Corporation Act with respect to the rights
of dissenting shareholder:
DATED: January 19,1990
By: --------------------------------
Its President
/s/ WAYNE D. SMITH
And: -------------------------------
Its Secretary
MULTI-SPECTRUM GROUP, INC.
By: --------------------------------
Its President
And: -------------------------------
Its Secretary
E-15
<PAGE>
STATE OF CALIFORNIA )
:ss.
COUNTY OF )
On the 31st day of January, 1990, personally appeared before me Wayne
D. Smith, who being by me duly sworn did say that he is the Secretary of
Santa Lucia Funding, Inc., the corporation that executed the above and
foregoing instrument and that said instrument was signed on behalf of said
corporation by authority of its bylaws and said Wayne D. Smith acknowledged
to me that said corporation executed the same.
/s/ CYNTHIA M. STAFFORD
------------------------------------
Notary Public
Residing at 2965 Sunrise Blvd #102
Rancho Cardova, CA 95742
My Commission Expires: July 1, 1991
E-16
<PAGE>
Utah State Tax Commission TC-784
Letter of Good Standing Rev. 2/94
Corporation Representatives Name and Address Issue Date
August 16, 1995
Account Number
MULTI-SPECTRUM INC 0001187258
1348 EAST 3300 SOUTH #101
SALT LAKE CITY, UTAH 84106 Tax Type
Corporation
Utah Charter Number
118725
The Utah State Tax Commission Certifies that:
MULTI-SPECTRUM INC
has filed all income or franchise tax returns required and paid all taxes
thereon to be due. The status of the account is current as of the date of
this letter.
The account is subject to audit, and if a liability exists, it may be
assessed at any time. The issuance of this letter does not fix, abate,
modify, or cancel any liability for payment of money due or an obligation
to the State of Utah.
This letter does not fulfill the requirements for dissolving or withdrawing
a corporation from the State of Utah. Please contact the Department of
Commerce, Division of Corporation for information regarding corporate
dissolution or withdrawal.
/s/ CINDY LOVE
- ----------------------------------
Cindy Love, Customer Service Agent
Customer Service Counter
Customer Service Division
Inquiries regarding this letter should be directed to: Customer Service
Counter, Utah State Tax Commission, 210 North 1950 West, Salt Lake City,
UT, 84134 or call (801) 297-7540.
E-17
<PAGE>
STATE OF UTAH
DEPARTMENT OF COMMERCE
CERTIFICATION
OF GOOD STANDING
THE UTAH DIVISION OF CORPORATIONS AND COMMERCIAL CODE HEREBY CERTIFIES THAT
SANTA LUCIA FUNDING, INC.
is a Utah corporation and is qualified to transact business in the State of
Utah, and that its most recent annual report required by Utah law has been
filed, and that Articles of Dissolution have not been filed. A Certificate
of Incorporation was issued from this office on JANUARY 17, 1986 and said
corporation is in good standing, as appears of record in the offices of the
Division.
The certification is not intended to reflect the financial condition,
business activity or practices of this corporation.
File Number: CO 118725
Dated this 24th day of August ,1995.
/s/ KORIA T. WOODS
By: --------------------------------
Koria T. Woods
Director, Division of
Corporations and Commercial Code
E-18
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MULTI SPECTRUM GROUP, INC.
(aka Santa Lucia Funding, Inc.)
Multi Spectrum Group, Inc., (aka Santa Lucia Funding, Inc.), a
corporation organized and existing under and by virtue of the General
Corporation and Business Laws of the State of Utah (hereinafter
"Corporation").
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth two proposed amendments of the
Certificate of Incorporation of Corporation, declaring said amendments to
be advisable and calling a meeting of the stockholders of Corporation for
consideration thereof. The resolution setting forth the proposed amendment
is as follows:
RESOLVED: that the Certificate of Incorporation be amended by
changing Article I thereof so that, as amended, said Article shall be
and read as follows:
"The name of the corporation is MedCare Technologies, Inc."
And be it,
FURTHER RESOLVED: that the Certificate of Incorporation be amended by
changing Article IV thereof so that, as amended, said Article shall
read as follows:
"The aggregate number of share which this corporation shall have
authority to issue is 101,000,000 shares, of which 100,000,000 shares
shall be $.001 par value Common Stock and 1,000,000 shares shall be
$.25 par value Preferred Stock. The Common Stock shall have voting
rights of one vote per share. The Board of Directors may issue the
Preferred Stock from time to time in one or more series, each series
to have such voting rights, preference in dividends and in liquidation
and such other rights, preferences and conditions as the Board of
Directors may designate by an amendment to these Articles of
Incorporation by action duly adopted without shareholder action shall
not be required therefor. Fully-paid stock of this Corporation shall
not be liable to any further call or assessment."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a meeting of the stockholders of said corporation was dully
called and held, upon notice in accordance with Section S. 16-10a-705 of
the General Corporation and Business Laws of the State of Utah at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendments.
E-19
<PAGE>
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section S. 16-10a-1003 of the General Corporation and
Business Laws of the State of Utah.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said Board of Directors has caused this
certificate to be signed by Kundan S. Rayat, its Secretary, this 25th day
of August, 1995.
Multi-Spectrum Group, Inc.
/s/ KUNDAN S. RAYAT
- ----------------------------
Kundan S. Rayat, Secretary
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<PAGE>
STATE OF UTAH
DEPARTMENT OF COMMERCE
CERTIFICATION
OF GOOD STANDING
THE UTAH DIVISION OF CORPORATIONS AND COMMERCIAL CODE HEREBY CERTIFIES THAT
MEDCARE TECHNOLOGIES, INC.
is a Utah corporation and is qualified to transact business in the State of
Utah, and that its most recent annual report required by Utah law has been
filed, and that Articles of Dissolution have not been filed. A Certificate
of Incorporation was issued from this office on JANUARY 17, 1986 and said
corporation is in good standing, as appears of record in the offices of the
Division.
The certification is not intended to reflect the financial condition,
business activity or practices of this corporation.
File Number: CO 118725
Dated this 28th day of August ,1995.
/s/ KORIA T. WOODS
By: --------------------------------
Koria T. Woods
Director, Division of
Corporations and Commercial Code
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<PAGE>
EXHIBIT 2:
BYLAWS
<PAGE>
BY-LAWS
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the State of
Delaware shall be at 710 Yorklyn Rd., Hockessin, Delaware, County of New
Castle
The registered agent in charge thereof shall be Registered Agents,
Ltd.
Section 2. The corporation may also have offices at such ocher
places as the Board of Directors may from time to time appoint or the
business of the corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate
Seal, Delaware".
ARTICLE III - STOCKHOLDERS' MEETING
Section 1. Meetings of stockholders shall be held at the registered
office of the corporation in this state or at such place, either within or
without this state, as may be selected from time to time by the Board of
Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders
shall be held on the fifteenth day of May in each year if not a legal
holiday, and if a legal holiday, then on the next secular day following at
two o'clock p.m.,
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when they shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting. If the annual meeting for
election of directors is not held on the date designated therefor, the
directors shall cause the meeting co be held as soon thereafter as
convenient.
Section 3. ELECTION OF DIRECTORS: Elections of the directors of the
corporation shall be by written ballot.
Section 4. SPECIAL MEETINGS: Special meetings of the stockholders may
be called at any time by the President, or the Board of Directors, or
stockholders entitled to cast at least one-fifth of the votes which all
stockholders are entitled to cast at the particular meeting. At any time,
upon written request of any person or persons who have duly called a
special meeting, it shall be the duty of the Secretary to fix the date of
the meeting, to be held not more than sixty days after receipt of the
request, and to give due notice thereof. If the Secretary shall neglect or
refuse to fix the date of the meeting and give notice thereof, the person
or persons calling the meeting may do so.
Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all
stockholders entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time
and place and object thereof, shall be given to each stock holder entitled
to vote thereof at least 14 days before such meeting, unless a greater
period of notice is required by statute in a particular case.
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Section 5. QUORUM: A majority outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders. If less than a majority of the
outstanding shares entitled to vote is represented at a meeting, a majority
of the shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment. notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 6. PROXIES: Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act
for him by proxy, but no such proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the corporation
generally. All proxies
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shall be filed with the Secretary of the meeting before being voted upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called.
Unless otherwise provided by law, written notice of any meeting shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be
taken at any annual or special meeting of stockholders of a corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take
such act notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders
who have not consented in writing.
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Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and
showing the address or each stockholder and the number of shares registered
in the name of each stockholder. No share of stock upon which any
installment is due and unpaid shall be voted at any meeting. The list
shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors, five in number. The directors need not
be residents of this state or stockholders in the corporation. They shall
be elected by the stockholders at the annual meeting of stockholders of the
corporation, and each director shall be elected for the term of one year,
and until his
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successor shall be elected and shall qualify or until his earlier
resignation or removal.
Section 2. REGULAR MEETINGS: Regular meetings of the Board shall be
held without notice every three months, on the first Monday of the quarter
at the registered office of the corporation, or at such other time and
place as shall be determined by the Board.
Section 3. SPECIAL MEETINGS: Special Meetings of the Board may be
called by the President on 10 days notice to each director, either
personally or by mail or by telegram; special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of a majority of the directors in office.
Section 4. QUORUM: A majority of the total number of directors shall
constitute a quorum for the transaction of business.
Section 5. CONSENT IN LIEU OF MEETING: Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereof in writing, and the
writing or writings are filed with the minutes of proceedings of the Board
or committee. The Board of Directors may hold its meetings, and have an
office or offices, outside of this state.
Section 6. CONFERENCE TELEPHONE: One or more directors may
participate in a meeting of the Board, of a committee of the Board
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or of the stockholders, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other; participation in this manner shall constitute
presence in person at such meeting.
Section 7. COMPENSATION: Directors as such, shall not receive any
stated salary for their services, but by resolution of the Board, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board PROVIDED, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 8. REMOVAL: Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors, except that when
cumulative voting is permitted, if less than the entire Board is to be
removed, no director may be removed without cause if the votes cast against
his removal would be sufficient to elect him if then cumulatively voted at
an election of the entire Board of Directors, or, if there be classes of
directors, at an election of the class of directors of which he is a part.
ARTICLE V - OFFICERS
Section 1. The executive-officers of the corporation shall be chosen
by the directors and shall be a President, Secretary
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and Treasurer. The Board of Directors may also choose a Chairman, one or
more Vice Presidents and such other officers as it shall deem necessary.
Any number of offices may be held by the same person.
Section 2. SALARIES: Salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: The officers of the corporation shall hold
office for one year and until their successors are chosen and have
qualified. Any officer or agent elected or appointed by the Board may be
removed by the Board of Directors whenever in its judgment the best
interest of the corporation will be served thereby.
Section 4. PRESIDENT: The President shall be the chief executive
officer of the corporation; he shall preside at all meetings of the
stockholders and directors; he shall have general and active management of
the business of the corporation, shall see that all orders and resolutions
of the Board are carried into effect, subject, however, to the right of the
directors to delegate any specific powers, except such as may be by statute
exclusively conferred on the President, to any other officer or officers of
the corporation; He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation. He shall be EX-OFFICIO
a member of all committees, and shall have the general power and duties of
supervision and management usually vested in the office or President of a
corporation.
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<PAGE>
Section 5. SECRETARY: The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and act as clerk thereof, and
record all the votes of the Corporation and the minutes of all its
transactions in a book to be kept for that purpose, and shall perform like
duties for all committees of the Board of Directors when required. He
shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or President, and
under whose supervision he shall be. He shall keep in safe custody the
corporate seal of the corporation, and when authorized by the Board, affix
the same to any instrument requiring it.
Section 6. TREASURER: The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation, and shall
keep the moneys of the corporation in a separate account to the credit of
the corporation. He shall disburse the funds of the corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the corporation.
ARTICLE VI - VACANCIES
Section 1. Any vacancy occurring in any office of the
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<PAGE>
corporation by death, resignation, removal or otherwise, shall be filled by
the Board of Directors. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at any time, by reason of death
or resignation or other cause, the corporation should have no directors in
office, then any officer or any stockholder or an executor, administrator,
trustee or guardian of a stockholder, or other fiduciary entrusted with
like responsibility for the person or estate of a stockholder, may call a
special meeting of stockholders in accordance with the provisions of these
By-Laws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more
directors shall resign from the Board, effective at a future date, a
majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or
other agency, shall, upon written demand under oath stating the purpose
thereof, have the right during the usual hours for business to inspect for
any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or
extracts therefrom.
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A proper purpose shall mean a purpose reasonably related to such person's
interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other
writing which authorizes the attorney or other agent to so act on behalf of
the stockholder. The demand under oath shall be directed to the corporation
at its registered office in this state or at its principal place of
business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall be
numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall bear the corporate seal and
shall be signed by the President and Secretary
Section 2 TRANSFERS: Transfers of shares shall be made on the books
of the corporation upon surrender of the certificates therefor, endorsed by
the person named in the certificate or by attorney, lawfully constituted in
writing. No transfer shall be made which is inconsistent with law.
Section 3. LOST CERTIFICATE: The corporation may issue a new
certificate of stock in the place of any certificate theretofore signed by
it, alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate, or his
legal representative.
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<PAGE>
to give the corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new
certificate.
Section 4. RECORD DATE: In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no-prior action by the Board of
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<PAGE>
Directors is necessary, shall be the day on which the first written consent
is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution replacing thereto.
(d) A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. DIVIDENDS: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to time
and to such extent as they deem advisable, in the manner and upon the terms
and conditions provided by statute and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there may be
set-aside out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as
a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conductive to the interests of the
corporation, and their director may abolish any such reserve in the manner
in which it was created.
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Directors is necessary, shall be the day on which the first written consent
is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. DIVIDENDS: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to time
and to such extent as they deem advisable, in the manner and upon the terms
and conditions provided by statute and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there may be set
aside out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as
a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve in the manner
in which it was created.
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<PAGE>
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section l. CHECKS: All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate
Section 2. FISCAL YEAR: The fiscal year shall begin on the first day
of April 1989
Section 3. NOTICE: Whenever written notice is required to be given
to any person, it may be given to such person, either personally or by
sending a copy thereof through the mail, or by telegram, charges prepaid,
to his address appearing on the books of the corporation, or supplied by
him to the corporation for the purpose of notice. If the notice is sent by
mail or by telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a
telegraph office for transmission to such person. Such notice shall specify
the place, day and hour of the meeting and, in the case of special meeting
of stockholders, the general nature of the business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice is required
by stature, or by the Certificate or the By-Laws of this corporation a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Except in the case of a special
meeting of stockholders neither the business to be transacted at nor the
purpose of the meeting need be specified in the waiver of notice of such
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meeting. Attendance of a person either in person or by proxy, at any
meeting shall constitute a waiver of notice of such meeting, except where
a person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 5. DISALLOWED COMPENSATION: Any payments made to an officer
or employee of the corporation such as a salary, commission, bonus,
interest, rent, travel or entertainment expense incurred by him, which
shall be disallowed in whole or in part as a deductible expense by the
Internal Revenue Service, shall be reimbursed by such officer or employee
to the corporation to the full extent of such disallowance. It shall be the
duty of the directors, as a Board, to enforce payment of each such amount
disallowed. In lieu of payment by the officer or employee, subject to the
determination of the directors, proportionate amounts may be withheld from
his future compensation payments until the amount owed to the corporation
has been recovered.
Section 6. RESIGNATIONS: Any director or other officer may resign at
anytime, such resignation to be in writing, and to take effect from the
time of its receipt by the corporation, unless some time be fixed in the
resignation and then from that date. The acceptance of a resignation shall
not be required to make it effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and Board of Directors shall
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present at each annual meeting a full and complete statement of the
business and affairs of the corporation for the preceding year. Such
statement shall be prepared and presented in whatever manner the Board of
Directors shall deem advisable and need not be verified by a certified
public accountant.
ARTICLE XI - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of
stockholders entitled to cast at least a majority of the votes which all
stockholders are entitled to cast thereon, at any regular or special
meeting of the stockholders, duly convened after notice to the stockholders
of that purpose.
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<PAGE>
BY-LAWS
OF
SANTA LUCIA FUNDING, INC.
ARTICLE I
OFFICES
The principal office of the corporation in the State of Utah shall be
located in the City of Salt Lake City, County of Salt Lake. The
corporation may have such other offices, either within or without the State
of Utah, as the Board of Directors may designate or as the Business of the
corporation may require from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the Fourth Thursday in the month of March in each year,
beginning with the year 1986, at the hour of 2:00 o'clock p.m., for the
purpose of electing Directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Utah, such meeting shall
be held on the next succeeding business day. If the election of Directors
shall not be held on the day designated herein for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors, and shall be called
by the President at the request of the holders of not less than ten percent
(10.0%) of all the outstanding shares of the corporation entitled to vote
at the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate
any place, either within or without the State of Utah, unless otherwise
prescribed by statute, as the place of meeting for any annual meeting or
for any special meeting. A
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waiver of notice signed by all shareholders entitled to vote at a meeting
may designate any place, either within or without the State of Utah, unless
otherwise prescribed by statute, as the place for the holding of such
meeting. If no designation is made, the place of meeting shall be the
principal office of the corporation is in the State of Utah.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall unless otherwise prescribed
by statute, be delivered not less than ten (10) nor more than fifty (50)
days before the date of the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States Mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS OF FIXING OF RECORD. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders
entitled to received payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the corporation may provide that the stock transfer books
shall be closed for a stated period, but not to exceed in any case fifty
(50) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any case to be not
more than fifty (50) days and, in case of a meeting of shareholders, not
less than ten (10) days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the stock
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at
any meeting of shareholders has been made as provided in this
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section, such determination shall apply to any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete
list of the shareholders entitled to vote at each meeting of shareholders
or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each. Such list shall be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority
of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. The shareholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder
may vote in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. No
proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in
the name of another corporation may be voted by such officer, agent or
proxy as the By-Laws of such corporation may prescribe or, in the absence
of such provision, as the Board of Directors of such corporation may
determine.
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Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be
voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into
his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name, if
authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise
provided by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWER. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be fixed by the Board of Directors, but
in no event shall be less than three (3). Each director shall hold office
until the next annual meeting of shareholders and until his successor shall
have been elected and qualified.
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SECTION 3. REGULAR MEETING. A regular meeting of the Board of
Directors shall be held without other notices than this By-Law immediately
after, and at the same place as, the annual meeting of shareholders. The
Board of Directors may provide, by resolution, the time and place for the
holding of additional regular meetings without notice other than such
resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The person or persons authorized to call special meetings of
the Board of Directors may fix the place for holding any special meeting
of the Board of Directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least one (1) day previous thereto by written notice delivered personally
or mailed to each director at his business address, or by telegram. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States Mail so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any directors may waive
notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called or convened.
SECTION 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
SECTION 8. ACTION WITHOUT A MEETING. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so to be taken, shall be
signed before such action by all of the Directors.
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SECTION 9. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors,
unless otherwise provided by law. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of Directors by the
shareholders.
SECTION 10. COMPENSATION. By resolution of the Board of Directors,
each Director may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a stated salary as
director or a fixed sum for attendance at each meeting of the Board of
Directors or both. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before the adjournment thereof, or
shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a Director ho voted in favor of such action.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers
and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors, including a Chairman of the Board. In
its discretion, the Board of Directors may leave unfilled for any such
period as it may determine any office except those of President and
Secretary. Any two or more offices may be held by the same person, except
for the offices of President and Secretary which may not be held by the
same person. Officers may or may not be directors or shareholders of the
Corporation.
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SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of the officers shall not be held at such meeting, such election
shall be held as soon thereafter as conveniently may be. Each officer
shall hold office until his successor shall have been duly elected and
shall have qualified, or until his death, or until he shall resign or shall
have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent may be removed by the Board
of Directors whenever, in its judgment, the best interests of the
corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all
meetings of the shareholders and of the Board of Directors, unless there is
a Chairman of the Board, in which case the Chairman shall preside. He may
sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the Board of Directors, certificates for shares of
the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President shall
perform the duties of the
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President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If there is more than one Vice
President, each Vice President shall succeed to the duties of the President
in order of rank as determined by the Board of Directors. If no such rank
has been determined, then each Vice President shall succeed to the duties
of the President in order of the date of election, the earliest date having
the first rank.
SECTION 7. SECRETARY. The Secretary shall: (a) keep the minutes of
the proceedings of the shareholders and of the Board of Directors in one or
more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these By-Laws or as required by
law; (c) be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed to all
documents, the execution of which on behalf of the corporation under its
seal is duly authorized; (d) keep a register of the post office address
of each shareholder which shall be furnished to the Secretary by such
shareholder; (e) sign with the President certificates for share of the
corporation, the issuance of which shall have been authorized by resolution
of the Board of Directors; (f) have general charge of the stock transfer
books of the corporation; and (g) in general perform all duties incident to
the office of the Secretary and such other duties as from time to time may
be assigned to him by the President or by the Board of Directors.
SECTION 8. TREASURER. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the
corporation; (b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever, and deposit all such moneys in
the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of
Article VI of these By-Laws; and (c) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
If required by the board of Directors, the Treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such sureties as
the Board of Directors shall determine.
SECTION 9. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors, and no
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officer shall be prevented from receiving such salary by reason of the fact
that he is also a director of the corporation.
ARTICLE V
INDEMNITY
The corporation shall indemnify its directors, officers, and employees
as follows:
(a) Every director, officer, or employee of the corporation shall be
indemnified by the corporation against all expenses and liabilities,
including counsel fees, reasonably incurred by or imposed upon him in
connection with any proceeding to which he may be made a party, or in which
he may become involved, by reason of his being or having been 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 the
corporation, partnership, joint venture, trust or enterprise, or any
settlement thereof, whether or not he is a director, officer, or employee
or agent at the time such expenses are incurred, except in such cases
wherein the director, officer, or employee is adjudged guilty or willful
misfeasance or malfeasance in the performance of his duties; provided that
in the event of a settlement the indemnification herein shall apply only
when the Board of Directors approves such settlement and reimbursement as
being for the best interests of the corporation.
(b) the corporation shall provide to 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 the corporation, partnership, joint venture, trust or
enterprise, the indemnity against expenses of suit, litigation or other
proceedings which is specifically permissible under the Utah Business
Corporation Act.
(c) the Board of Directors may, in its discretion, direct the
purchase of liability insurance by way of implementing the provisions of
this Article V.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation,
and such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the
Board of Directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates
for shares shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on
the stock transfer books of the corporation. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificate
shall be issued until the former certificate for a like number of shares
shall have been surrendered and canceled, except that in case of a lost,
destroyed or militated certificate, a new one may be issued
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therefor upon such terms and indemnity to the corporation as the Board of
directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary
of the corporation, and on surrender of or cancellation of the certificate
for such shares. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for
all purposes.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its articles of
incorporation.
ARTICLE X
CORPORATE SEAL
The Board of Directors may provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words, "Corporate Seal."
ARTICLE XI
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to
be given to any shareholder or director of the corporation under the
provisions of these By-Laws or under the provisions of the Articles of
Incorporation or under the
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provisions of the Utah Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE XIII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of
the Board of Directors.
The above By-Laws are certified to have been adopted by the Board of
Directors or the corporation on the 22nd day of January, 1986.
/s/ WAYNE D. SMITH
------------------------------------
Wayne D. Smith/ Secretary
CDN1276W
<PAGE>
EXHIBIT 3:
PLAN OF MERGER
WITH MULTI-SPECTRUM GROUP
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
MULTI-SPECTRUM GROUP, INC.
AND
SANTA LUCIA FUNDING, INC.
Dated as of December 20, 1989
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated December 20, 1989, by
and between SANTA LUCIA FUNDING, INC., a Utah corporation ( Santa Lucia"),
and MULTI-SPECTRUM GROUP, INC., a Delaware corporation ("MAGI"), (Santa
Lucia and MSGI are herein collectively referred to as the "Constituent
Corporations").
WHEREAS, the Board of Directors of MSGI and Santa Lucia desire to
enter into this Agreement and have approved the merger of MSGI with and
into Santa Lucia (the "Merger"), upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein set forth, and for the purpose of
setting forth certain terms and conditions of the Merger, and the mode of
carrying the same into effect, MSGI and Santa Lucia hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions hereof, at the Effective Time(as defined in Section 1.02), MSGI
shall be merged with and into Santa Lucia in accordance with the Business
Corporation Act of the State of Utah ("BCA") and the General Corporation
Law of the State of Delaware ("DGCL"), whereupon the separate existence of
MSGI shall cease and Santa Lucia shall be the surviving corporation (the
"Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Utah. From and after the Effective Time, the
status, rights and liabilities of, and the effect of the Merger on, each
of the corporations which is a party to the Merger and the Surviving
Corporation shall be as provided in S. 16-10-71 of the BCA.
SECTION 1.02. FILING OF CERTIFICATE OF MERGER AND ARTICLES OF MERGER:
EFFECTIVE TIME. As soon as practicable after the satisfaction of waiver of
the conditions to the consummation of the Merger set forth in Articles VII,
VIII AND IX hereof (except Sections 7.02, 8.02 and 9.01(i), Santa Lucia
will deliver for filing, or cause to be delivered for filing, with the
Secretary of the State of Delaware, a Certificate of Merger and (ii) the
parties will deliver for filing, or cause to be delivered for filing with
the Utah Department of Commerce, Division of Corporations and Commercial
Code ("UDOC"), duly executed Articles of Merger and such other instruments
as may be required by Section 16-10-72 of the BCA to effect the Merger.
The Merger shall become effective on the later of the date and time when
(i) the Certificate of Merger has been filed with the State of Delaware of
(ii) the issuance by the UDOC of the Certificate of merger. The date and
time of such effectiveness is herein referred to as the "Effective Time."
SECTION 1.03. CONVERSION OF OUTSTANDING SHARES.
(a) From and after the Effective Time, each share of common stock of
MSGI ("MSGI Stock") outstanding immediately prior to the Effective Time,
except
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shares held by MSGI in treasury and shares with respect to which appraisal
rights have been properly exercised in accordance with the DGCL, shall, by
virtue of the Merger and without any action on the part of MSGI, Santa
Lucia or any holder thereof, cease to exist and be converted into and
become 55,305 shares of common stock of the Surviving Corporation, $.001
par value per share ("Surviving Corporation Stock"). The consideration
referred to above, together with any cash payments in lieu of fractional
shares as provided herein, is hereinafter referred to as the "Merger
Consideration." The stock certificates representing the Surviving
Corporation Stock issued to the Shareholders of MSGI shall bear the
following, or a similar, restrictive legend:
The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be offered, sold or otherwise transferred in
the absence of an effective Registration Statement for the shares
under the Securities Act of 1933 or a prior opinion of counsel,
satisfactory to the issuer, that registration is not required under
the Act.
(b) Each share of capital stock of Santa Lucia ("Santa Lucia Stock")
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to
exist and be converted into one share of the Surviving Corporation Stock,
$.01 par value per share.
(c) No fractional shares of Surviving Corporation Stock shall be
issued pursuant to the Merger and no holder of MSGI Stock of Santa Lucia
Stock immediately prior to the Effective Time shall, by reason of such
ownership, be entitled to any rights or privileges pertaining to any
fraction of any share of Surviving Corporation Stock. Any person (as
hereinafter defined) who, by reason of the ownership of MSGI Stock or Santa
Lucia Stock, shall be entitled, but for the provisions of this Section, to
receive a fractional share of Surviving Corporation Stock, shall be
entitled to receive a fractional share of Surviving Corporation an amount
in cash equal to the fractional interest multiplied by the fair market
value of the Surviving Corporation Stock at the Effective Time. The
Surviving Corporation will pay the respective amounts to the persons
entitled thereto in accordance with Section 1.04.
(d) No person who after the Effective Time holds an option to acquire
MSGI Stock, for which a right to acquire Surviving Corporation Stock is
substituted in accordance with the provisions of this Section, shall be
entitled by reason thereof to any fractional share of Surviving Corporation
Stock, but shall receive in lieu thereof an amount in cash equal to the
fractional interest multiplied by the fair market value of Surviving
Corporation Stock on the date of exercise of such option less the exercise
price for such fractional interest.
(e) Each share of MSGI Stock and Santa Lucia Stock held by MSGI and
Santa Lucia, respectively, as treasury stock immediately prior to the
Effective Time, shall be canceled, and no payment shall be made with
respect thereto; and
(f) Notwithstanding anything in this Agreement to the contrary, shares
of Santa Lucia Stock outstanding immediately prior to the Effective Time
and which
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are held by shareholders who have not voted such shares in favor of the
approval and adoption of this Agreement and shall have delivered to Santa
Lucia, prior to or at the meeting of Santa Lucia shareholders to be held
pursuant to Section 6.01, a written objection to the Merger and, delivered
to Santa Lucia or the Surviving Corporation, within ten days after such
meeting, a written demand for appraisal of such shares in the manner and
otherwise in accordance with Section 16-10-76 of the BCA ("Dissenting Santa
Lucia Shares"), shall not be converted into or be exchangeable for the
Merger Consideration pursuant to Section 1.03(a), but shall instead be
entitled to receive such consideration pursuant to Section 16-10-76 of the
BCA: PROVIDED, HOWEVER, that if such holder shall have failed to perfect or
shall have withdrawn or lost his right to appraisal and payment under the
BCA, his Santa Lucia Stock shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Time, the
right to receive the Merger Consideration , without any interest thereon,
in accordance with Section 1.03 (a) of this Agreement. Santa Lucia shall
give MSGI prompt notice of any demands received by Santa Lucia for
appraisal, and MSGI shall have the right to participate in all negotiations
and proceedings with respect to such demands. Santa Lucia shall not,
except with the prior written consent of MSGI, settle or offer to settle
any such demands or make any payment with respect thereto, except as shall
be required by a final, non-appealable judgment of a court of competent
jurisdiction.
(g) Notwithstanding anything in this Agreement to the contrary,
shares of Santa Lucia Stock outstanding immediately prior to the Effective
Time and which are held by shareholder who have voted such shares in favor
of or consented to the adoption of this Agreement and shall have delivered
to MSGI, before the taking of the vote on the Merger, a written demand for
appraisal of such shares delivered to the Surviving Corporation, in the
manner and otherwise in accordance with Section 262 of the DGCL
("Dissenting Santa Lucia Shares"), shall not be converted into or be
exchangeable for the Merger Consideration pursuant to Section 1.03(a) , but
shall instead by entitled to receive such consideration as shall be
determined pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, that is
such holder shall have failed to perfect or shall have withdrawn or lost
his right to appraisal and payment under the DGCL, his MSGI Stock shall
thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, in accordance with Section
1.03(a) of this Agreement. MSGI shall give Santa Lucia prompt notice of
any demands received by MSGI for payment, and Santa Lucia shall have the
right to participate in all negotiations and proceedings with respect to
such demands. MSGI shall not, except with the prior written consent of
Santa Lucia, settle or offer to settle any such demands or make any payment
with respect thereto, except as shall be required by a final, non-
appealable judgment of a court of competent jurisdiction.
SECTION 1.04. EXCHANGE OF MSGI STOCK: SURRENDER OF CERTIFICATES.
(a) After the Effective Time, each holder of an outstanding
certificate of certificates, which immediately prior to the Effective Time
represented MSGI Stock, may surrender such certificate to an exchange agent
appointed by the Surviving Corporation (the "Exchange Agent") and receive
one or more stock certificates for the number of full shares of Surviving
Corporation Stock into
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which the MSGI Stock represented by the certificate or certificates so
surrendered have been converted as a result of the Merger; provided,
however, that the holder is otherwise entitled hereby to receive the Merger
Consideration. Subject to the next subsection hereof, until so surrendered
for exchange, each such certificate nominally representing MSGI Stock shall
be deemed for all corporate purposes to evidence the ownership of the
number of full shares of Surviving Corporation which the holder thereof
would be entitled to receive upon its surrender to the Exchange Agent:
provided, however, that holders of MSGI Dissenting Shares or Santa Lucia
Dissenting Shares who have properly exercised their appraisal rights in
accordance with the DGCL or BCA, as applicable, shall not be entitled to
vote or to exercise any other rights as a shareholder.
(b) Unless and until such outstanding certificate or certificates
shall be so surrendered for exchange, no holder thereof shall be entitled
to receive any payment for any fractional share interest or any dividend or
distribution whether in cash or otherwise, payable to holders of record of
Surviving Corporation Stock, but upon the surrender and exchange of such
certificate or certificates there shall be paid to the record holder of the
certificate or certificates of Surviving Corporation Stock issued and
exchanged therefor, the amount of any cash payable in lieu of a fractional
share and all such dividends and distributions (without interest thereof)
which have become payable with respect to Surviving Corporation Stock
represented by the certificate or certificates issued upon such surrender
and exchange as if such certificates of Surviving Corporation Stock had
been issued at the Effective Time. Promptly after the Effective Time,
Santa Lucia and MSGI will, in accordance with Section 6.01, cause the
Exchange Agent to send to all holders of MSGI Stock a letter of transmittal
for use in exchanging their certificates for certificates representing
Surviving Corporation Stock.
(c) If any shares of Surviving Corporation Stock are to be issued in
a name other than that in which the certificate representing MSGI Stock
surrendered for exchange is registered, it shall be a condition of such
exchange that (i) the certificate so surrendered by properly endorsed or
otherwise in proper form for transfer and that the person requesting such
exchange either pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of Surviving Corporation Stock to
persons other than the registered holder of the certificate surrendered or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable and (ii) upon request by Surviving Corporation, the
person requesting such exchange shall provide to Surviving Corporation an
opinion of counsel, satisfactory to Surviving Corporation, to the effect
that the transfer does not require registration under the Securities Act of
1933, as amended ("Securities Act"), or that an exemption from the
requirement of such registration is available.
(d) The stock transfer books of MSGI shall be permanently closed at
the Effective Time. Holders of MSGI Stock who have lost their stock
certificates evidencing MSGI Stock will be entitled to receive
certificates evidencing the Surviving Corporation into which their MSGI
Stock has been converted upon compliance with the procedures, which may
include requests for the furnishing of appropriate indemnification,
affidavits and bonds, established by Surviving Corporation pursuant to its
Bylaws, or otherwise, for replacement of lost Surviving Corporation Stock
certificates.
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(e) Notwithstanding the foregoing, neither the Surviving Corporation
nor any other party hereto shall be liable to a holder of MSGI Stock for
any amount paid to a public official pursuant to applicable abandoned
property laws. If any holders of certificates representing shares of MSGI
Stock are entitled to receive certificates prior to the seventh anniversary
date on which any payment of respect therefor of any governmental agency or
other governmental entity) the amount receivable in remitted by applicable
law, become the property of surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(f) MSGI agrees to use its best efforts to cut the effect that he is
acquiring the MSGI Stock as an investment, solely for his own account and
not with a view to or for the intent of resale, fractionalization or any
further distribution.
SECTION 1.05. ARTICLES OF INCORPORATION. The Articles of
Incorporation of Santa Lucia, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation except that, subject to the approval of the Merger Agreement by
the shareholders of the MSGI and Santa Lucia, such Articles of
Incorporation shall be amended to (i) change the name of the Corporation to
Multi-Spectrum Group, Incorporated; (ii) increase the number of authorized
common shares to 100,000,000 par value $.001; (iii) limit the personal
liability of the directors of the Surviving corporation; and (iv) to make
such other changes as the Board of Directors deems to be in the best
interests of the Surviving Corporation. The text of these amendments to
the Articles of Incorporation of Santa Lucia are as set forth on Appendix
"A" attached hereto and by this reference made a part hereof.
SECTION 1.06. BYLAWS. The Bylaws of Santa Lucia, as in effect
immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 1.07. DIRECTORS AND OFFICERS.
(a) The directors of the Surviving Corporation immediately after the
Effective Time shall be Edward V. Ellis (Chairman of the Board), Charles
Cannon, Patrick J. Ellis, Edward O. Lauman and David E. Taylor.
The directors shall hold office from and after the Effective Time
until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation and
Bylaws of the Surviving Corporation, or as otherwise provided by law. If
at or after the Effective Time a vacancy shall exist on the Board of
Directors of, or in respect of the officers of, the Surviving Corporation,
such vacancy may thereafter be filled in the manner provided in the Bylaws
of the Surviving Corporation.
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(b) The officers of the Surviving Corporation immediately after the
Effective Time shall be:
David E. Taylor President
Edward 0. Lauman Executive Vice President
Edward S. Delong Vice President-Communications
Charles J. Smrykal Vice President - Operations
John J. Keating Vice President - Franchise Development
Ed Boyle Vice President - Public Relations
Michael E. Ellis Vice President - Franchise Marketing
Charles Cannon Secretary
Edward V. Ellis Treasurer
The officers shall hold office from and after the Effective Time at the
pleasure of the board of Directors of the Surviving Corporation, subject to
the provisions set forth in the bylaws of the Surviving Corporation.
SECTION 1.08. CERTAIN EFFECTS OF THE MERGER. From and after the
Effective Time, the Surviving Corporation shall (a) possess all the rights,
privileges, powers and franchises, of a public or of a private nature, of
the Constituent Corporations, (b) be subject to all restrictions,
disabilities, liabilities and duties of each of Santa Lucia and MSGI, all
with the effect and to the extent provided in the BCA and (c) continue its
corporate existence as a Utah corporation.
SECTION 1.09. INCENTIVE PLAN. The Surviving Corporation shall use
its best efforts to adopt an incentive plan ("Incentive Plan") pursuant to
which employees, directors and officers of the Surviving Corporation and
other persons who perform substantial services for or on behalf of the
Surviving Corporation will be eligible to receive stock options and other
awards. A copy of the Incentive Plan is attached hereto as Appendix "B".
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
MSGI
MSGI represents and warrants to Santa Lucia, except as set forth on
the Disclosure Schedules attached hereto (the "Schedules"), that:
SECTION 2.01. CORPORATE EXISTENCE AND POWER. MSGI is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power, authority and legal right to
conduct its business as it is now being conducted and to own the properties
and assets it now owns. MSGI is duly qualified or licensed to do business
as a foreign corporation and is in good standing in every jurisdiction
where the character of the property owned or leased by it or the nature of
its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations (a "Material Adverse
Effect") of MSGI.
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SECTION 2.02. CORPORATE AUTHORIZATION. Subject to shareholder
approval, as required under the DGCL, (a) MSGI has full corporate power
and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, (b) the Board of Directors of MSGI has
taken all action required by law, its Articles of Incorporation and Bylaws
or otherwise to authorized the execution and delivery by MSGI of this
Agreement and the performance by MSGI of the transactions contemplated
hereby, (c) this Agreement has been duly and validly executed and delivered
by MSGI and no other corporate action is necessary in connection therewith
and (d) to the best knowledge of MSGI after conducting diligent inquiry,
this Agreement is a valid and binding agreement of MSGI enforceable against
MSGI in accordance with its terms, except to the extent that enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforcement is sought in equity
or at law).
SECTION 2.03. CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. To
the best knowledge of MSGI after conducting diligent inquiry, except for
the requirements of (a) the Securities Act of 1933, as amended (the
"Securities Act"), (b) the filing and recordation of the Certificate of
Merger as required by the DGCL and (c) the filing and recordation of
Articles of Merger and certain other instruments as required by the BCA, no
consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, United States
or foreign, is required in connection with the execution, delivery and
performance of this Agreement by MSGI and the consummation of the
transactions contemplated hereby.
SECTION 2.04 NO VIOLATION. To the best knowledge of MSGI after
conducting diligent inquiry, the execution, delivery and performance of
this Agreement by MSGI (a) will not violate MSGI's Articles of
Incorporation or Bylaws, (b) will not violate, or be in conflict with, or
constitute a default (or an event which, with or without due notice or
lapse of time, or both, would constitute a default) (a "Default") under, or
result in the termination of or accelerate the performance required by, or
result in the creation or imposition of any security interest, lien or
other encumbrance upon, any properties or assets of MSGI under any debt,
obligation, contract, lease, commitment, license, permit or other agreement
to which MSGI is a party or by which any is bound or to which any is
subject, nor result in the loss of any rights by MSGI and (c) will not
violate any law, judgment, decree, order, regulation or rule of any court
or governmental authority.
SECTION 2.05. CAPITALIZATION. The authorized capital stock of MSGI
consists of 1,000 shares of MSGI Stock. As of December 15, 1989, there
were issued and outstanding 1,000 shares of MSGI Stock. As of December 15,
1989, they have been duly authorized and validly issued and are fully paid
and non-assessable. There are no other outstanding shares of, no
securities of MSGI convertible into or exchangeable for, no options or
other rights (including any pre-emptive rights) to acquire from MSGI, and
no other contracts, understanding, arrangements or obligations (whether or
not contingent) providing for the issuance or sale by MSGI, directly or
indirectly, of any capital stock or other equity or debt security of MSGI.
There are no outstanding
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contractual obligations of MSGI to repurchase, redeem or otherwise acquire
an outstanding shares of MSGI Stock or other securities issued by MSGI.
SECTION 2.06. FINANCIAL STATEMENTS. To the best knowledge of MSGI
after conducting diligent inquiry, the unaudited financial statements of
MSGI for the period ended November 30, 1989 (the "MSGI Financial
Statements"), a copy of which has been delivered to Santa Lucia, fairly
present the financial position of MSGI as of the date thereof and its
results of operations and cash flows or changes in financial position for
the periods then ended, all in conformity with generally accepted
accounting principles applied on a consistent basis.
SECTION 2.07. NO UNDISCLOSED LIABILITIES. To the best knowledge of
MSGI after conducting diligent inquiry, except as set forth on Schedule
2.07, MSGI has no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) (herein "Liabilities"), required by
generally accepted accounting principles to be disclosed, except (a)
Liabilities which are accrued in the MSGI Financial Statements, (b)
Liabilities incurred in the ordinary course of business and consistent, in
type and amount, with past practice since November 30, 1989, (c)
Liabilities MSGI has heretofore disclosed in writing to Santa Lucia and
which in, the aggregate, are not material and (d) expenses incurred in
connection with this Agreement.
SECTION 2.08. NO MATERIAL ADVERSE CHANGE. To the best knowledge of
MSGI after conducting diligent inquiry, since November 30, 1989, there has
been no material adverse change in the business, financial position,
results of operations, operations or prospects of MSGI taken as a whole,
from that reflected in the MSGI Financial Statements.
SECTION 2.09. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 2.09, and except as otherwise permitted in this Agreement, since
November 30, 1989, MSGI has not:
(a) borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise,
any obligation or liability (absolute or contingent) except Liabilities
incurred in the ordinary course of business and consistent with past
practice;
(b) paid, discharged or satisfied any Liabilities (in excess of
$25,000) other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of Liabilities
reflected or reserved against in the MSGI Financial Statements or incurred
in the ordinary course of business and consistent with past practice, since
November 30, 1989;
(c) permitted or allowed any of its property or assets to be
subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, except MSGI Permitted Exceptions under
Section 2.10 hereof;
(d) written off as uncollectible any notes or accounts receivable in
excess of $25,000, in the aggregate, for MSGI (other than those reserved
against in the MSGI Financial Statements) except for write-offs in the
ordinary course of business and consistent with past practice, none of
which is material;
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(e) canceled any debts or waived any claims or rights of substantial
value, or sold, transferred or otherwise disposed of any of its properties
or assets, except in the ordinary course of business and consistent with
past practice;
(f) disposed of or disclosed to any person (other than an employee or
representative of Santa Lucia, agents of Santa Lucia, or otherwise in the
ordinary course of business) any trade secret not previously a matter of
public knowledge;
(g) made any loan to or investment in, or acquired the assets,
business or securities of, any person;
(h) paid or granted nay increase in the compensation of directors,
officers, agents or employees (including any such increase pursuant to any
bonus, insurance, pension, profit-sharing or other employee benefit plan or
commitment) or any increase in the compensation payable to any director,
officer, agent or employee, except for normal periodic increases made
pursuant to MSGI's established compensation policies applied on a basis
consistent with that of the prior two years or otherwise in the ordinary
course of business;
(i) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or ownership interest, or,
directly or indirectly, redeemed, purchased or otherwise acquired any
shares of its capital stock, ownership interest or other securities;
(j) made any change in any accounting principles or practices, except
as required by the financial Accounting Standards Board or its foreign
equivalent and reflected in the MSGI Financial Statements;
(k) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or
arrangement with, any of its officers or directors or any "affiliate" or
"associate" of any of its officers or directors (as such terms are defined
in the rules and regulations of the SEC under the Securities Act), except
for (i) directors' fees and compensation to officers at rates not exceeding
the rates of compensation paid during the fiscal quarter ended September
30, 1989, (ii) payments contemplated in subsection (h) hereof, and (iii)
advances for business expenses in the ordinary course of business; or
(l) agreed, whether in writing or otherwise, to take any action
described in this Section 2.9, except as otherwise contemplate herein.
SECTION 2.10. TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Except as set forth on Schedule 2.10, to the best knowledge of
MSGI after conducting diligent inquiry, MSGI has good and marketable title
to all its properties and assets, including without limitation, all such
properties reflected in the MSGI Financial Statements and all such
properties and assets purchased by MSGI since November 30, 1989, except in
each case for properties and assets sold or disposed of since November 30,
1989, in the ordinary course of business and consistent with past practice.
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(b) Except for the Disclosed Liabilities and except as set forth on
Schedule 2.10, to the best knowledge of MSGI after conducting diligent
inquiry, none of such properties or assets is subject to any mortgage,
pledge, lien, security interest, encumbrance or charge of any kind except
the following (herein called "MSGI Permitted Exception"): (i) as shown on
the MSGI Financial Statements, securing Liabilities with respect to which
no Default exists, (ii) arising in the ordinary course of business since
November 30, 1989 and consistent with past practice, (iii) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the existing use of the
property subject thereto, or impairs the operations of MSGI, (iv) current
taxes, assessments and charges not yet due, and (v) taxes, assessments and
charges being contested in good faith by MSGI in appropriate proceedings,
and with respect to which adequate reserves have been set aside, and if
arising hereafter, will promptly so advise Santa Lucia.
SECTION 2.11. PATENTS: TRADEMARKS: TRADE NAMES: INTELLECTUAL
PROPERTY. Section 2.11 correctly sets forth a list of all letters patent,
patent applications, inventions upon which patent applications have not yet
been filed, trade names, trade name registrations and applications,
trademarks, trademark registrations and applications, copyrights, copyright
registrations and applications, both domestic and foreign, presently owned,
possessed, used or held by MSGI. Unless otherwise indicated in such
schedule. MSGI owns the entire right, title and interest in and to the
same. Such schedule also correctly sets forth a list of all licenses
granted to MSGI by others and to others by MSGI. All letters patents,
patent applications, trade names, trade name registrations and
applications, trademarks, trademark registrations and applications,
copyrights, copyright registrations, and applications, and pending or, to
the best knowledge of MSGI, threatened challenge except as set forth in
said schedule, and neither the execution and delivery of this Agreement or
the consummation of this Agreement will give any licensor or licensee or
MSGI any right to change the terms or provisions of, or terminate or
cancel, any license to which MSGI is a party. MSGI has not agreed to
indemnify any person for or against any infringement of any patent,
trademark, or copyright except as shown on Schedule 2.11.
SECTION 2.12. LITIGATION. There are no actions, suits or proceedings
pending against or, to the knowledge of MSGI, threat governmental body,
agency or official, and MSGI does not know or have reason to know of any
valid basis for any such action, suit, proceeding or claim.
SECTION 2.13. TAXES. Except as set forth on Schedule 2.13:
(a) MSGI has duly filed or caused to be filed with the appropriate
governmental authorities all federal, state, local and foreign tax reports
and returns required to be filed by it, subject to any allowable extension
periods, and has maintained, or caused to be maintained, all required
records with respect to taxes, and has duly paid in full or caused to be
duly paid in full, or has established or caused to be established reserves
for taxes specifically reflected in the MSGI Financial Statements adequate
for payment of all federal, state, local and foreign
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taxes and other changes due or claimed to be due from it by federal, state,
local or foreign taxing authorities for all periods up to and including the
date of this Agreement. Except as set forth on Schedule 2.13, as of the
time of filing, the foregoing tax reports and returns correctly reflected
the facts regarding the income, business, assets, operations and activities
of MSGI or any other information to be shown thereon. Except as set forth
on Schedule 2.13, MSGI has timely paid all taxes that have been shown as
due and payable on such tax reports and returns. MSGI is not delinquent in
the payment of any taxes.
(b) None of the federal, state and local tax returns of MSGI have
been audited by the respective governmental authorities, nor have the
statutes of limitations with respect to income taxes expired for any
taxable periods ending prior to the date hereof.
(c) All deficiencies and assessments resulting form any examination
of the federal, state and local tax returns and reports of MSGI have been
paid, finally settled, or adequately provided for in the MSGI Financial
Statements, and no issue resulting in an adjustment has been raised by the
IRS or relevant state or local authorities in any examination which, by
application of similar principles, reasonably could be expected to result
in a proposed deficiency for any other period not so examined.
(d) To the best knowledge of MSGI after conducting diligent inquiry,
no deficiency for any taxes has been proposed, asserted or assessed against
MSGI (other than deficiencies or assessments referred to in subparagraph
(c) hereof, which deficiencies or assessments have either been paid,
finally settled or adequately provided fro in the MSGI Financial
Statements), and MSGI has no reason to believe that any such deficiency
will be proposed, asserted or assessed. There has been no intentional
disregard of any statute, regulation, rule or revenue ruling in the
preparation of any tax return that would result in a material increase in
any tax liability for any period that remains open to adjustment.
(e) To the best knowledge of MSGI after conducting diligent inquiry,
amounts have been withheld and paid over to the appropriate governmental
authorities by MSGI from their respective employees for all prior periods
in compliance with the tax withholding provisions of all applicable
federal, state, local and foreign laws.
(f) To the best knowledge of MSGI after conducting diligent inquiry,
amounts have been withheld and paid over to the appropriate governmental
authorities by MSGI from any payments made in respect of which a
withholding obligation is imposed, in compliance with the withholding
provisions or "collection at source" provisions of all applicable federal,
state, local and foreign laws.
SECTION 2.14. COMPLIANCE WITH LAW. To the best knowledge of MSGI
after conducting diligent inquiry, neither MSGI no any director, officer,
agent, employee or other person associated with or acting on behalf of MSGI
has (i) used any corporate funds for unlawful activity, nor (ii) made any
direct or indirect unlawful payments to government officials or others, nor
(iii) participated or cooperated in any boycott activities in violation of
any statute or law, nor
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which must be disclosed under applicable disclosure regulations and
policies of applications, such noncompliance will not have an adverse
affect on its business, financial position, results of operations,
operations or prospects.
SECTION 2.15. INSURANCE. Set forth on Schedule 2.15 is an accurate
and complete description of all material terms of policies of fire,
liability, workmen's compensation and other forms of insurance owned or
held by MSGI or under which MSGI is covered. Except as set forth on
Schedule 2.15, such policies are (a) in full force and effect, (b)
sufficient for compliance with all requirements of law and of all
agreements to which MSGI is a party, or to which assets are subject, (c)
provide adequate insurance coverage for the assets and operations of MSGI
in accordance with customary industry practice, (d) will remain in full
force and effect through the respective dates MSGI heretofore disclosed in
writing to Santa Lucia and (e) will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.
SECTION 2.16. BENEFIT PLANS.
(a) MSGI does not maintain or contribute to any "employee pension
benefit plan", as such term is defined in S. 3(2) of the Employee Retire
excluded from coverage by S. 4(b)(4) or S. 4(b)(5) of ERISA.
(b) MSGI does not maintain or contribute to an "employee welfare
benefit plan", as such term is defined in S. 3(1) of ERISA (including a
plan excluded from coverage by S. 4(b)(4) of ERISA), whether insured or
otherwise. MSGI has not established nor contributed to any "voluntary
employees' beneficiary association" within the meaning of S. 501(c)(9) of
the Internal Revenue Code of 1986, as amended (the "Code").
(c) Except as set forth on Schedule 2.16, MSGI does not maintain or
contribute to any bonus, incentive compensation, stock option, stock
purchase or other fringe benefit plan or program, whether formal or
informal.
SECTION 2.17. BANK ACCOUNTS. Schedule 2.17 sets forth the names and
locations for all banks, trust companies, savings and loan associations and
other financial institutions at which MSGI maintains accounts of any
nature, the names of all persons authorized to draw thereon or make
withdrawals therefrom and the account numbers for all such accounts.
SECTION 2.18. CONTRACTS AND COMMITMENTS. Except as set forth in
Schedule 2.18, with respect to subsections (a) through (k) below, or as set
forth in the MSGI Financial Statements, MSGI:
(a) does not have any contract, arrangement or commitment which is
material to its business, operation or prospects (for the purpose of this
subsection, any contract, or arrangement or commitment shall be deemed
"material" if it calls for fixed and/or contingent payments thereunder of
more than $25,000 in the aggregate) except those which (i) are cancelable
by MSGI on notice of not
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longer than thirty (30) days an without liability, penalty or premium or
(ii) are excepted fro disclosure pursuant to other sections in this
Agreement;
(b) does not have any contract, arrangement or commitment which may
result in a loss exceeding $25,000;
(c) does not have any contract, arrangement or commitment with any
director, officer, employee, agent, consultant, advisor, salesman or
representative providing for future compensation of more than $25,000 that
is not cancelable by it on notice of not longer than thirty (30) days and
without liability, penalty or premium;
(d) does not have any employment agreement with any officer, employee
or agent, nor any agreement that contains any severance or termination pay
liabilities or obligations;
(e) does not have any collective bargaining or union contracts or
agreements;
(f) is not in Default of or in material breach or violation of, nor
is there any basis known to MSGI for any valid claim therefor, under any
contract, arrangement or commitment of MSGI involving more than $25,000;
(g) does not have any agreement restricting it from carrying on its
business or any part thereof anywhere in the world or from competing in any
line of business with any person;
(h) does not have any debt obligation for borrowed money, including
guarantees of or agreements to acquire any such debt obligation of others;
(i) does not have any outstanding loans to any person and advances to
directors, officers and employees of MSGI for business expenses in the
ordinary course of business exceeding $10,000 in the aggregate;
(j) does not have any obligation or liability as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person including MSGI; or
(k) does not have any irrevocable power of attorney to, or appointed
as agent for service of process, any person except any agent for service of
process in foreign jurisdictions, the qualification of which is necessary
to comply with the provisions of this Agreement.
SECTION 2.19. ACCOUNTS RECEIVABLE. Except as set forth on Schedule
2.19, to the best of MSGI's knowledge after conducting diligent inquiry,
all accounts receivable of MSGI are not subject to any conditions to
payment, offsets, counterclaims, defenses of any kind, allowances or
credits which together with
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uncollectible accounts exceed the bad debt reserves shown on the MSGI
Financial Statements (which reserves are adequate and were calculated
consistent with past practice).
SECTION 2.20. PROXY MATERIALS. The information regarding MSGI to be
contained in the proxy statement to be mailed to the shareholders of MSGI
and Santa Lucia pursuant to Section 6.02 hereof ( the "Proxy Statement")
will, to the best of MSGI's knowledge, be correct in all material respects
and will not omit any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; provided,
however, that no representation or warranty is made hereby with respect to
Santa Lucia.
SECTION 2.21. PERMITS AND OTHER OPERATING RIGHTS. Except as set
forth on Schedule 2.21, to the best knowledge of MSGI after conducting
diligent inquiry, MSGI does not (a) require the consent of any third party
to permit it to operate its business in the manner in which it presently
is being conducted, except as heretofore obtained and presently in effect,
(b) MSGI possesses all permits and other authorizations from third parties,
including without limitation, federal, foreign, state and local
governmental authorities, presently required by applicable provisions of
law, including statutes, regulations and existing judicial decisions, and
by the property and contract rights of third parties, necessary to permit
them to operate their businesses in the manner in which they presently are
being conducted, or in which it is contemplated that they will be
conducted, except where the failure to obtain such permits or
authorizations would not, in the aggregate, result in a Material Adverse
Effect and (c) none of the permits and authorizations are dependent on
retention of any person, organization, agent or employee or the maintenance
of any relationship or arrangement, other than performance of contractual
obligations under contracts disclosed elsewhere herein.
SECTION 2.22. DISCLOSURE. To the best knowledge of MSGI after
conducting diligent inquiry, no representation or warranty made by MSGI in
this Agreement or the Schedules and no statement, certificate or other
writing furnished or to be furnished by MSGI to Santa Lucia and/or any
other persons pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omit or will omit to state any material
fact required to be stated therein or herein or necessary in order to make
the statements herein or therein not misleading; provided, however, that no
representation or warranty is made hereby with respect to Santa Lucia. To
the best knowledge of MSGI after conducting diligent inquiry, none of the
information with respect to MSGI in the Proxy Statement contains or will
contain any untrue statement of a material fact or omit or will omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading.
SECTION 2.23. NUMBER OF SHAREHOLDERS. To the best knowledge of MSGI
after conducting diligent inquiry, MSGI has thirty-five (35) or fewer
unaccredited shareholders. For purposes of this Section 2.24, the term
"unaccredited investors" shall mean any investor who does not fall within
the definition of an accredited investor as set forth in Rule 501 (a) of
Regulation D of the Securities Act.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SANTA LUCIA
Santa Lucia represents and warrants to MSGI, except as set forth on
the Disclosure Schedules attached hereto ("Schedules"), that:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Santa Lucia is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Utah and has all corporate power, authority and legal
right to conduct its business as it is now being conducted and to own the
properties and assets it now owns. Santa Lucia is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except
for those jurisdictions where the failure to be so qualified would not, in
the aggregate, have a Material Adverse Effect.
SECTION 3.02. CORPORATE AUTHORIZATION. Subject to shareholder
approval, as required under the BCA, (a) Santa Lucia has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, (b) the Board of Directors of Santa Lucia
has taken all actions required by law, its Certificate of Incorporation and
Bylaws or otherwise to authorize the execution and delivery of this
Agreement and the performance by Santa Lucia of the transactions
contemplated hereby, (c) this Agreement has been duly and validly executed
and delivered by Santa Lucia and no other corporate action is necessary in
connection therewith and (d) to the best knowledge of Santa Lucia after
conducting diligent inquiry, this Agreement is a valid and binding
Agreement of Santa Lucia enforceable against Santa Lucia in accordance with
its terms, except to the extent that enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 3.03. CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. To
the best knowledge of Santa Lucia after conducting diligent inquiry, except
for the requirements of (a) the Securities Act of 1934, as amended (the
"Exchange Act"), (b) the Securities Act , (c) the filing and recordation of
the Certificate of Merger as required by the DGCL and (d) the filing and
recordation of Articles of Merger and certain other instruments as required
by the BCA, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority,
United States or foreign, is required in connection with execution,
delivery and performance or this Agreement by Santa Lucia and the
consummation of the transactions contemplated hereby.
SECTION 3.04. NO VIOLATION. To the best knowledge of Santa Lucia
after conducting diligent inquiry, the execution, delivery and performance
of this Agreement by Santa Lucia (a) will not violate Santa Lucia's
Articles of Incorporation or Bylaws, (b) will not violate, or be in
conflict with or constitute a Default under, or result in the termination
of, or accelerate the performance required by, or result in the creation or
imposition of any security interest, lien or
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other encumbrance upon, any properties or assets of Santa Lucia under any
debt, obligation, contract, lease, commitment, license, permit or other
agreement to which Santa Lucia is a party, or by which either is bound or
to which either is subject, nor the loss of nay rights by Santa Lucia and
(c) will not violate any law, judgment, decree, order, regulation or rule
of any court or governmental authority.
SECTION 3.05. CAPITALIZATION OF SANTA LUCIA. The authorized capital
stock of Santa Lucia consists of 50,000,000 share of Santa Lucia Stock, par
value $.001. As of December 15, 1989, there were issued and outstanding
6,145,000 shares of Santa Lucia Stock. As of December 15, 1989, there were
no outstanding options to purchase the shares of Santa Lucia Stock. To the
best knowledge of Santa Lucia after conducting diligent inquiry, all issued
and outstanding shares of Santa Lucia Stock have been duly authorized and
validly issued and assessable. There are no other outstanding shares of,
no securities of Santa Lucia convertible into or exchangeable for, no
options or other rights (including any pre-emptive rights) to acquire from
Santa Lucia, and no other contracts, understandings, arrangements or
obligations (whether or not contingent) providing for the issuance or sale
by Santa Lucia, directly or indirectly, of any capital stock or other
equity or debt security of Santa Lucia, other than pursuant to this
Agreement. There are no outstanding contractual obligations of Santa Lucia
to repurchase, redeem or otherwise acquire any outstanding shares of Santa
Lucia Stock or other securities issued by Santa Lucia.
SECTION 3.06. CONDUCT OF PUBLIC OFFERING. To the best knowledge of
Santa Lucia after conducting diligent inquiry, the offering of Santa
Lucia's securities, as described in Santa Lucia's prospectus, and the sale
of Santa Lucia's securities, as described in Santa Lucia's prospectus, and
the sale of the securities thereunder were carried out in accordance with
(a) the terms and conditions of the prospectus, (b) the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission (the "Commission") adopted thereunder and (c) the securities
laws of all states and other jurisdictions in which the securities were
offered or sold and the rules and regulations of the securities
administrators of any such states or other jurisdictions. To the best
knowledge of Santa Lucia after conducting reasonable inquiry, the
securities were duly registered an necessary government authority was
obtained with respect to the offer and sale of the securities in the state
of Utah, and in no other jurisdictions. To the best knowledge of Santa
Lucia after conducting reasonable inquiry, the registration statement with
respect to the securities, at the time it became effective under the
Securities Act, the prospectus, of all times during which it was delivered
in connection with the offer an sale of the securities, did not contain a
misstatement of a material fact, nor omitted to state any material fact
necessary to make the statements therein not misleading, within the meaning
of the Securities Act and the rules and regulations of the Commission
adopted thereunder.
SECTION 3.07. FINANCIAL STATEMENTS. To the best knowledge of Santa
Lucia after conducting diligent inquiry, the audited financial statements
of Santa Lucia for the year ended December 31, 1988 (the "Santa Lucia
Financial Statements"), a copy of which has been delivered to MSGI, fairly
present the financial position of Santa Lucia as of the date thereof and
its results of operations and cash flows or changes in financial position
for the periods then ended, all in conformity with generally accepted
accounting principles applied on a consistent basis.
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SECTION 3.08. NO UNDISCLOSED LIABILITIES. To the best knowledge of
Santa Lucia after conducting diligent inquiry, except as set forth on
Schedule 3.08, Santa Lucia has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) (herein "Santa Lucia
Liabilities"), required by generally accepted accounting principles to be
disclosed, except (a) Santa Lucia Liabilities which are accrued in the
Santa Lucia Financial Statements, (b) Santa Lucia Liabilities incurred in
the ordinary course of business and consistent, in type and amount. with
past practice since December 31, 1988, (c) Santa Lucia Liabilities which
Santa Lucia has heretofore disclosed in writing to MSGI, and which, in the
aggregate, are not material, and (d) expenses incur. ed in connection with
this Agreement.
SECTION 3.09. NO MATERIAL ADVERSE CHANGE. Since December 31, 1988,
there has been no material adverse change in the business, financial
position, results of operations, operations or prospects of Santa Lucia
taken as a whole, from that reflected in the Santa Lucia Financial
Statements.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 3.10, and except as otherwise permitted in this Agreement, since
December 31, 1988, Santa Lucia a has not:
(a) borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise,
any obligation or liability (absolute or contingent) except Santa Lucia
Liabilities incurred in the ordinary course of business and consistent with
past practice;
(b) paid, discharged or satisfied any Santa Lucia Liabilities (in
excess of $25,000) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of Santa
Lucia Financial Statements or incurred in the ordinary course of business
and consistent with past practice of Santa Lucia Liabilities reflected or
reserved against in the Santa Lucia Financial Statements or incurred in the
ordinary course of business and consistent with past practice, since
December 31, 1988;
(c) permitted or allowed any of its property or assets to be subject
to any mortgage, pledge, lien, security interest, encumbrance, restriction
or charge of any kind, except Santa Lucia Permitted Exceptions under
Section 3.11 hereof;
(d) written off as uncollectible any notes or accounts receivable in
excess of $25,000, in the aggregate, for Santa Lucia (other than those
reserved against in the Santa Lucia Financial Statements) except for write-
offs in the ordinary course of business and consistent with past practice,
none of which is material;
(e) canceled any debts or waived any claims or rights of substantial
value, or sold, transferred or otherwise disposed of any of its properties
or assets, except in the ordinary course of business and consistent with
past practice;
(f) disposed of or disclosed to any person (other than an employee or
representative of Santa Lucia, agents or Santa Lucia, or otherwise in the
ordinary course of business) any trade secret not previously a matter of
public knowledge;
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(g) made any loan to or investment in, or acquired the assets,
business or securities of, any person;
(h) paid or granted any increase in the compensation or directors,
officers, agents or employees (including any such increase pursuant to any
bonus, insurance, pension, profit-sharing or other employee benefit plan or
commitment) or any increase in the compensation payable or to become
payable to any director, officer, agent or employee, except for normal
periodic increases made pursuant to Santa Lucia's established compensation
policies applied on a basis consistent with that of the prior two years or
otherwise in the ordinary course of business;
(i) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or ownership interest, or,
directly or indirectly, redeemed, purchased or otherwise acquired any
shares of its capital stock, ownership interest or other securities;
(j) made any change in any accounting principles or practices,
except as required by the Financial Accounting Standards Board or its
foreign equivalent and reflected in the Santa Lucia Financial Statements;
(k) paid, loaned or advanced any amount to, or sold, transferred or
leased an properties or assets to, or entered into any agreement or
arrangement with any of its officers or directors or any "affiliate" or "
associate" of any of its officers or directors (as such terms are defined
in the rules and regulations of the SEC under the Securities Act), except
for (i) directors' fees and compensation to officers at rates not exceeding
the rates of compensation paid during the fiscal quarter ended September
30, 1989, (ii) payments contemplated in subsection (h) hereof and (iii)
advances for business expenses in the ordinary course of business; or
(l) agreed, whether in writing or otherwise, to take any action
described in this Section 3.10, except as otherwise contemplated herein.
SECTION 3.11. TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Except as set forth on Schedule 3.11, to the best knowledge of
Santa Lucia, after conducting diligent inquiry, Santa Lucia has good and
marketable title to all its properties and assets, including without
limitation, all such properties and assets purchased by Santa Lucia since
December 31, 1988, except in each case for properties and assets sold or
disposed of since December 31, 1988, in the ordinary course of business and
consistent with past practice.
(b) Except for the Santa Lucia liabilities and except as set forth on
Schedule 3.11, to the best knowledge of Santa Lucia after conducting
diligent inquiry, none of such properties or assets is subject to any
mortgage, pledge, lien, security interest, encumbrance or charge of any
kind except the following (herein called "Santa Lucia permitted
Exceptions"): (i) as shown on the Santa Lucia Financial Statements,
securing Liabilities with respect to which no Default exists, (ii) arising
in the ordinary course of business since December 31, 1988, and consistent
with past practice, (iii) minor imperfections of title, if any, none of
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which is substantial in amount, materially detracts from the value or
impairs the existing use of the property subject thereto, or impairs the
operations of Santa Lucia, (iv) current taxes, assessments and charges not
yet due and (v) taxes, assessments and charges being contested in good
faith by Santa Lucia in appropriate proceedings, and with respect to which
adequate reserves have been set aside, and if arising hereafter, will
promptly so advise MSGI.
SECTION 3.12. LITIGATION. There are no actions, suits or proceedings
pending against or, to the knowledge of Santa Lucia, threatened against
Santa Lucia, before an court or arbitrator or any governmental body, agency
or official, and Santa Lucia does not know or have reason to know of any
valid basis for any such action, suit, proceeding or claim.
SECTION 3.13. TAXES. Except as set forth on Schedule 3.13:
(a) Santa Lucia has duly filed or caused to be filed with the
appropriate governmental authorities all federal, state, local and foreign
tax reports and returns required to be filed by it subject to any allowable
extension periods, and has maintained, or caused to be maintained, all
required records with respect to taxes, and has duly paid in full or caused
to be duly paid in full, or has established or caused to be established
reserves for taxes specifically reflected in the Santa Lucia Financial
Statements adequate for payment of all federal, state, local and foreign
taxing authorities for all periods up to and including the date of this
Agreement. Except as set forth on Schedule 3.13, as of the time of filing,
the foregoing tax reports and returns correctly reflected the facts
regarding the income, business, assets, operations and activities of Santa
Lucia or any other information to be shown thereon. Except as set forth on
Schedule 3.13, Santa Lucia has timely paid all taxes that have been shown
as due and payable on such tax reports and returns. Santa Lucia is not
delinquent in the payment of any taxes.
(b) None of the federal, state and local tax returns of Santa Lucia
have been audited by the respective governmental authorities, nor have the
statutes of limitations with respect to income taxes expired for any
taxable periods ending prior to the date hereof.
(c) All deficiencies and assessments resulting from any examination
of the federal, state and local tax returns and reports of Santa Lucia have
bee paid, finally settled or adequately provided for in the Santa Lucia
Financial Statements, and no issue resulting in an adjustment has been
raised by the IRS or relevant state or local authorities in any examination
which, by application of similar principles, reasonably could be expected
to result in a proposed deficiency for any other period not so examined.
(d) To the best knowledge of Santa Lucia after conducting diligent
inquiry, no deficiency for any taxes has been proposed, asserted or
assessed against Santa Lucia (other than deficiencies of assessments
referred to in subparagraph (c), which deficiencies or assessments have
either been paid, finally settled or adequately provided for in the Santa
Lucia Financial Statements), and Santa Lucia has reason to believe that any
such deficiency will be proposed, asserted or
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assessed. There has been no intentional disregard of nay statue,
regulation, rule or revenue ruling in the preparation of any tax return
that would result in a material increase in any tax liability for any
period that remains open to adjustment.
(e) To the best knowledge of Santa Lucia after conducting diligent
inquiry, amounts have been withheld and paid over to the appropriate
governmental authorities by Santa Lucia from their respective employees for
all prior periods in compliance with the tax withholding provisions of all
applicable federal, state, local and foreign laws.
(f) To the best knowledge of Santa Lucia after conducting diligent
inquiry, amounts have been withheld and paid over to the appropriate
governmental authorities by Santa Lucia from any payments made in respect
of which a withholding obligation is imposed, in compliance with the
withholding provisions or "collection at source" provisions of all
applicable federal, state, local and foreign laws.
SECTION 3.14. COMPLIANCE WITH LAW. To the best knowledge of Santa
Lucia after conducting diligent inquiry, neither Santa Lucia nor any
director, officer, agent, employee or other person associated with or
acting on behalf of Santa Lucia has used any corporate funds for unlawful
contributions, payments, gifts, entertainment or other unlawful expenses
relating to political activity, or made any direct of indirect unlawful
payments to government officials or others, nor participated or cooperated
in any boycott activities in violation of any statute or law, or which must
be disclosed under applicable disclosure regulations and policies of
applicable law. To the extent, if any, that Santa Lucia is not in
compliance with all applicable laws and regulations, such noncompliance
will not have an adverse effect on its business, financial position,
results of operations, operations or prospects.
SECTION 3.15. INSURANCE. Santa Lucia maintains no policies of fire,
liability, workmen's compensation or other forms of insurance.
SECTION 3.16. BENEFIT PLANS.
(a) Santa Lucia does not maintain or contribute to any "employee
pension benefit plan", as such term is defined in S. 3(a) of ERISA
including, solely for the purpose of this subsection, a plan excluded from
coverage by S. 4(b)(4) or S. 4(b)(5) or ERISA.
(b) Santa Lucia does not maintain or contribute to any "employee
welfare benefit plan", as such term is defined in S. 3(1) of ERISA
(including a plan excluded from coverage by S. 4(b)(4) of ERISA), whether
insured or otherwise. Santa Lucia has not established nor contributed to
an "voluntary employees" beneficiary association" within the meaning of S.
501(c)(9) of the Code.
(c) Except as set forth on Schedule 3.16, Santa Lucia does not
maintain or contribute to any bonus, incentive compensation, stock option,
stock purchase or other fringe benefit plan or program, whether formal or
informal.
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SECTION 3.17. BANK ACCOUNTS. Schedule 3.17 sets forth the names and
locations for all banks, trust companies, savings and loan associations and
other financial institutions at which Santa Lucia maintains accounts of any
nature, the names of all persons authorized to draw thereon or make
withdrawals therefrom and the account numbers for all such accounts.
SECTION 3.18. CONTRACTS AND COMMITMENTS. Except as set forth in
Schedule 3.18, with respect to subsection (a) through (k) below, or as set
forth in the Santa Lucia Financial Statements, Santa Lucia:
(a) does not have any contract, arrangement or commitment which is
material to its business, operations or prospects (for the purpose of this
subsection, any contract, arrangement or commitment shall be deemed
"material" if it calls for fixed and/or contingent payments thereunder of
more than $25,000 in the aggregate) except those which (i) are cancelable
by Santa Lucia on notice of not longer than thirty (30) days and without
liability, penalty or premium or (ii) are excepted from disclosure pursuant
to other sections of this Agreement.
(b) does not have any contract, arrangement or commitment which may
result in a loss exceeding $25,000;
(c) does not have any contract, arrangement or commitment with any
director, officer, employee, agent, consultant, advisor, salesman or
representative providing for future compensation of more than $25,000 that
is not cancelable by it on notice of not longer than thirty (30) days and
without liability, penalty or premium;
(d) does not have nay employment agreement with any officer, employee
or agent, nor any agreement that contains any severance or termination pay
liabilities or obligations;
(e) does not have any collective bargaining or union contracts or
agreements;
(f) is not in Default of or in material breach or violation of, nor
is there any basis known to Santa Lucia for any valid claim therefor, under
any contract, arrangement or commitment of Santa Lucia involving more than
$25,000;
(g) does not have any agreement restricting it from carrying on its
business or any part thereof anywhere in the world or from competing in any
line of business with any person;
(h) does not have any debt obligation for borrowed money, including
guarantees of or agreements to acquire any such debt obligation of others;
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(i) does not have any outstanding loans to any person and advances to
directors, officers and employees of Santa Lucia for business expenses in
the ordinary course of business exceeding $10,000 in the aggregate;
(j) does not have any obligation or liability as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person including Santa Lucia; or
(k) does not have any irrevocable power of attorney to, or appointed
as agent for service of process, any person except any agent for service of
process in foreign jurisdictions, the qualification of which is necessary
to comply with the provisions of this Agreement.
SECTION 3.19. ACCOUNTS RECEIVABLE. Except as set forth on Schedule
3.19, to the best knowledge of Santa Lucia after conducting diligent
inquiry, all accounts receivable of Santa Lucia are not subject to any
conditions to payment, offsets, counterclaims, defenses of any kind,
allowances or credits which together with uncollectible accounts exceed the
bad debt reserves shown on the Santa Lucia Financial Statements (which
reserves are adequate and were calculated consistent with past practice).
SECTION 3.20. PROXY MATERIALS. The information regarding Santa Lucia
to be contained in the Proxy Statement to be mailed to the shareholders of
MSGI and Santa Lucia, pursuant to Section 6.02 hereof, will , to the best
of Santa Lucia's knowledge, be correct in all material respects and will
not omit any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; provided, however,
that no representation or warranty is made hereby with respect to MSGI.
SECTION 3.21. PERMITS AND OTHER OPERATING RIGHTS. Except as set
forth on Schedule 3.21, to the best knowledge of Santa Lucia after
conducting diligent inquiry, Santa Lucia doe snot require the consent of
any third party to permit it to operate its business in the manner in which
it presently is being conducted, except as heretofore obtained and
presently in effect, (b) Santa Lucia possesses all permits and other
authorizations form third parties, including without limitation, federal,
foreign, state and local governmental are to obtain such permits or
authorizations would not, in the aggregate, result in a Material Adverse
Effect and (c) none of the permits and authorizations are dependent on
retention of any person, organization, agent or employee or the maintenance
of any relationship or arrangement, other than performance of contractual
obligations under contracts disclosed elsewhere herein.
SECTION 3.22. DISCLOSURE. To the best knowledge of Santa Lucia after
conducting diligent inquiry, no representation or warranty made by Santa
Lucia in this Agreement or the Schedules and no statement relating to Santa
Lucia contained in any document (including, without limitation, the Proxy
Statement
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referred to herein), financial statement, disclosure statement, certificate
or other writing furnished or to be furnished by Santa Lucia to MSGI
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
herein or therein or necessary in order to make the statements herein or
therein not misleading; provided, however, that no representation or
warranty is made hereby with respect to MSGI. To the best knowledge of
Santa Lucia after conducting diligent inquiry, none of the information with
respect to Santa Lucia in the Proxy Statement contains or will contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
ARTICLE IV
CONDUCT ON MSGI BUSINESS PENDING THE EFFECTIVE TIME
Pending the Effective Time, and except as other wise consented to or
approved by Santa Lucia in writing, which consent or approval will not be
unreasonably withheld:
SECTION 4.01. REGULAR COURSE OF BUSINESS. MSGI will conduct its
business in the same manner as heretofore conducted and MSGI will not
engage in any transaction or activity, enter into any agreement or make any
commitment except in the ordinary course of business. MSGI will not take
any action the taking of which, or omit to take any action the omission of
which, would cause any of the representations or warranties contained in
Article II to fail to be true in any material respect at and as of any time
prior to the Effective Time, except as otherwise permitted by this
Agreement.
SECTION 4.02. CHARTER DOCUMENTS AND CAPITAL CHANGES. MSGI will not
(a) change or amend its Certificate of Incorporation, Bylaws or
organizational documents, (b) issue or sell, nor issue options, warrants to
purchase or rights to subscribe to, or enter into any arrangement or
contract with respect at and as of any time prior to the Effective Time,
except as otherwise permitted by this Agreement.
SECTION 4.03. COMPENSATION. MSGI will not adopt any new compensation
arrangement for the benefit of officers, directors, agents, consultants,
partners or employees.
SECTION 4.04. STOCK OPTIONS. No further options to acquire stock in
MSGI will be issued by the Board of Directors of MSGI at or before the
Effective Time.
SECTION 4.05. ORGANIZATION AND GOOD WILL. MSGI will use its
reasonable efforts, consistent with the terms of this Agreement, to
preserve its business, business organization and good will, keep available
to MSGI its present officers and key employees and preserve its present
relationships with persons having business dealings with it.
SECTION 4.06. CERTAIN CHANGES. From the date hereof until the
Effective Time, MSGI will not (a) take any action or permit to occur any
event referred to in Section 2.10 hereof or (b) enter into any contracts or
commitments referred to
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in Section 2.18 hereof, except (i) with the prior written consent of Santa
Lucia, which will not be unreasonably withheld, (ii) for matters not
required to be disclosed pursuant hereto or (iii) as otherwise permitted in
this Agreement.
SECTION 4.07. INSURANCE. MSGI will maintain insurance on all
property, real, personal and mixed, owned or leased by it in the manner
contemplated by Section 2.15 hereof.
SECTION 4.08. COMPLIANCE WITH LAWS. MSGI will use its best efforts
to duly comply with all laws applicable to it and its properties,
operations, business and employees.
SECTION 4.09. TAX RETURNS: CONSENT. MSGI will prepare and file all
federal, state, local and foreign tax returns and amendments thereto
required to be filed by it for all periods ending at the Effective Time,
subject to any extensions of time granted with respect thereto.
ARTICLE V
CONDUCT OF SANTA LUCIA BUSINESS PENDING EFFECTIVE TIME
Pending the Effective Time, and except as otherwise consented to or
approved by MSGI in writing, which consent or approval will not be
unreasonably withheld:
SECTION 5.01. REGULAR COURSE OF BUSINESS. Santa Lucia will conduct
its business in the same manner as heretofore conducted and Santa Lucia
will not engage in any transaction or activity, enter into any agreement or
make any commitment otherwise than in the ordinary course of business and
consistent with past practice. Santa Lucia will not take any action the
taking of which, or omit to take any action the omission of which, would
cause any of the representations or warranties contained in Article III to
fail to be true in any material respect at and as of any time prior to the
Effective Time, except as otherwise permitted by this Agreement.
SECTION 5.02. CHARTER DOCUMENTS AND CAPITAL CHANGES. Santa Lucia
will not (a) change or amend its Certificate of Incorporation, Bylaws or
organizational documents (b) issue or sell, nor issue options, warrants to
purchase or rights to subscribe to, or enter into any arrangement or
contract with respect to, any shares of its capital stock or any of its
other securities or ownership interests or (c) make any other changes in
its capital structure, except as otherwise permitted by this Agreement.
SECTION 5.03. COMPENSATION. Santa Lucia will not adopt any new
compensation arrangement for the benefit of officers, directors, agents,
consultants, partners or employees.
SECTION 5.04. STOCK OPTIONS. No further options to acquire stock in
Santa Lucia will be issued by the Board of Directors of Santa Lucia at or
before the Effective Time.
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SECTION 5.05. ORGANIZATION AND GOOD WILL. Santa Lucia will use its
reasonable efforts, consistent with the terms of this Agreement, to
preserve its business, business organization and good will, keep available
to Santa Lucia its present officers and key employees and preserve its
present relationships with persons having business dealings with it.
SECTION 5.06. CERTAIN CHANGES. From the date hereof until the
Effective Time, Santa Lucia will not (a) take any action or permit to occur
any event referred to in Section 3.10 hereof or (b) enter into any
contracts or commitments referred to in Section 3.18 hereof, except (i)
with the prior written consent of MSGI, which will not unreasonably be
withheld, (ii) for matters not required to be disclosed pursuant hereto or
(iii) as otherwise permitted in this Agreement.
SECTION 5.07. COMPLIANCE WITH LAWS. Santa Lucia will use its best
efforts to duly comply with all laws applicable to it and its properties,
operations, business and employees.
SECTION 5.08. TAX RETURNS: CONSENT. Santa Lucia will prepare and
file all federal, state, local and foreign tax returns and amendments
thereto required to be filed by it for all periods ending at the Effective
Time, subject to any extensions of time granted with respect thereto.
ARTICLE VI
COVENANTS OF MSGI AND SANTA LUCIA
MSGI hereby covenants and agrees with Santa Lucia and Santa Lucia
hereby covenants and agrees with MSGI that:
SECTION 6.01. APPROVAL OF SHAREHOLDERS. MSGI and Santa Lucia shall
each (a) cause a meeting of its shareholders to be duly called and held in
accordance with the laws of the states of Delaware and Utah, respectively,
and MSGI's and Santa Lucia's respective Certificate of Incorporation or
Articles of Incorporation and Bylaws as soon as reasonably practicable for
the purpose of voting on the adoption and approval of this Agreement and
the Merger (the "Proposal"), (b) recommend to its shareholders approval of
the Proposal, (c) use its best efforts to obtain the necessary approval of
its shareholders, (d) mail notice of shareholders' approval of the
Proposal, if approved, to all shareholders immediately following such
shareholders' meeting and (e) mail to shareholders of MSGI a transmittal
letter in form and substance reasonable satisfactory to MSGI and Santa
Lucia to be used by such shareholders in forwarding their certificates for
surrender and exchange.
SECTION 6.02. SECURITIES LAW COMPLIANCE. Santa Lucia and MSGI will
promptly prepare a joint Proxy Statement in connection with the vote of
MSGI's and Santa Lucia's shareholders with respect to the Proposal. MSGI
and Santa Lucia will take any actions required to be taken under applicable
state securities laws and MSGI and Santa Lucia will also take actions to
secure all necessary exemptions or clearances under all state securities
laws applicable to the Merger and the issuance of Surviving Corporation
Stock pursuant thereto.
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SECTION 6.03. FULL ACCESS/AUDIT. Each of MSGI and Santa Lucia has
afforded and will continue to afford to the other, its counsel, accountants
and other authorized representatives, full access to its offices,
properties, books and records in order that each may have full opportunity
to make such investigations as they shall desire to make of the affairs of
the other. Each of MSGI and Santa Lucia will also cause its officers,
accountants and attorneys to furnish such additional financial and
operating data and other information as the other shall from time to time
reasonably request.
SECTION 6.04. CONFIDENTIALITY. Until the Effective Time, or for a
period of one year in the event of the termination of this Agreement
pursuant to Article X, MSGI and Santa Lucia and their respective
consultants, advisors, officers and directors shall hold in confidence and
not divulge or use any confidential or proprietary information of the other
obtained from any investigation of the other referred to in the proceeding
Section or given to them by the other except to the extent (a) required by
law, (b) otherwise available from third parties or (c) previously known to
it. Neither MSGI nor Santa Lucia will misuse to the detriment of the other
material confidential or proprietary information obtained from the other.
Notwithstanding anything contained herein to the contrary, in the event of
a termination of this Agreement pursuant to Article X., Santa Lucia shall
acquire no rights or interest of any kind in or to any trademarks or trade
names owned or held by MSGI by virtue of the terms and conditions of this
Agreement.
SECTION 6.05. COOPERATION. MSGI and Santa Lucia will generally
cooperate with each other and take such reasonable action as may be
necessary to consummate the Merger in a manner advantageous to all parties
as soon as reasonably practicable, including furnishing to each other the
information relating to each of them required by applicable statutes, rules
and regulations for the purpose of preparing the Proxy Statement and state
securities law filings for solicitation of shareholders' approval of this
Agreement and MSGI and using their best efforts to cause the Proxy
Statement to be mailed to MSGI's and Santa Lucia's shareholders, all as
soon as practicable.
SECTION 6.06. FILINGS: CONSENTS: REMOVAL OF OBJECTIONS. It is the
intent of the parties to consummate the Merger at the earliest practicable
time, and they respectively agree to exert their best efforts to that end,
including, without limitation, the preparation and filing of all requisite
applications, documents and notifications in connection with the
transactions contemplated herein required by applicable law and will use
their best efforts to respond as promptly as practicable to all inquiries
in connection therewith, the removal or satisfaction, if possible, of any
objections to the validity or legality of the Merger, and the satisfaction
of the conditions to consummation of the Merger, including, without
limitation, the obtaining of any consents necessary to the consummation of
the Merger, provided, however, that neither MSGI nor Santa Lucia shall be
obligated to (a) consent to any arrangement or undertake any obligation
which would in its reasonable judgment materially adversely affect its
business or properties.
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SECTION 6.07 PUBLIC ANNOUNCEMENTS. MSGI and Santa Lucia will consult
with each other before issuing any press release or making any public
statement with respect to the Merger and, except as may be required by
applicable law, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 6.08. NOTIFICATION OF CERTAIN MATTERS. MSGI and Santa Lucia
agree to give prompt notice to the other party of (k) the occurrence, or
failure to occur, of any event or circumstance where such occurrence or
failure to occur would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time and(ii) any
material failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
SECTION 6.09. FURTHER ASSURANCES. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of Santa Lucia or MSGI,
any other actions and things to vest, perfect or confirm or record or
otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of MSGI
acquired or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger.
ARTICLE VII
CONDITIONS TO SANTA LUCIA'S OBLIGATION
TO MAKE THE MERGER EFFECTIVE
The obligation of Santa Lucia to cause the Merger to become effective
is subject to the satisfaction, at or before the Effective Time, of each of
the following conditions, all or any of which may be waived by Santa Lucia
in whole or in part except for Section 7.02:
SECTION 7.01. REPRESENTATIONS AND WARRANTIES TRUE: FULL PERFORMANCE.
The representations and warranties of MSGI contained herein and in the
Schedules, and in the written disclosures heretofore provided by MSGI to
Santa Lucia in writing, and in all certificates and other documents
delivered by MSGI to Santa Lucia pursuant hereto or in connection with the
transactions contemplated hereby shall be in all material respects true and
accurate as of the date when made and at and as of the Effective Time as
though such representations and warranties were made at and as of such date
and time, except as otherwise permitted by this Agreement. MSGI shall have
fully performed and complied in all material respects with all agreements,
obligations and conditions required by this Agreement to be performed or
complied with by it at or prior to the Effective Time, except as otherwise
permitted by this Agreement.
SECTION 7.02. APPROVAL OF MSGI SHAREHOLDERS. The approval of the
shareholders of MSGI to this Agreement and the Merger, required under the
DGCL and as contemplated by Section 6.01, shall have been obtained.
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SECTION 7.03. REGULATORY APPROVALS: LITIGATION. All permits and
consents required by state securities laws, if any, shall have been
obtained. No legal proceeding by any person shall have been instituted
which questions the validity or legality of the transactions contemplated
hereby, nor shall any court order or decree have been issued enjoining the
transactions contemplated hereby.
SECTION 7.04. MATERIAL ADVERSE CHANGES. No material adverse change
shall have occurred in the business, financial position, results of
operations, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, operations or prospects of MSGI, nor shall any event
or events have occurred which may reasonably be expected to have a material
adverse effect on MSGI.
SECTION 7.05. CERTIFICATE OF MSGI OFFICERS. MSGI shall have
delivered to Santa Lucia a certificate or certificates signed by its
officers dated the Effective Time, in form and substance satisfactory to
Santa Lucia and its counsel to the effect that, to the best of their
knowledge after conducting diligent inquiry, the representations and
warranties of MSGI contained in Article II hereof are true, accurate and
complete.
SECTION 7.06. LENDER APPROVALS. MSGI shall use its best efforts to
obtain, by the Effective Time, all approvals required from institutional
lenders to it, if any, to the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS TO MSGI'S OBLIGATION TO
MAKE THE MERGER EFFECTIVE
The obligation of MSGI to cause the Merger to become effective is
subjection to the satisfaction, on or before the Effective Time, of each of
the following conditions, all or any of which may be waived by MSGI in
whole or in part, except for Section 8.02:
SECTION 8.01. REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of Santa Lucia contained herein and in the
Schedules, and in all certificates and other documents delivered by Santa
Lucia to MSGI pursuant thereto or in connection with the transactions
contemplated hereby shall be in all material respects true and accurate as
of the date when made and at and as of the Effective Time as though such
representations and warranties were made at and as of such date and time,
except as otherwise permitted by this Agreement. Santa Lucia shall have
fully performed and complied in all material respects with all agreements,
obligations and conditions required by this Agreement to be performed or
complied with by it at or prior to the Effective Time, except as otherwise
permitted by this Agreement.
SECTION 8.02. APPROVAL OF SANTA LUCIA SHAREHOLDERS: REGULATORY
APPROVALS. The approval of the shareholders of Santa Lucia to this
Agreement and the Merger, required under the BCA and as contemplated by
Section 6.01 shall have been obtained, and all regulatory obligations
administered by the SEC shall have been satisfied.
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SECTION 8.03. REGULATORY APPROVALS: LITIGATION. All permits and
consents required by state securities laws, if any, shall have been
obtained. No legal proceeding by any person shall have been instituted
which questions the validity or legality of the transactions contemplated
hereby, nor shall any court order of decree have been issued enjoining the
transactions contemplated hereby.
SECTION 8.04. MATERIAL ADVERSE CHANGES. No material adverse change
shall have occurred in the business, financial position, results of
operations, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, operations or prospects of Santa Lucia, nor shall any
event or events have occurred which may reasonably be expected to have a
Material Adverse Effect on Santa Lucia.
SECTION 8.05. CERTIFICATE OF SANTA LUCIA OFFICERS. Santa Lucia shall
have delivered to MSGI a certificate or certificates signed by its
president dated the Effective Time, in form and substance satisfactory to
MSGI and its counsel to the effect that, to the best of their knowledge
after conducting diligent inquiry, that the representations and warranties
of Santa Lucia contained in Article III hereof are true, accurate and
complete.
ARTICLE IX
ADDITIONAL CONDITIONS TO THE MERGER
SECTION 9.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of each party to consummate the Merger are subject to the
satisfaction of the following conditions:
(i) there shall not be any statute, rule or regulation which makes
consummation of the Merger or performance of any of the transactions
contemplated hereby illegal or otherwise prohibited, or any order, decree,
injunction or judgment enjoining consummation of the Merger or performance
of such transaction: and
(ii) the issuance of the Surviving Corporation Stock to be issued in
exchange for MSGI Stock shall have received all Blue Sky Law authorizations
necessary to carry out the transactions contemplated thereby.
ARTICLE X
TERMINATION
SECTION 10.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (whether
before or after approval of this Agreement by the shareholders of MSGI and
Santa Lucia):
(a) by mutual written consent of MSGI and Santa Lucia;
(b) by either MSGI or Santa Lucia if there shall be any statute, rule
or regulation which make consummation of the Merger illegal or otherwise
prohibited or any order, decree, injunction or judgment enjoining MSGI or
Santa Lucia from consummating the Merger and such order, decree, injunction
or judgment shall have become final and non-appealable;
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(c) by Santa Lucia upon the occurrence of any event that would result
in a failure of any of the conditions set forth in Articles VII and IX
hereof; or
(d) by MSGI upon the occurrence of any event that would result in a
failure of any of the conditions set forth in Articles VIII and IX hereof.
SECTION 10.02. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and
of no effect with no liability on the part of any party hereto, except that
(a) the agreements contained in Section 6.04 shall survive the termination
hereof and (b) nothing herein shall relieve any party of any liability for
willful breach hereof.
ARTICLE XI
CLOSING
SECTION 11.01. CLOSING. Unless this Agreement shall have been
terminated and the Merger herein contemplated shall have been abandoned as
provided in Article X, a closing will be held, as soon as practicable at a
time and place agreed upon by the parties.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been given if delivered personally or by telecopier or if mailed, postage
prepaid, return receipt requested, in which the third business day
following the date of mailing shall be deemed the date such notice is
given, to the following address or to such other address as any party may
from time to time designate in writing to the other party hereto:
If to MSGI, to :
Multi-Spectrum Group, Incorporated
1055 Germantown Pike
Norristown, PA 19401
Attention: Edward V. Ellis
If to Santa Lucia, to:
Santa Lucia Funding, Inc.
2055 Greenbriar Circle
Salt Lake City, UT 84109
Attention: Fredrick L. Elliott
SECTION 12.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations or warranties contained herein shall survive the
Effective Time.
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SECTION 12.03. AMENDMENTS. Any provision of this Agreement may be
amended by mutual agreement of the parties hereto at any time prior to the
Effective Time; PROVIDED, that any such amendment made after the approval
of the Proposal by the shareholders of MSGI or Santa Lucia shall not,
without further approval of such shareholders, (i) alter or change the
amount or kind of consideration to be received in exchange for MSGI Stock,
(ii) alter or change any term of the Articles or Certificate of
Incorporation of the Surviving Corporation if it would adversely affect
such shareholders or (iii) alter or change any of the terms and conditions
of this Agreement if such alteration or change would adversely affect the
holders of any shares of MSGI Stock or Santa Lucia Stock. Any amendment to
this Agreement shall be in writing signed by all the parties hereto.
SECTION 12.04. WAIVERS. At any time prior to the Effective Time,
Santa Lucia, on the one hand, and MSGI, on the other hand, may (i) extend
the time for the performance of any agreement of another party hereto, (ii)
waive any inaccuracy in there presentations and warranties contained herein
or in any document delivered pursuant hereto or (iii) subject to the
provisions in Section 12.03, waive compliance with any agreement or
condition contained herein, except Sections 7.02, 8.02 and 9.01(i). Any
agreement on the part of any party to any such extension or waiver shall be
effective only if set forth in writing signed on behalf of such party and
delivered to the other parties.
SECTION 12.05. SUCCESSORS AND ASSIGNS. The provisions of this
agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; PROVIDED, that no party
may assign or otherwise transfer any of its rights or obligations under
this Agreement without the consent of each of the other parties hereto.
This Agreement shall be binding upon and is solely for the benefit of each
of the parties hereto and their respective successors and assigns, and
nothing in this Agreement is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason by this
Agreement.
SECTION 12.06. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Utah applicable to contracts made
and to be performed entirely therein. The parties hereby irrevocable
submit to the jurisdiction and venue of any Utah state or federal court
sitting in Salt Lake City, Utah, over any action or proceeding arising out
of or relating to this Agreement and the transactions contemplated hereby,
and irrevocable agree that all claims in respect of such action or
proceeding may be heard and determined in such Utah state or federal court.
The parties hereby irrevocable waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. In any such action or proceeding, the
prevailing party shall be entitled to reimbursement of reasonable
attorneys' fees and costs.
SECTION 12.07. COUNTERPART: EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other parties
hereto.
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SECTION 12.08. ENTIRE AGREEMENT. This Agreement, including the
Schedules hereto, contain all of the terms, conditions and representations
and warranties agreed upon by the parties relating to the subject matter of
this Agreement and supersede all prior and contemporaneous agreements,
negotiations, correspondence, undertakings and communications of the
parties, oral or written, respecting such subject matter.
SECTION 12.09. EXPENSES. MSGI shall pay all expenses incurred in
connection with this Agreement and the transactions contemplated herein
provided, however, that if this Agreement shall terminate prior to the
Effective Time because of a failure by either party to perform or comply
with any of its obligations hereunder, such party shall pay the expenses of
the other party incurred thereby.
SECTION 12.10. EXHIBITS. The Exhibits and Schedules attached hereto
are made a part of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year
first above written.
MULTI-SPECTRUM GROUP, INC.
By: /s/ David E. Taylor
----------------------------------------
David E. Taylor
Its: President
SANTA LUCIA FUNDING, INC.
By: /s/ Fredrick L. Elliott
----------------------------------------
Fredrick L. Elliott
Its: President
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STATE OF )
:ss.
COUNTY OF )
On the _____ day of ________________________, 1989, personally
appeared before me David E. Taylor, who being by me duly sworn did say that
he is the President of Multi-Spectrum Group Inc., the corporation that
executed the above and foregoing instrument and that said instrument was
signed on behalf of said corporation authority of its Bylaws and said XXX
DAVID E. TAYLOR acknowledged to me that said corporation executed the same.
----------------------------------------
Notary Public
Residing in __________________________
My Commission Expires:
_________________________________
STATE OF Utah )
:ss.
COUNTY OF Salt Lake )
On the 27th day of December, 1989, personally appeared before me David
E. Taylor, who being by me duly sworn did say that he is the President of
Santa Lucia Funding, Inc., the corporation that executed the above and
foregoing instrument and that said instrument was signed on behalf of said
corporation authority of its Bylaws and said Fredrick L. Elliott
acknowledged to me that said corporation executed the same.
Shana L. Wahl
Notary Public
Residing in Salt Lake City, Ut.
My Commission Expires:
____________________________
[Seal of Shana L. Wahl, Notary Public]
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APPENDIX "A"
ARTICLE 1 - NAME
The name of the corporation is Multi-Spectrum Group, Inc.
ARTICLE IV - STOCK
The aggregate number of shares which the corporation shall have
authority to issue shall be 100,000,000 common shares, par value $0.001 per
share. All shares of the corporation shall be of the same class and shall
have the same rights and preferences. Fully paid shares of the
corporation shall not be liable to any further call or assessment.
ARTICLE X - INDEMNIFICATION
A. No director of the corporation shall have any liability to the
corporation of its shareholders for monetary damages for breach of
fiduciary duty, except that this Article X shall not eliminate or limit the
liability of a director (i) for any breach of such director's duty of
loyalty to the corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) for actions specified under Section 16-10-44 of the
Utah Business Corporation Act, or (iv) for any transaction from which the
director derived an improper personal benefit.
B. The corporation shall, to the fullest extent permitted by the
Utah Business Corporation Act, as the same may be amended and supplemented,
indemnify all directors, officers, employees and agents of the corporation
whom it shall have the power to indemnify thereunder from and against any
and all of the expenses, liabilities, or other matters referred to therein
or covered thereby. The corporation shall have the right to advance
expenses to its directors, officers, employees and agents to the full
extent permitted by the Utah Business Corporation Act, as the same may be
amended or supplemented. Such right to indemnification or advancement of
expenses shall continue as to a person who has ceased to be a director,
officer, employee or agent of the corporation, and shall inure to the
benefit of the heirs, executors and administrators of such persons. The
indemnification and advancement of expenses provided for herein shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement may be entitled under any bylaw, agreement,
vote of shareholders or of disinterested directors or otherwise. The
corporation shall have the right to purchase and maintain insurance on
behalf of its directors, officers, employees or agents to the full extent
permitted by the Utah Business Corporation Act, as the same may be amended
or supplemented.
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SCHEDULES OF MULTI-SPECTRUM GROUP, INC.
Schedule 2.11
Tradename "Creative Link"
Schedule 2.17
Union National Bank, Kulpsville, Pennsylvania
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SCHEDULE OF SANTA LUCIA FUNDING, INC.
Schedule 3.17
Utah Bank & Trust, 778 South Main Street, Salt Lake City, Utah
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DELAWARE GENERAL CORPORATION LAW
S. 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares
of stock on the date of the making of a demand pursuant to the provisions
of subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with the provisions of subsection
(d) of this Section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to S. 228 of this
Chapter shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this Section. As used in this Section, the word
"stockholder" means a holder of record of stock in a stock corporation and
also a member of record of a non-stock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a non-stock corporation.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to Sections 251, 252, 254, 257 or 258
of this Chapter;
(1) provided, however, that no appraisal rights under this
Section shall be available for the shares of any class or series of stock
which, at the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to act upon
the agreement of merger or consolidation, were either (i) listed on a
national securities exchange or (ii) held of record by more than 2,000
stockholders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this
Section, appraisal rights under this Section shall be available for the
shares of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257 and 258 of this
Chapter to accept for such stock anything except (i) shares of stock of the
corporation surviving or resulting from such merger or consolidation; (ii)
shares of stock of any other corporation which at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or held of record by more than 2,000 stockholders; (iii) cash in
lieu of fractional shares of the corporations described in the foregoing
clauses (i) and (ii); or (iv) any combination of the shares of stock and
cash in lieu of fractional shares described in the foregoing clauses (i),
(ii) and (iii) of this subsection.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this chapter is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this Section shall be available for the shares
of any class or
EXHIBIT "B"
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series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this Section, including those set forth
in subsections (d) and (e), shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this Section is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders entitled to such
appraisal rights that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such notice a
copy of this Section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the vote
on the merger of consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with the provisions of this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or section 253 of this Chapter, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for any or
all of the shares of the constituent corporation, and shall include in such
notice a copy of this Section. The notice shall be sent by certified or
registered mail, return receipt requested, addressed to the stockholder at
his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with the provisions of subsections (a) and (d) hereof and
who is otherwise entitled to appraisal rights, may file a petition in the
Court of Chancery demanding a determination of the value of the stock of
all such stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or consolidation, any
stockholder shall have the right to withdraw his demand for appraisal and
to accept the terms offered upon the merger or consolidation. Within 120
days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation
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surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for the appraisal
have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period
for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment of their shares and with whom agreement as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register
in Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by one or more publications at least one week before the day of
the hearing in a newspaper of general circulation published in the City of
Wilmington, Delaware, or such publication as the Court deems advisable.
The forms of the notices by mail and by publication shall be approved by
the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provision of this Section and who
have become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock to
the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors.
In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or
resulting corporation pursuant to subsection (f) of this Section and who
has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights under this
Section.
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(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock forthwith,
and in the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any other state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all of the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this Section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation; provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this Section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this Section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(l) The shares of the surviving or resulting corporation into which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.
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UTAH BUSINESS CORPORATION ACT
16-10-75
Rights of Dissenting Shareholders upon Merger or Consolidation or
Sale or Exchange of Assets - Right to Dissent - Exception
Any shareholder of a corporation shall have the right to dissent from
any of the following corporate actions:
(a) Any plan of merger or consolidation to which the corporation is
a party; or
(b) Any sale or exchange of all or substantially all of the property
and assets of the corporation, otherwise than in the usual and
regular course of its business and other than a sale for cash
where the shareholder's approval thereof is conditional upon the
distribution of all or substantially all of the net proceeds of
the sale to shareholders in accordance with their respective
interests within one year after the date of sale.
This section shall not apply to the shareholders of the surviving
corporation in a merger if a vote of the shareholders of such corporation
is not necessary to authorize such merger; nor shall it apply to the
holders of shares of any class or series if the shares of such class or
series were registered on the New York Stock Exchange or the American Stock
Exchange on the date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which a plan of merger or consolidation
or a proposed sale or exchange of property and assets is to be acted upon
unless the articles of incorporation of the corporation shall otherwise
provide. (Amended by S.B. 91, L.'71, eff. 5-10-71)
16-10-76
Rights of Dissenting Shareholders upon Merger or Consolidation or
Sale or Exchange of Assets - Filing Objections - Payment of Fair Value
for Shares - Procedure
Any shareholder electing to exercise such right of dissent shall file
with the corporation, prior to or at the meeting of shareholders at which
such proposed corporate action is submitted to a vote, a written objection
to such proposed corporation action. If such proposed corporation action
be approved by the required vote and such shareholders shall not have voted
in favor thereof, such shareholder may, within ten days after the date on
which the vote was taken or if a corporation is to be merged without a vote
of its shareholders into another corporation, any of its shareholders may,
within fifteen days after the plan of such corporation, or, in the case of
a merger or consolidation, on the surviving or new corporation, domestic or
foreign, for payment of the fair value of such shareholder's shares, and,
if such proposed corporate action is effected, such corporation shall pay
to such shareholder, upon surrender of the certificate or
EXHIBIT "C"
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<PAGE>
certificates representing such shares, the fair value thereof as of the day
prior to the date on which the vote was taken approving the proposed
corporation action, excluding any appreciation or depreciation in
anticipation of such corporate action. Any shareholder failing to make
demand within the applicable ten-day or fifteen-day period shall be bound
by the terms of the proposed corporate action. Any shareholder making such
demand shall thereafter be entitled only to payment as in this section
provided and shall not be entitled to vote or to exercise any other rights
of a shareholder.
No such demand may be withdrawn unless the corporation shall consent
thereto. If, however, such demand shall be withdrawn upon consent, or if
the proposed corporation action shall be abandoned or rescinded or the
shareholders shall revoke the authority to effect such action, or if, in
the case of a merger, on the date of the filing of the articles of merger
the surviving corporation is the owner of all the outstanding shares of the
other corporations, domestic and foreign, that are parties to the merger,
or if no demand or petition for the determination of fair value by a court
shall have been made or filed within the time provided in this section, or
if a court of competent jurisdiction shall determine that such shareholder
is not entitled to the relief provided by this section, then the right of
such shareholder to be paid the fair value of his shares shall cease and
his status as a shareholder shall be restored, without prejudice to any
corporate proceedings which may have been taken during the interim.
Within ten days after such corporate action is affected, the
corporation, or in the case of a merger or consolidation, the surviving or
new corporation, domestic or foreign, shall give written notice thereof to
each dissenting shareholder who has made demand as herein provided, and
shall make a written offer to each such shareholder to pay for such shares
at a specified price deemed by such corporation to be the fair value
thereof. Such notice and offer shall be accompanied by a balance sheet of
the corporation the shares of which the dissenting shareholder holds, as of
the latest available date and not more than twelve months prior to the
making of such offer, and a profit and loss statement of such corporation
for the twelve months' period ended on the date of such balance sheet.
If within thirty days after the date on which such corporate action
was effected the fair value of such shares is agreed upon between any such
dissenting shareholder and the corporation, payment therefore shall be made
within ninety days after the date on which such corporate action was
effected, upon surrender of the certificate or certificates representing
such shares. Upon payment of the agreed value the dissenting shareholder
shall cease to have any interest in such shares.
If within such period of thirty days a dissenting shareholder and the
corporation do not so agree, then the corporation, within thirty days after
receipt of written demand from any dissenting shareholder given within
sixty days after the date on which such corporate action was effected,
shall, or at its election at any time within such period of sixty days may,
file a petition in any court of competent jurisdiction in the county in
this state where the registered office of the corporation is located
praying that the fair value of such shares be found and
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determined. If, in the case of a merger or consolidation, the surviving or
new corporation is a foreign corporation without a registered office in
this state, such petition shall be filed in the county where the registered
office of the domestic corporation was last located. If the corporation
shall fail to institute the proceeding as herein provided, any dissenting
shareholder may do so in the name of the corporation. All dissenting
shareholders, wherever residing, shall be made parties to the proceeding as
an action against their shares quasi in rem. A copy of the petition shall
be served on each dissenting shareholder who is a resident of this state
and shall be served by registered or certified mail on each dissenting
shareholder who is nonresident. Service on nonresidents shall also be made
by publication as provided by law. The jurisdiction of the court shall be
plenary and exclusive. All shareholders who are parties to the proceeding
shall be entitled to judgment against the corporation for the amount of the
fair value of their shares. The court may, if it so elects, appoint one or
more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraiser shall have such power and
authority as shall be specified in order of their appointment or an
amendment thereof. The judgment shall be payable only upon and
concurrently with the surrender to the corporation of the certificate or
certificates representing such shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in such shares.
The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable in all the circumstances, from
the date on which the vote was taken on the proposed corporate action to
the date of payment.
The costs and expenses of any such proceedings shall be determined by
the court and shall be assessed against the corporation, but all or any
part of such costs and expenses may be apportioned and assessed as the
court may deem equitable against any or all of the dissenting shareholders
who are parties to the proceeding to whom the corporation shall have made
an offer to pay for the shares if the court shall find that the action of
such shareholders in failing to accept such offer was arbitrary or
vexatious or not in good faith. Such expenses shall include reasonable
compensation for the reasonable expenses of the appraisers, but shall
exclude the fee and expenses of counsel for and experts employed by any
party; but if the fair value of the share as determined materially exceeds
the amount which the corporation offered to pay therefor, or if no offer
was made, the court in its discretion may award to any shareholder who is
a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or expert employed by the shareholder
in the proceeding.
Within twenty days after demanding payment for his shares, each
shareholder demanding payment shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such
demand has been made. His failure to do so shall, at the option of the
corporation, terminate his rights under this section unless a court of
competent jurisdiction, for good and sufficient cause shown, shall
otherwise direct. If shares represented by a certificate on which notation
has been so made shall be transferred, each new certificate issued
therefore shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares
shall
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acquire by such transfer no rights in the corporation other than those
which the original dissenting shareholder had after making demand for
payment of the fair value thereof.
Shares acquired by corporation pursuant to payment of the agreed value
therefor, or to payment of the judgment entered therefor, as in this
section provided, may be held and disposed of by such corporation as in the
case of other treasury shares, except that, in the case of a merger or
consolidation, they may be held disposed of as the plan of merger or
consolidation may otherwise provide. (Amended by S.B. 91, L. 71, eff. 5-
10-71)
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MULTI-SPECTRUM GROUP, INC.
1990 INCENTIVE PLAN
Effective ____________________, 1990
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MULTI-SPECTRUM GROUP, INC.
1990 INCENTIVE PLAN
Effective ___________________, 1990
1. PURPOSE.
-------
The purpose of the Multi-Spectrum Group, Inc. 1990 Incentive Plan is
to attract and retain persons of ability as employees of the Company,
motivate and reward good performance, encourage such employees to continue
to exert their best efforts on behalf of the Company and further
opportunities for Stock ownership by such employees in order to increase
their proprietary interest in the Company by providing incentive awards to
Key Employees (including officers and directors who are also employees, but
excluding those directors as specified by resolution of the Board of
Directors), whose responsibilities and decisions directly affect the
performance of the Company. Such incentive awards may consist of Stock of
the Company or, in the discretion of the Committee, other securities of the
Company convertible into such Stock, subject to such restrictions as the
Committee may determine or as provided herein, Performance Units or Stock
Appreciation Rights payable in such Stock or cash, or incentive or
nonqualified stock options to purchase such Stock, or any combination of
the foregoing, together with supplemental cash payments, all as the
Committee may determine.
2. DEFINITIONS.
-----------
When used herein, the following terms shall have the following
meanings:
"AWARD" means an award granted to any Key Employee in accordance with
the provisions of the Plan in the form of Options, SARs, Restricted Stock,
Deferred Stock or Performance Units, or any combination of the foregoing.
"AWARD AGREEMENT" means the written agreement evidencing each Award
granted to a Key Employee under the Plan.
"BENEFICIARY" means the beneficiary or beneficiaries designated
pursuant to Section 11 below to receive the amount, if any, payable under
the Plan upon the death of a Key Employee.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the happening of any of the following:
(a) receipt by the Company of a report on Schedule 13D filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (the "1934 Act") disclosing that any
person, group
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corporation or other entity (other than the Company or a wholly-owned
subsidiary of the Company) is the beneficial owner, directly or indirectly,
of 20 percent or more of the outstanding stock of the Company;
(b) purchase by any person (as defined in Section 13(d) of the 1934
Act), corporation or other entity other than the Company or a wholly-owned
subsidiary of the Company, of shares pursuant to a tender or exchange offer
to acquire any Stock of the Company (or securities convertible into Stock)
for cash, securities or any other consideration, provided that, after
consummation of the offer, such person, group, corporation or other entity
is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 20 percent or more of the outstanding Stock
(calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 act
in the case of rights to acquire Stock);
(c) approval by the stockholders of the Company of any (i)
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Stock of
the Company would be converted into cash, securities or other property,
other than a consolidation or merger of the Company in which holders of its
Stock immediately prior to the consolidation or merger have substantially
the same proportionate ownership of common stock of the surviving
corporation immediately after the consolidation or merger as immediately
before, or (ii) sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all the assets
of the Company; or
(d) a change in the majority of the members of the Board of Directors
within a 12-month period unless the election or nomination for election by
the Company's stockholders of each new director was approved by the vote of
two-thirds of the directors then still in office who were in office at the
beginning of the 12-month period.
"CODE" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.)
"COMMITTEE" means the Committee appointed by the Board pursuant to
Section 12. As used herein, references to the Committee shall mean either
such Committee or the Board if no Committed has been established.
"COMPANY" means Multi-Spectrum Group, Inc. and its subsidiaries,
successors and assigns.
"DEFERRED STOCK" means Stock credited to a Key Employee under the Plan
subject to the requirements of Section 8 and such other restrictions as the
Committee deems appropriate or desirable.
"FAIR MARKET VALUE" means, as of any date, the closing price based
upon composite transactions on the national stock exchanges for one share
of Stock on the exchanges or, if no sales of Stock have taken place on such
date, the closing price on the most recent date on which selling prices
were quoted; PROVIDED,
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HOWEVER, that at the time of grant of any Award other than an incentive
stock option, the Committee, in its sole discretion, may elect to determine
Fair Market Value for all purposes under the Plan with respect to such
Award, based on the average of the closing prices, as of the date of
determination and a period of up to nine (9) trading days immediately
preceding such date. If no public trading market exists for the Company's
Stock, the Fair Market Value shall be determined in the sole discretion of
the Committee or the Company's Board of Directors.
"KEY EMPLOYEE" means an officer, director or other Key Employee of any
Participating Company who, in the judgment of the Committee, is responsible
for or contributes to the management, growth or profitability of the
business of any Participating Company, but excludes those directors as
specified by resolution of the Board of Directors.
"OPTION" means an option to purchase Stock, including Restricted Stock
or Deferred Stock, if the Committee so determines, subject to the
applicable provisions of Section 5 and awarded in accordance with the terms
of the Plan and which may be an incentive stock option qualified under
Section 422A of the Code or a nonqualified stock option.
"PARTICIPATING COMPANY" means the Company or any subsidiary or other
affiliate of the Company; PROVIDED, HOWEVER, for incentive stock options
only, "Participating Company" means the Company or any corporation which at
the time such option is granted under the Plan qualifies as a subsidiary of
the Company under the definition of "subsidiary corporation" contained in
Section 425(f) of the Code.
"PERFORMANCE UNIT" means a performance unit subject to the
requirements of Section 6 and awarded in accordance with the terms of the
Plan.
"PLAN" means the Multi-Spectrum Group, Inc. 1990 Incentive Plan, as
the same may be amended, administered or interpreted from time to time.
"RESTRICTED STOCK" means Stock delivered under the Plan subject to the
requirements of Section 7 and such other restrictions as the Committee
deems appropriate or desirable.
"SAR" means a stock appreciation right subject to the appropriate
requirements under Section 5 and awarded in accordance with the terms of
the Plan.
"STOCK" means the common stock ($0.001 par value) of the Company.
"TOTAL DISABILITY" means the complete and permanent inability of a Key
Employee to perform all of his or her duties under the terms of his or her
employment with any Participating Company, as determined by the Committee
upon the basis of such evidence, including independent medical reports and
data, as the Committee deems appropriate or necessary.
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3. SHARES SUBJECT TO THE PLAN.
--------------------------
The aggregate number of shares of Stock which may be awarded under the
Plan or subject to purchase by exercising an Option shall not exceed five
million (5,000,000) shares. Such shares shall be made available either from
authorized and unissued shares or shares held by the Company in its
treasury. The Committee may, in its discretion, decide to award other
shares issued by the Company that are convertible into Stock or make such
shares subject to purchase by an Option, in which event the maximum number
of shares of Stock into which such Stock may be converted shall be used in
applying the aggregate share limit under this Section 3 and all provisions
of the Plan relating to Stock shall apply with full force and effect with
respect to such convertible shares. If, for any reason, any shares or Stock
awarded or subject to purchase by exercising an Option under the Plan are
not delivered or are reacquired by the Company, for reasons including, but
not limited to, a forfeiture of Restricted Stock or Deferred Stock or
termination, expiration or a cancellation with the consent or a key
Employee of an Option, SAR or a Performance Unit, such shares of Stock
shall again become available for award under the Plan.
4. GRANT OF AWARDS AND AWARD AGREEMENTS.
------------------------------------
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of
Key Employees to whom Awards are granted; (ii) determine the form or forms
of Award to be granted to any Key Employee; (iii) determine the amount or
number of shares of Stock, including Restricted Stock or Deferred Stock if
the Committee so determines, subject to each Award; (iv) determine the
terms and conditions of each Award; and (v) determine whether and to what
extent Key Employees shall be allowed or required to defer receipt of any
Awards or other amounts payable under the Plan to the occurrence of a
specified date or event; provided, however, that no Award shall be granted
after the expiration of ten (10) years from the effective date of the Plan.
(b) Each Award granted under the Plan shall be evidenced by a written
Award Agreement, in a form approved by the Committee. Such agreement shall
be subject to and incorporate the express terms and conditions, if any,
required under the Plan or as required by the Committee for the form of
Award granted and such other terms and conditions as the Committee may
specify.
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
-------------------------------------------
(a) With respect to Options and SARs, the Committee shall (i)
authorize the granting of incentive stock options, nonqualified stock
options, SARs or a combination of incentive stock options, nonqualified
stock options and SARs; (ii) determine the number of shares of Stock
subject to each Option or the number of shares of Stock that shall be used
to determine the value of a SAR; (iii) determine whether such Stock shall
be Restricted Stock or, with respect to nonqualified stock options,
Deferred Stock; (iv) determine the time or times when and the duration of
the exercise period; and (v) determine whether or not all or
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part of each Option may be cancelled by the exercise of a SAR; PROVIDED,
HOWEVER, that (A) no Option shall be granted after the expiration of ten
years from the effective date of the Plan and (B) the aggregate Fair Market
Value (determined as of the date an Option is granted) of the Stock
(disregarding any restrictions in the case of Restricted Stock) for which
incentive stock options granted to any Key Employee under this Plan may
first become exercisable in any calendar year shall not exceed One Hundred
Thousand Dollars ($100,000).
(b) The exercise period for a nonqualified stock option shall not
exceed ten years and one day from the date of grant, and the exercise
period for an incentive stock option or SAR, including any extension which
the Committee may from time to time decide to grant, shall not exceed ten
years from the date of grant; PROVIDED, HOWEVER, that, in the case of an
incentive stock option granted to a Key Employee who, at the time of grant,
owns stock possessing more than 10 percent of the total combined voting
power or all classes of stock of the Company (a "Ten Percent Stockholder"),
such period, including extensions, shall not exceed five years from the
date of Grant.
(c) The Option or SAR price per share shall be determined by the
Committee at the time any Option is granted and shall be not less than (i)
in the case of incentive stock options and any tandem SARs the Fair Market
Value, or in the case of an Option granted to a Ten Percent Stockholder,
110 percent of the Fair Market Value or (ii) in the case of any other
Options or SARs, at least 85 percent of Fair Market Value, disregarding any
restrictions in the case of Restricted Stock or Deferred Stock, on the date
the Option is granted, as determined by the Committee; PROVIDED, HOWEVER,
that such price shall be at least equal to the par value of one share of
Stock.
(d) No part of any Option or SAR may be exercised until (i) the Key
Employee who has been granted the Award shall have remained in the employ
of a Participating Company for such period, if any, after the date on which
the Option or SAR is granted, or (ii) achievement of such performance or
other criteria, if any, by the Key Employee, the Company or any subsidiary,
affiliate or division of the Company, as the Committee may specify, and the
Committee may further require exercisability in installments; PROVIDED,
HOWEVER, the period during which a SAR is exercisable shall commence no
earlier than six months following the date the Option or SAR is granted.
(e) Subject to Section 10(c), except as otherwise provided in the
Plan, the purchase price of the shares as to which an Option shall be
exercised shall be paid to the Company at the time of exercise either in
cash or in such other consideration as the Committee deems appropriate,
including Stock, or, with respect to nonqualified options, Restricted Stock
or Deferred Stock, already owned by the optionee, having a total fair
market value, as determined by the Committee, equal to the purchase price,
or a combination of cash and such other consideration having a total fair
market value, as so determined, equal to the purchase price; PROVIDED,
HOWEVER, that if payment of the exercise price is made in whole or in part
in the form of Restricted Stock or Deferred Stock, the Stock received upon
the exercise of the Option shall be Restricted Stock or Deferred
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Stock, as the case may be, at least with respect to the same number of
shares and subject to the same restrictions or other limitations as the
Restricted Stock or Deferred Stock paid on the exercise of the Option.
(f) (i) If a Key Employee who has been granted an Option or SAR dies
(A) while an employee of any Participating Company or (B) within three
months after termination of his or her employment with all Participating
Companies because of his or her Total Disability, his or her Options or
SARs may be exercised, to the extent that the Key Employee shall have been
entitled to do so on the date of his or her death or such termination of
employment, by the person or persons to whom the Key Employee's rights
under the Option or SAR pass by will, or if no such person has such rights,
by his or her executors or administrators, at any time, or from time to
time, within twelve months after the date of the Key Employee's death or
within such other period, and subject to such terms and conditions as the
Committee may specify, but not later than the expiration date specified in
Section 5(b) above.
(ii) If the Key Employee's employment by any Participating
Company terminates because of his or her Total Disability and such Key
Employee has not died within the following three months, he or she may
exercise his or her Options or SARs, to the extent that he or she shall
have been entitled to do so at the date of the termination of his or her
employment, at any time, or from time to time, within twelve months after
the date of the termination of his or her employment or within such other
period, and subject to such terms and conditions as the Committee may
specify, but not later than the expiration date specified in Section 5(b)
above.
(iii) If the Key Employee's employment terminates for any other
reason, he or she may exercise his or her Options or SARs to the extent
that he or she shall have been entitled to do so at the date of the
termination of his or her employment, at any time, or from time to time,
within three months after the date of the termination of his or her
employment or within such other period, and subject to such terms and
conditions as the Committee may specify, but not later than the expiration
date specified in Section 5(b) above.
(g) No Option or SAR granted under the Plan shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option shall be exercisable only by him or
her.
(h) With respect to an incentive stock option, the Committee shall
specify such terms and provisions as the Committee may determine to be
necessary or desirable in order to qualify such Option as an incentive
stock option within the meaning of Section 422A of the Code.
(i) Upon exercise of a SAR, the Key Employee shall be entitled,
subject to such terms and conditions as the Committee may specify, to
receive upon exercise thereof all or a portion of the excess of (i) the
Fair Market Value of a specified number of shares of Stock at the time of
exercise, as determined by the Committee, over (ii) a specified amount
which shall not, subject to Section 5(j), be less than the Fair Market
Value of such specified number of shares of
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Stock at the time the SAR is granted. Upon exercise of a SAR, payment of
such excess shall be made as the Committee shall specify at the time of the
grant of a SAR or otherwise (A) in cash, (B) through the issuance or
transfer to the Key Employee of whole shares of Stock, including Restricted
Stock or Deferred Stock, with a fair Market Value, disregarding any
restrictions in the case of Restricted Stock or Deferred Stock, at such
time equal to any such excess, or (C) a combination of cash and shares of
Stock with a combined fair market value at such time equal to any such
excess, all as determined by the Committee; PROVIDED, HOWEVER, a fractional
share of Stock shall be paid in cash equal to the Fair Market Value of the
fractional share of Stock, disregarding any restrictions in the case of
Restricted Stock or Deferred Stock, at such time. If the full amount of
such value is not paid in Stock, then the shares or Stock representing such
portion of the value of the SAR not paid in Stock shall again become
available for award under the Plan.
(j) If the Award granted to a Key Employee allows the Key Employee to
elect to cancel all or any portion of an unexercised Option by exercising
a related SAR, then the Option price per share of Stock shall be used as
the specified price in Section 5(i), to determine the value of the SAR, the
Company's obligation in respect of such Option or such portion thereof will
be discharged by payment of the SAR so exercised. In the event of such a
cancellation, the number of shares as to which such Option was canceled
shall become available for use under the Plan less the number of shares
received by the optionee upon such cancellation. Any such SAR shall be
transferable only by will or by the laws of descent and distribution.
During the lifetime of the optionee, such SAR shall be exercisable only by
him or her.
6. PERFORMANCE UNITS.
-----------------
(a) The Committee shall determine a performance period (the
"Performance Period") of one or more years and shall determine the
performance objectives for grants of Performance Units. Performance
objectives may vary from Key Employee to Key Employee and between groups of
Key Employees and shall be based upon such performance criteria or
combination of factors as the Committee may deem appropriate, including,
but not limited to, minimum earnings per share or return on equity.
Performance Periods may overlap and Key Employees may participate
simultaneously with respect to Performance Units for which different
Performance Periods are prescribed.
(b) At the beginning of a Performance Period, the Committee shall
determine for each Key Employee or group of Key Employees eligible for
Performance Units with respect to that Performance Period the range of
dollar values, if any, which may be fixed or may vary in accordance with
such performance or other criteria specified by the Committee, which shall
be paid to a Key Employee as an Award if the relevant measure of Company
performance for the Performance Period is met.
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(c) If during the course of a Performance Period there shall occur
significant events as determined by the Committee, including, but not
limited to, a reorganization of the Company, which the Committee expects to
have a substantial effect on a performance objective during such period,
the Committee may revise such objective.
(d) If a Key Employee terminates service with all Participating
Companies during a Performance Period because of death, Total Disability,
retirement on or after age 65, or at an earlier age with the consent of the
company, or a significant event, as determined by the Committee, that Key
Employee shall be entitled to payment in settlement of each Performance
Unit for which the Performance Period was prescribed (i) based upon the
performance objectives satisfied at the end of such period and (ii)
prorated for the portion of the Performance Period during which the Key
Employee was employed by any Participating Company; PROVIDED, HOWEVER, the
Committee may provide for an earlier payment in settlement of such
Performance Unit in such amount; and under such terms and conditions as the
Committee deems appropriate or desirable with the consent of the Key
Employee. If a Key Employee terminates service with all Participating
Companies during a Performance Period for any other reason, such Key
Employee shall not be entitled to any payment with respect to that
Performance Period unless the Committee shall otherwise determine.
(e) Each Performance Unit may be paid in whole shares of Stock,
including Restricted Stock or Deferred Stock (together with any cash
representing fractional shares of Stock), or cash, or a combination of
Stock and cash either as a lump sum payment or in annual installments, all
as the Committee shall determine, at the time of grant of the Performance
Unit or otherwise, commencing as soon as practicable after the end of the
relevant Performance Period. If and to the extent the full value of a
Performance Unit is not paid in Stock, then the shares of Stock
representing the potion of the value of the Performance Unit not paid in
Stock shall again become available for award under the Plan.
7. RESTRICTED STOCK.
----------------
(a) Restricted Stock may be received by a Key Employee either as an
Award or as the result of an exercise of an Option or SAR or as payment for
a Performance Unit. Restricted Stock shall be subject to a restriction
period (after which restrictions shall lapse) which shall mean a period
commencing on the date the Award is granted and ending on such date or upon
the achievement of such performance or other criteria as the Committee
shall determine (the "Restriction Period"). The Committee may provide for
the lapse of restrictions in installments where deemed appropriate.
(b) Except as otherwise provided in this Section 7, no shares of
Restricted Stock received by a Key Employee shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period; PROVIDED, HOWEVER, the Restriction Period for any Key
Employee shall expire and all restrictions on shares of Restricted Stock
shall lapse upon the Key Employee's death, Total Disability or retirement
on or after age 65, or an earlier
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age with the consent of the Company, or upon some significant event, as
determined by the Committee, including, but not limited to, a
reorganization of the Company.
(c) If a Key Employee terminates employment with all Participating
Companies for any reason before the expiration of the Restriction Period,
all shares of Restricted Stock still subject to restriction shall, unless
the Committee otherwise determines, be forfeited by the Key Employee and
shall be reacquired by the Company, and, in the case of Restricted Stock
purchased through the exercise or an Option, the Company shall refund the
purchase price paid on the exercise of the Option. Upon such forfeiture,
such forfeited shares of Restricted Stock shall again become available for
award under the Plan.
(d) The Committee may require under such terms and conditions as it
deems appropriate or desirable that the certificates for Stock delivered
under the Plan may be held in custody by a bank or other institution, or
that the Company may itself hold such shares in custody until the
Restriction Period expires or until restrictions thereon otherwise lapse,
and may require, as a condition of any receipt of Restricted Stock that the
Key Employee shall have delivered a stock power endorsed in blank relating
to the Restricted Stock.
(e) Nothing in this Section 7 shall preclude a Key Employee from
exchanging any shares of Restricted Stock subject to the restrictions
contained herein for any other shares of Stock that are similarly
restricted.
8. DEFERRED STOCK.
--------------
(a) Deferred Stock may be credited to a Key Employee either as an
Award or as the result of an exercise or an Option or SAR or as payment for
a Performance Unit. Deferred Stock shall be subject to a deferral period
which shall mean a period commencing on the date the Award is granted and
ending on such date or upon the achievement of such performance or other
criteria as the Committee shall determine (the "Deferral Period"). The
Committee may provide for the expiration of the Deferral Period in
installments where deemed appropriate .
(b) Except as otherwise provided in this Section 8, no Deferred Stock
credited to a Key Employee shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Deferral Period; PROVIDED,
HOWEVER, the Deferral Period for any Key Employee shall expire upon the Key
Employee's death, Total Disability or retirement on or after age 65, or an
earlier age with the consent of the Company, or upon some significant
event, as determined by the Committee, including, but not limited to, a
reorganization or the Company.
(c) At the expiration of the Deferral Period, the Key Employee shall
be entitled to receive a certificate pursuant to Section 9 for the number
of shares of Stock equal to the number of shares of Deferred Stock credited
on his or her behalf. Amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares of Deferred Stock
credited to a Key Employee
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shall be paid to such Key Employee within thirty (30) days after each
dividend was declared unless, at the time of the Award the Committee
determined that such dividends should be reinvested in additional shares of
Deferred Stock, in which case additional shares of Deferred Stock shall be
credited to the Key Employee based on the Stock's Fair Market Value at the
time of each such dividend.
(d) If a Key Employee terminates employment with all Participating
Companies for any reason before the expiration of the Deferral Period, all
shares of Deferred Stock shall, unless the Committee otherwise determines,
be forfeited by the Key Employee, and, in the case of Deferred Stock
purchased through the exercise of an Option, the Company shall refund the
purchase price paid on the exercise of the Option. Upon such forfeiture,
such forfeited shares of Deferred Stock shall again become available for
award under the Plan.
9. CERTIFICATES FOR AWARDS OF STOCK.
--------------------------------
(a) Subject to Section 7(d), each Key Employee entitled to receive
shares of Stock under the Plan shall be issued a certificate for such
shares. Such certificate shall be registered in the name or the Key
Employee, and shall bear an appropriate legend reciting the terms,
conditions and restrictions, if any, applicable to such shares and shall
be subject of appropriate stop-transfer orders.
(b) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares on
any stock exchange on which the Stock may be listed, if applicable, and
(ii) the completion of any registration, qualification or exemption from
registration of such shares under any federal or state law, or any ruling
or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
(c) All certificates for shares of Stock delivered under the Plan
shall also be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. The foregoing provisions of this Section 9(c) shall not be
effective if and to the extent that the shares of Stock delivered under the
Plan are covered by an effective and current registration statement under
the Securities Act of 1933, or if and so long as the Committee determines
that application or such provisions is no longer required or desirable. In
making such determination, the Committee may rely upon an opinion of
counsel for the Company.
(d) Except for the restrictions on Restricted Stock or Deferred Stock
under Sections 7 and 8, each Key Employee who receives an award of Stock
shall have all of the rights of a shareholder with respect to such shares,
including the right to vote the shares and receive dividends and other
distributions. No Key Employee awarded an Option, a SAR, a Performance
Unit or Deferred Stock shall
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have any right as a shareholder with respect to any shares subject to such
Award prior to the date of issuance to him or her of a certificate or
certificates for such shares.
10. LOANS AND SUPPLEMENTAL CASH PAYMENTS.
------------------------------------
(a) The Committee may provide for supplemental cash payments or loans
to Key Employees at such time and in such manner as the Committee may
determine in connection with Awards granted under the Plan.
(b) Supplemental cash payments shall be subject to such terms and
conditions as the Committee may specify; PROVIDED, HOWEVER, in no event
shall the amount of such payment exceed (i) in the case of an Option, the
excess of the Fair Market Value of the shares of Stock, disregarding any
restrictions in the case of Restricted Stock or Deferred Stock, purchased
through the Option on the date of exercise over the option price, or (i) in
the case of an Award of a SAR, Performance Unit; or Restricted Stock or
Deferred Stock, the value of the shares of Stock and other consideration
issued in payment of such Award; and PROVIDED, FURTHER, in the case of an
incentive stock option, no supplemental cash payment shall be made if it
would disqualify such option under Section 422A of the Code.
(c) In the case of loans, any such loan shall be evidenced by a
written loan agreement or other instrument in such form and shall contain
such terms and conditions, including without limitation, provisions for
interest, payment schedules, collateral, forgiveness, events of default or
acceleration or such loans or parts thereof, as the Committee shall
specify; PROVIDED, HOWEVER, that in the case of an incentive stock option,
the interest rate set by the Committee under such an arrangement shall be
no lower than that required to avoid the imputation of unstated interest
under the Code and the Committee shall specify no such term or condition
that would result in such option failing to qualify as an incentive stock
option.
11. BENEFICIARY.
-----------
(a) Each Key Employee shall file with the Committee a written
designation of one or more persons as the beneficiary who shall be entitled
to receive the Award, if any, payable under the Plan upon his or her death.
A Key Employee may from time to time revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by
filing a new designation with the Committee. The last such designation
received by the Committee shall be controlling; PROVIDED, HOWEVER, that no
designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Key Employee's death, and in no
event shall it be effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of a
Key Employee's death, or if no designated Beneficiary survives the Key
Employee or if such designation conflicts with law, the Key Employee's
estate shall be entitled to receive the Award, if any, payable under the
plan upon his or her death. If the Committee is in doubt as to the right
of any person to receive such Award, the
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Company may retain such Award, without liability for any interest thereon,
until the Committee determines the rights thereto, or the Company may pay
such award into any court of appropriate jurisdiction and such payment
shall be a complete discharge of the liability of the Company therefor.
12. ADMINISTRATION OF THE PLAN.
--------------------------
(a) The Plan shall be administered by the Committee, as appointed by
the Board and serving at the Board's pleasure. If no Committee has been
appointed by the Board, the Board shall administer the plan until such a
Committee is appointed. If the Company has registered any of its
securities under the Securities Exchange Act of 1934 (the "Exchange Act
Registration"), the Committee shall have at least three (3) members and
each member of the Committee shall be both a member of the Board and, if
possible, a "disinterested person" within the meaning of Rule 16b-3 under
the Exchange Act or successor rule or regulation. By definition in Rule
16b-3, a "disinterested person" is one who shall not be, and shall not have
been, eligible to receive an Award under the Plan or any other plan
maintained by any Participating Company to acquire stock, stock options,
stock appreciation rights or restricted stock of a Participating Company at
any time within the one year immediately preceding the member's appointment
to the Committee. The Board may exclude any director from such eligibility
by resolution.
(b) All decisions, determinations or actions of the Committee made or
taken pursuant to grants of authority under the Plan shall be made or taken
in the sole discretion of the Committee and shall be final, conclusive and
binding on all persons for all purposes.
(c) The Committee shall have full power, discretion and authority to
interpret, construe and administer the Plan and any part thereof, and its
interpretations and constructions thereof and actions taken thereunder
shall be, except as otherwise determined by the Board, final, conclusive
and binding on all persons for all purposes.
(d) The Committee's decisions and determinations under the Plan need
not be uniform and may be made selectively among Key Employees, whether or
not such Key Employees are similarly situated.
(e) The Committee shall keep minutes of its actions under the Plan.
The act of a majority of the members present at a meeting duly called and
held shall be the act of the Committee. Any decision or determination
reduced to writing and signed by all members of the Committee shall be
fully as effective as if made by unanimous vote at a meeting duly called
and held.
(f) The Committee may employ such legal counsel, including without
limitation, independent legal counsel and counsel regularly employed by the
Company, consultants and agents as the Committee may deem appropriate for
the administration of the Plan and may rely upon any opinion received from
any such
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counsel or consultant or agent. All expenses incurred by the Committee in
interpreting and administering the Plan, including without limitation,
meeting fees and expenses and professional fees, shall be paid by the
Company.
(g) No member or former member of the Committee of the Board shall be
liable for any action or determination made in good faith with respect to
the Plan or any Award granted under it. Each member or former member of the
Committee or the Board shall be indemnified and held harmless by the
Company against all cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Board) arising out of any act or omission to act in connection with the
Plan unless arising out of such member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification the
members or former members may have as directors or under the bylaws of the
Company.
13. AMENDMENT OR DISCONTINUANCE.
---------------------------
The Board may, at any time, amend or terminate the Plan. The Plan may
also be amended by the Committee, provided that all such amendments shall
be reported to the Board. No amendment shall, without approval by a
majority of the Company's stockholders, (i) alter the group of persons
eligible to participate in the Plan, (ii) materially increase the benefits
provided under the Plan to the extent that stockholder approval would then
be required pursuant to Rule 16b-3 under the Securities Exchange Act of
1934 or successor rule or regulation, if such rule(s) or regulation(s) is
applicable at that time, (iii) increase the maximum number of shares of
Stock which are available for Awards under the Plan, or (iv) extend the
period during which Awards may be granted under the Plan beyond the
expiration of ten years from the effective date of the Plan. No amendment
or termination shall retroactively impair the rights of any person with
respect to an Award. On or after the occurrence of a Change in Control, the
Plan may not be amended or terminated until all payments required by
Section 15 are made.
14. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK.
----------------------------------------------
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock, merger or consolidation of the Company or
sale by the Company of all or a portion of its assets, or other event which
could distort the implementation of the Plan or the realization of its
objectives, the Committee may make such appropriate adjustments in the
Stock subject to Awards, including Stock subject to purchase by an Option,
or the terms, conditions or restrictions on Stock or Awards as the
Committee deems equitable; PROVIDED, HOWEVER, that no such adjustments
shall be made on or after the occurrence of a Change in Control without the
affected Key Employee's consent.
15. CHANGE IN CONTROL.
-----------------
Notwithstanding anything else herein to the contrary, as soon as
practicable after the occurrence of a Change in Control, if any, the
following shall occur:
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(a) All Key Employees may, regardless of whether still an employee of
any Participating Company, elect to cancel all or any portion of any Option
no later than ninety (90) days after the Change in Control, in which event
the Company shall pay to such electing Key Employee, an amount in cash
equal to the excess, if any, of the Current Market Value (as defined below)
of the shares of Stock, including Restricted Stock or Deferred Stock,
subject to the Option or the portion thereof so cancelled over the option
price for such shares; PROVIDED, HOWEVER, that no Key Employee shall have
the right to elect cancellation unless and until at least six (6) months
have elapsed after the date of grant of the option and provided, further,
that, if the Key Employee is no longer an employee of any Participating
Company, the Option is exercisable at the time of the Change in Control.
(b) All Performance Periods shall end and the Company shall pay each
Key Employee an amount in cash equal to the value of such Key Employee's
Performance Units, if any, based upon the Stock's Current Market Value, in
full settlement of such Performance Units.
(c) All Restriction Periods shall end and the Company shall pay each
Key Employee an amount in cash equal to the Current Market Value of the
Restricted Stock held by, or on behalf of, each Key Employee in exchange
for such Restricted Stock.
(d) All Deferral Periods shall end and the Company shall pay to each
Key Employee an amount in cash equal to the current Market Value of the
number of shares of Stock equal to the number of shares of Deferred Stock
credited to such Key Employee in full settlement of such Deferred Stock.
(e) The Company shall pay to each Key Employee all amounts, if any,
deferred by such Key Employee under the Plan which are not Performance
Units, Restricted Stock or Deferred Stock.
(f) The Company may reduce the amount due any Key Employee under this
Section by the unpaid balance, if any, of the principal of any loans to
such Key Employee under Section 10.
(g) For purposes of this Section 15, "Current Market Value" means the
highest "Closing Price" during the period (the "Reference Period")
commencing thirty (30) days prior to the Change in Control and ending
thirty (30) days after the Change of Control; provided that, if the Change
in Control occurs as a result of a tender offer or exchange offer, or a
merger, purchase of assets or stock or other transaction approved by
stockholders of the Company, Current Market Value means the higher of (i)
the highest Closing Price during the Reference Period, or (ii) the highest
price paid per share pursuant to such tender offer, exchange offer or
transaction. The "Closing Price" on any day during the Reference Price
means the closing price per share of Stock based upon composite
transactions on the national stock exchanges that day. If there is no
public market for the Company's Stock at the applicable time, "Current
Market Value" shall be established at the discretion of the Board of
Directors.
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16. RESTRICTIONS ON SHARES.
----------------------
At the discretion of the Committee or the Board, the Company may
reserve to itself or its assignee(s) in any Award (a) a right of first
refusal to purchase any Stock that a Key Employee (or a subsequent
transferee) may propose to transfer to a third party, (b) a right to
repurchase any or all Stock held by a Key Employee upon the Key Employee's
termination of employment or service with the Company or any Participating
Company for any reason within a specified time as determined by the
Committee or Board at the time of the Award at (i) the Key Employee's
original purchase price, (ii) the Fair Market Value of such Stock or (iii)
a price determined by a formula or other provision set forth in the Grant
and (c) if applicable, a market standoff agreement.
17. MISCELLANEOUS.
-------------
(a) Nothing in this Plan or any Award granted hereunder shall confer
upon any employee any right to continue in the employ of any Participating
Company or interfere in any way with the right of any Participating Company
to terminate his or her employment at any time.
(b) No Award payable under the Plan shall be deemed salary or
compensation of the purpose of computing benefits under any employee
benefit plan or other arrangement of any Participating Company for the
benefit of its employees unless the Company shall determine otherwise.
(c) No Key Employee shall have any claim to an Award until it is
actually granted under the Plan. To the extent that any person acquires a
right to receive payments from the Company under this Plan, such right
shall be no greater than the right of an unsecured general creditor or the
Company. All payments of awards provided for under the Plan shall be paid
in cash from the general funds of the Company; PROVIDED, HOWEVER, that such
payments shall be reduced by the amount of any payments made to the
participant or his or her dependents, beneficiaries or estate from any
trust or special or separate fund established by the Company to assure such
payments. The Company shall not be required to establish a special or
separate fund or other segregation of assets to assure such payments, and
if the Company shall make any investments to aid it in meeting its
obligations hereunder, the participant shall have no right, title or
interest whatsoever in or to any such investments except as may otherwise
be expressly provided in a separate written instrument relating to such
investments. Nothing contained in this Plan, and no action taken pursuant
to its provisions, shall create or be construed to create a trust of any
kind between the Company and any participants. To the extent that any
participant acquires a right to receive payment from the Company hereunder,
such right shall be no greater than the right of an unsecured creditor of
the Company.
(d) Absence on leave, when otherwise approved by the Board in
accordance with applicable laws, shall not be considered interruption or
termination of employment for any purposes of the Plan; PROVIDED, HOWEVER,
that no Award may be granted to an employee while he or she is absent on
leave.
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<PAGE>
(e) If the Committee shall find that any person to whom any Award, or
portion thereof, is payable under the Plan is unable to care for his or her
affairs because of illness or accident, or is a minor, then any payment due
him or her (unless a prior claim therefor has been made by a duly appointed
legal representative) may, if the Committee so directs the Company, be paid
to his or her spouse, a child, a relative, an institution maintaining or
having custody of such person, or any person deemed by the Committee to be
a proper recipient on behalf of such person otherwise entitled to payment.
Any such payment shall be a complete discharge of the liability of the
Company therefor.
(f) The right of any Key Employee or other person to any Award
payable under the Plan may not be assigned, transferred, pledged or
encumbered, either voluntarily or by operation of law, except as provided
in Section 11 with respect to the designation of a Beneficiary or as may
otherwise be required by law. If, by reason of any attempted assignment,
transfer, pledge or encumbrance or any bankruptcy or other event happening
at any time, any amount payable under the Plan would be made subject to the
debts or liabilities of the Key Employee or his or her Beneficiary or would
otherwise devolve upon anyone else and not be enjoyed by the Key Employee
or his or her Beneficiary, then the Committee may terminate such person's
interest in any such payment and direct that the same be held and applied
to or for the benefit of the Key Employee, his or her Beneficiary or any
other person deemed to be the natural objects of his or her bounty, taking
into account the express wishes of the Key Employee (or, in the event of
his or her death, those of his or her Beneficiary) in such manner as the
Committee may deem proper.
(g) Copies of the Plan and all amendments, administrative rules and
procedures and interpretations shall be made available to all Key Employees
at all reasonable times at the Company's headquarters.
(h) The Committee may cause to be made, as a condition precedent to
the payment of any Award, or otherwise, appropriate arrangements with the
Key Employee or his or her Beneficiary, for the withholding of any federal,
state, local or foreign taxes.
(i) The Plan and the grant of Awards shall be subject to all
applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as may be required.
(j) All elections, designations, requests, notices, instructions and
other communications from a Key Employee, Beneficiary or other person to
the Committee, required or permitted under the Plan, shall be in such form
as is prescribed from time to time by the Committee and shall be mailed by
first class mail or delivered to such locations as shall be specified by
the Committee.
(k) The terms of the Plan shall be binding upon the Company and its
successors and assigns.
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(l) Captions preceding the section hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of
any provision hereof.
18. EFFECTIVE DATE, TERM OF PLAN AND STOCKHOLDER APPROVAL.
-----------------------------------------------------
The effective date of the Plan shall be ________________, 1990,
subject to approval by a majority of the Company's stockholders at an
Annual or Special Meeting or by their unanimous written consent.
Notwithstanding anything in the Plan to the contrary, if the Plan shall
have been approved by the Board prior to such Annual or Special Meeting or
unanimous written consent, Key Employees may be selected and Award criteria
may be determined as provided herein subject to such subsequent stockholder
approval.
APPROVED this _________ day of ____________________________________, 1990.
MULTI-SPECTRUM GROUP, INC.
By: ______________________________
David E. Taylor
Its: President
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EXHIBIT 4:
BOARD MEETING MINUTES
FOR REVERSE STOCK SPLIT
OF 8/11/95
<PAGE>
Minutes of Directors Meeting
Of
MULTI SPECTRUM GROUP, INC.
_______________________________________________________________________
A meeting of the Board of Directors of Multi Spectrum Group, Inc. was
held on the 11th day of August, 1995 at 10:00 a.m. at the offices located
at 1348 E. 3300 S., Suite 101, Salt Lake City, Utah 84106.
There were present and participating at the meeting, either in person
or telephonically York Chandler, Kipp Chandler and Gayle Chandler being all
of the Directors of the Company. Telephonically attending as invited
guests were Eric Gable, Heather Robb, Kundan S. Rayat, all from Vancouver,
BC and Allen Stout of Phoenix, AZ. York Chandler, the President, chaired
the meeting. Gayle Chandler, the secretary, read the minutes of the last
regular meeting and they were approved.
The first item of discussion brought before the Board of Directors was
a discussion concerning a reverse split of the Company's common stock by a
ratio of 1 (one) new share for every 1200 (one thousand two hundred) old
shares with the par value to remain at $.001. The reverse split is to take
effect on this 11th day of August, 1995. After motion duly made, seconded
and unanimously carried with all in favor; it was,
RESOLVED, that the Company reverse split its common stock by a ratio
of one (1) new share for every one thousand two hundred (1200) old
shares with the par value remaining $.001.
FURTHER RESOLVED, that the effective date of the reverse split to be
August 11, 1995.
The second item of discussion related to the appointment of Dr. Eric
Gable, Mr. Kundan S. Rayat, and Ms. Heather Robb to serve as Directors of
the Company. After motion duly made, seconded and unanimously carried; it
was,
RESOLVED, that Eric Gable, Heather Robb and Kundan S. Rayat be
appointed as Directors of the Company.
The next item of business to be brought before the Board of Directors
was election of new officers of the Company. After a thorough discussion,
it was agreed that Eric Gable be President, Allen Stout be Secretary,
Heather Robb be Treasurer, and Kundan Rayat be Vice President. Upon motion
duly made, seconded and unanimously carried, it was;
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<PAGE>
RESOLVED, that Eric Gable be President; Allen Stout be Secretary;
Heather Robb be Treasurer, and Kundan Rayat be Vice President.
The last item to be discussed was concerning the possibilities of
acquiring the MedCare UI System, a non-invasive, non-surgical, non-drug
method which can reduce or completely eliminate Urinary incontinence.
After a thorough discussion it was agreed to put the vote on hold until the
next Board of Directors meeting which was scheduled to be on Monday, August
14, 1995.
There being no further business and upon motion duly made and
seconded, the meeting was adjourned.
/s/ York Chandler /s/ Gayle Chandler
- ------------------------------- ----------------------------------
York Chandler, Director Gayle Chandler, Director
/s/ Kundan S. Rayat /s/ Allen Stout
- ------------------------------- ----------------------------------
Kundan S. Rayat, VP, Director Allen Stout, Secretary
/s/ Eric Gable /s/ Heather Robb
- ------------------------------- ----------------------------------
Eric Gable, President, Director Heather Robb, Treasurer, Director
/s/ Kipp Chandler
- -------------------------------
Kipp Chandler,
Director
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<PAGE>
EXHIBIT 5:
BOARD MEETING MINUTES
FOR INCREASE IN CAPITAL
OF 8/25/95
<PAGE>
MINUTES OF ACTION BY THE
SHAREHOLDERS OF
MULTI SPECTRUM GROUP, INC.
AT A SPECIAL SHAREHOLDERS MEETING
(AUGUST 25, 1995)
WHEREAS, the By-Laws of the Corporation provide that a Special
Meeting of the shareholders may be called at any time by the Board of
Directors of by the President, and shall be called by the President or
the Secretary at the written request of the holders of ten percent (10%)
of the shares then outstanding and entitled to vote thereat, or as
otherwise required under the provisions of the Business Corporation Act.
WHEREAS, there were represented by proxy or in person 2,030,263
shares of the Corporation which constituted a quorum, there being
currently 2,058,519 shares issued and outstanding, and,
WHEREAS, being all the Directors of the corporation, desire that the
Board of Directors shall take the action expressed in the Resolution
hereinafter set forth;
NOW THEREFORE, we the undersigned, do hereby declare that the action
expressed in the following Resolutions shall be and are hereby taken by
majority vote of the shareholders of the corporation as of the date
hereof;
RESOLVED, that the following individuals be and hereby are appointed
to the Board of Directors of this Corporation, to serve in their
respective capacities until the next annual Meeting of Shareholders:
Eric Gable, Heather Robb, and Kundan S. Rayat.
RESOLVED, that the Corporation change its name from Multi Spectrum
Group, Inc. to MedCare Technologies, Inc.
RESOLVED, that Article One of the Article of Incorporation be
amended to read, "the name of the Corporation be, MedCare
Technologies, Inc.
RESOLVED, that the Corporation be and hereby is authorized 1,000,000
shares of Preferred Stock.
RESOLVED, that Article Four of the Articles of Incorporation be
amended to increase the authorized as follows:
"The aggregate number of shares which this corporation shall
have authority to issue is 101,000,000 shares, of which
1,000,000 shares shall be $.001 Par value Common Stock and
1,000,000 shares shall have $.25 par value Preferred Stock.
The Common Stock shall have voting right of one vote per share.
The Board of Directors may issue the Preferred Stock from time
to time in one or more series, to have such voting rights,
preference in dividends and in liquidation and such other
rights, preferences and conditions as the Board of Directors
may designate by an amendment to these Articles of
Incorporation by action duly adopted without shareholder action
and shareholder action and share holder action shall not be
required therefor. Fully-paid stock of this Corporation shall
not be liable to any further call or assessment."
RESOLVED, that the Directors are authorized to establish a Stock
Option Plan.
RESOLVED, that all past actions taken by the Board of Directors of
this Company be ratified.
RESOLVED, that the Gary R. Blume is appointed SEC counsel for the
company.
RESOLVED, that William Clancy, CPA is appointed Company's
Independent Public Accountant.
We, Eric Gable and Kundan S. Rayat, do hereby certify that we are
respectively the duly elected President and the duly elected and
qualified Secretary and keeper of the records of MedCare Technologies,
Inc. a corporation organized and existing under the laws of the State of
Utah, and that the above is a true and correct copy of resolution duly
adopted at a special meeting of the Shareholders thereof, convened and
held in accordance with law and the By-Laws of said Corporation on the
25th day of August 1995, and that such resolution is now in full force
and effect.
/s/ ERIC GABLE /s/ KUNDAN S. RAYAT
_________________________________ __________________________________
Eric Gable, President Kundan S. Rayat, Vice Pres.
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<PAGE>
EXHIBIT 6:
ACQUISITION AGREEMENT
FOR ASSETS OF
MEDCARE CORPORATION
<PAGE>
HARMEL S. RAYAT
5131 Highgate Street
Vancouver, B.C., VSR 3G9
August 7, 1995
MEDCARE TECHNOLOGIES, INC.
Suite 1408 - 400 Burrard Street
Vancouver, B.C.. V6C 3G2
Dear Sirs:
RE: ACQUISITION OF THE MEDCARE UI RIGHTS FOR 2,000,000 RESTRICTED SHARES
- ------------------------------------------------------------------------
This letter will confirm the sale of the above referenced world wide
rights of the MedCare Urinary Incontinence system to MedCare
Technologies, Inc, for 2,000,000 restricted shares of MedCare
Technologies, Inc.
Sincerely,
Harmel S. Rayat
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<PAGE>
MINUTES OF DIRECTORS MEETING
OF
MULTI SPECTRUM GROUP, INC.
A meeting of the Board of Directors of Multi Spectrum Group, Inc.
was held on the 14th day of August, 1995 at 1:00 p.m. at the offices of
the Company located at 1348 E. 3300 S., Suite 1010, Salt Lake City, Utah
84106
There were present and participating at the meeting, either in
person or telephonically, Eric Gable, Allen Stout, Kundan S. Radat,
Heather Robb, York Chandler, Kipp Chandler and Gayle Chandler. Eric
Gable acted as Chairman. The minutes of the last meeting were read and
approved.
The first item of business brought before the Board was a discussion
concerning the acquisition of MedCare Technologies, Inc. After a long
and thorough discussion it was agreed that the Company acquire the
business of the MedCare UI System and issue 2,000,000 shares of its
unissued common shares of stock for the acquisition of MedCare
Technologies, Inc. It was agreed that 1,750,000 shares be issued to Eric
Gable and 250,000 shares issued to Hermal Rayat. Upon motion duly made,
seconded and unanimously carried with all in favor, it was;
RESOLVED, the Company issue 2,000,000 shares of its unissued stock
to acquire the business of MedCare UI System as presented by MedCare
Technologies, Inc.
FURTHER RESOLVED, that 1,750,000 shares be issued in the name of
Eric Gable and 250,000 shares be to Harmel Rayat.
The second item of business to be discussed was concerning the
resignations of York Chandler, Kipp chandler and Gayle Chandler. After a
short discussion it was agreed that the resignations of York Chandler and
Gayle Chandler be accepted and said resignations to be effective
immediately. Upon motion duly made, seconded and unanimously carried; it
was;
RESOLVED that the resignations of York Chandler, Kipp Chandler and
Gayle Chandler be accepted.
FURTHER RESOLVED that the said resignations be to effective as of
this date.
There being no further business, and upon motion duly made and
seconded the meeting was adjourned.
/s/ ERIC GABLE /s/ ALLEN STOUT
- ------------------------------- ----------------------------------
Eric Gable, President, Director Allen Stout, Secretary
/s/ KUNDAN RAYAT /s/ HEATHER ROBB
- ------------------------------- ----------------------------------
Kundan S. Rayat, VP Director Heather Robb, Treasurer, Director
/s/ YORK CHANDLER /s/ GAYLE CHANDLER
- ------------------------------- ----------------------------------
York Chandler Gayle Chandler
/s/ KIPP CHANDLER
- -------------------------------
Kipp Chandler
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<PAGE>
EXHIBIT 7:
504 MEMORANDUM
OF 8/31/95
<PAGE>
DISCLOSURE MEMORANDUM
MEDCARE TECHNOLOGIES, INC.
A Utah Corporation
4,200,000 SHARES
COMMON STOCK, $.001 PAR VALUE
OFFERING PRICE $0.15 PER SHARE
MEDCARE TECHNOLOGIES, INC., a Utah Corporation (the "Company") is
offering up to 4,200,000 shares of its common stock, $.001 par value per
share (the "Shares"), on a "best efforts" basis, pursuant to the terms of
this Disclosure Memorandum ("Memorandum"). (See "OFFERING").
The Shares are being offered pursuant to an exemption provided by Rule
504 of Regulation D promulgated under the Securities Act of 1933, as
amended. The Shares are not registered for sale under the securities laws
of any State.
PRIOR TO THIS OFFERING THERE HAS BEEN A LIMITED AND SPORADIC PUBLIC
MARKET FOR THE COMMON STOCK OF THE COMPANY AND THERE CAN BE NO ASSURANCE
THAT A MORE ACTIVE MARKET WILL RESULT FOLLOWING THE SALE OF THE SHARES
OFFERED HEREBY OR THAT THE COMMON STOCK CAN BE SOLD AT OR NEAR THE OFFERING
PRICE. SEE "PRICE RANGE OF COMMON STOCK." THE OFFERING PRICE HAS BEEN
ARBITRARILY DETERMINED BY THE COMPANY BASED UPON WHAT IT BELIEVES
PURCHASERS OF SPECULATIVE ISSUES WOULD BE WILLING TO PAY FOR THE SECURITIES
OF THE COMPANY AND BEARS NO RELATIONSHIP WHATSOEVER TO ASSETS, BOOK VALUE
OR ANY OTHER ESTABLISHED CRITERIA OF VALUE. THIS IS NOT A BLANK CHECK/BLIND
POOL OFFERING. THE COMPANY INTENDS TO PURSUE THE BUSINESS ACTIVITY
DESCRIBED HEREIN. PURCHASE OF THE SHARES IS HIGHLY SPECULATIVE AND SHOULD
NOT BE UNDERTAKEN BY ANYONE NOT CAPABLE OF SUSTAINING A TOTAL LOSS OF HIS
OR HER INVESTMENT.
________________________________________________________________________
Selling Proceeds To
Offering Price Commissions Company
________________________________________________________________________
Per Share: $0.15 -0- $0.15
Total Maximum:
(4,200,000 Shares) $630,000 -0- $630,000 (1)
(l) Does not include approximately 530,000 to cover offering expenses.
________________________________________________________________________
MEDCARE TECHNOLOGIES, INC.
1404-400 BURRARD STREET
VANCOUVER, BC V6C 3G2
THE DATE OF THIS DISCLOSURE MEMORANDUM IS AUGUST 31, 1995
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THE SHARES ARE OFFERED BY THE COMPANY THROUGH ITS OFFICERS AND
DIRECTORS ON A "BEST EFFORTS" BASIS. NO COMMISSIONS WILL BE PAID TO SUCH
OFFICERS OR DIRECTORS.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE ENTIRE LOSS OF THEIR
INVESTMENT. (SEE "RISK FACTORS").
THE SHARES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY AND APPROVAL OF CERTAIN
LEGAL MATTERS BY COUNSEL TO THE COMPANY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR THE SECURITIES DIVISION OF ANY STATE
NOR HAS THE COMMISSION OR ANY STATE PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ALL OFFEREES AND SUBSCRIBERS WILL HAVE AN OPPORTUNITY TO MEET WITH
REPRESENTATIVES OF THE COMPANY TO VERIFY ANY OF THE INFORMATION INCLUDED
HEREIN AND TO OBTAIN ADDITIONAL INFORMATION REGARDING THE COMPANY. COPIES
OF ALL DOCUMENTS, CONTRACTS, FINANCIAL STATEMENTS AND OTHER COMPANY RECORDS
WILL BE MADE AVAILABLE FOR INSPECTION AT ANY SUCH MEETING OR DURING NORMAL
BUSINESS HOURS UPON REQUEST TO THE COMPANY. OFFEREES AND SUBSCRIBERS WILL
BE ASKED TO ACKNOWLEDGE IN THE SUBSCRIPTION AGREEMENT THAT THEY HAVE READ
THIS MEMORANDUM CAREFULLY AND THOROUGHLY; THAT THEY WERE GIVEN THE
OPPORTUNITY TO OBTAIN ADDITIONAL INFORMATION; AND THEY DID SO TO THEIR
SATISFACTION OR REQUIRED NO FURTHER INFORMATION.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM AND THE EXHIBITS HERETO
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED, THIS MEMORANDUM DOES NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS MEMORANDUM AT ANY TIME DOES NOT IMPLY THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
THE COMPANY HAS THE RIGHT, IN ITS SOLE DISCRETION, TO ACCEPT OR REJECT
SUBSCRIPTIONS IN WHOLE OR IN PART, FOR ANY REASON OR FOR NO REASON.
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MEMORANDUM SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in the Memorandum. Each prospective
investor is urged to read this Memorandum in its entirety.
THE COMPANY
MedCare Technologies, Inc. (the "Company"), formerly Multi-Spectrum
Group, Inc. (MSGI), was incorporated as Santa Lucia Funding, Inc. (SLFI) in
the state of Utah on January 17, 1986, for the purpose of creating a
capital resource fund to seek, investigate and, if warranted in the opinion
of its management, acquire, merge with or participate in a favorable
business opportunity. On January 19, 1990, SLFI merged with MSGI, a
Delaware corporation engaged in the business of operating, marketing and
franchising combined printing centers and office supply outlets. Under the
terms of the merger agreement, Santa Lucia Funding, Inc. was the surviving
corporation, a Utah corporation; however, the name of the Company was
changed to Multi-Spectrum Group, Inc. The outstanding shares of MSGI were
converted into common shares of SLFI at the exchange ratio of 55,305 shares
of SLFI for each common share of MSGI then issued and outstanding. In
addition, the number of common shares authorized was increased from
50,000,000 to 100,000,000 with the par value remaining $.001.
On August 11, 1995 the Company affected a reverse split of its $.001
par value common stock by a ratio of one new share for every one thousand
two hundred old shares; thereby, reducing the total number of shares issued
and outstanding to 58,519. On August 14, 1995, a total of 2,000,000 post
split shares were issued in order to acquire MedCare Technologies, Inc.
MedCare Technologies, Inc. has developed the MedCare UI System, a
non-surgical non-invasive, non-drug and cost effective method to
significantly reduce and/or completely eliminate the majority of urinary
incontinence cases. The Company plans to test market the program within an
established medical center in the Pacific Northwest. At a Special
Shareholders Meeting held on August 25, 1995 the Shareholders ratified the
name change of the Company from Multi-Spectrum Group, Inc. to MedCare
Technologies, Inc. and amended the Articles of Incorporation to allow the
authorization of 101,000,000 shares of which 1,000,000 shares are to be
Preferred Shares with a par value of $.25. As of the date of this
Disclosure Memorandum there are no Preferred Shares issued and outstanding.
The Company maintains executive offices at 1404-400 Burrard Street, in
Vancouver, B.C. V6C 3G2. The telephone number is 604.643.1765, the telefax
number is 604.643.1776.
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THE OFFERING
SECURITIES OFFERED:
Total Maximum 4,200,000 shares of common stock
OFFERING PRICE PER SHARE . . . . $0.15
SHARES OUTSTANDING:
Prior to the offering 2,058,519 shares(1)
After the offering 6,258,519 shares
(1) Including post consolidation numbers and the issuance of 2,000,000
shares in consideration for the acquisition of MedCare Technologies, Inc.
USE OF NET PROCEEDS
The proceeds of this offering, assuming that all 4,200,000 shares
offered are sold, will be approximately $630.000 (less expenses of
approximately $30,000). Such proceeds will be utilized for the provision of
working capital for the Company, which will enable it to complete the final
stage of developing the MedCare UI System. The Company plans to test market
the program within an established medical center in the Pacific Northwest.
(See "Use of Proceeds").
RISK FACTORS
The purchase of the shares offered hereby involves many risk factors
including those associated with a relatively new venture, risks associated
with the industry, substantial dilution from the offering price, and other
possible risks. Prospective investors should be prepared to suffer a total
loss of their investment. (See "Risk Factors").
DILUTION
The offering involves immediate substantial dilution in the book value
per share of common stock from the offering price. (See "Dilution").
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SUITABILITY STANDARDS
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR THOSE INVESTORS WHO HAVE SUBSTANTIAL FINANCIAL RESOURCES
IN RELATION TO THEIR INVESTMENT, WHO UNDERSTAND THE PARTICULAR RISK FACTORS
OF THIS INVESTMENT AND WHO ARE PREPARED TO SUSTAIN A TOTAL LOSS OF THEIR
INVESTMENT.
The Company has not established any standards for determining
suitability of investors in this offering. However, prospective purchasers
of Shares should be aware that an investment in the Company is highly
speculative, that the future success of the Company is dependent upon a
number of factors in addition to those usually associated with
developmental companies in the health industry and that an investment in
the Shares may be totally lost.
RISK FACTORS
Before deciding whether to purchase Shares of the Company, prospective
investors should read this Memorandum in its entirety and carefully
consider, among others, the following risk factors:
Purchase of Shares involves a high degree of risk. Prospective
--------------------------------------------------------------
purchasers should consider carefully, among other factors set forth in this
- -------------------------------------------------------------------------
Memorandum, the following:
- --------------------------
BUSINESS OF THE COMPANY
The Company has expended considerable resources on the research and
development of the MedCare UI System. At present, MedCare Technologies,
Inc. is in the final stages of Research & Development. And while all
indications are that the MedCare UI System is a viable treatment process
for those individuals suffering from certain types of adult urinary
incontinence, there can be no assurances that the system will actually gain
acceptance in the marketplace.
POLITICAL AND ECONOMIC CONSIDERATIONS AFFECTING THE COMPANY
At present, there are no political risks anticipated by the Company
since all future R & D and clinical operations of MedCare are expected to
be undertaken in North America. The MedCare UI System has not applied to
Medicare in order to receive reimbursements for potential patients. As a
result, many sufferers may not seek treatment because of the costs
associated with treatment.
RISK FACTORS RELATING TO THE BUSINESS OF THE COMPANY
1. NEW BUSINESS. Adult urinary incontinence, despite its prevalence
among the elderly as well as a large percentage of the female American
population, is such an embarrassing affliction that most sufferers resign
themselves to using absorbent products rather than seek treatment. As a
result, adult urinary incontinence has received little, if any, recognition
from the medical community. Based on the negative stigma and embarrassing
nature of the affliction, there may be a great deal of resistance from many
sufferers to "come out of the closet" in order to seek treatment.
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2. LIMITED FUNDS AVAILABLE FOR FEASIBILITY & DEVELOPMENT. Management
believes the net proceeds of this offering will be sufficient to implement
the Company's initial plan of finalizing the development of the MedCare UI
System. The Company does not have a track record of actual clinical
treatment using the MedCare UI System ant there can be no assurances that
such treatment program will become economically viable in the future. The
Company plans to open its first clinic in the near future and test market,
on a limited scale, the commercial viability of the MedCare UI System.
3. MANAGEMENT EXPERIENCE. The Company's management team consists of
seasoned individuals that have many years of experience in the requisite
fields necessary to build a successful enterprise. Collectively, the
Company's management has over sixty years of experience in medicine.
management, finance and employee development.
4. CONTINUED MANAGEMENT CONTROL. The Company's management team plans
to devote a substantial portion of their time on development of the
Company's MedCare UI clinical system. The clinics are to be operated by
personnel trained by senior management. None of the Company's directors
have entered into written agreements with the Company and none are expected
to in the foreseeable future. The Company has not obtained key man life
insurance on any of its officers or directors.
5. CONFLICTS OF INTEREST. The Company's directors and officers are
not involved in and do not plan to become involved with any firms that are
directly involved in the adult urinary incontinence market. Conflicts of
interest and non arms-length transactions may arise in the future in the
event the Company's officers or directors are involved in the management of
any firm with which the Company transacts business. When such conflicts
occur, the Directors will make any such declarations to the Shareholders as
may be deemed fit by the Company s legal advisors.
6. NO REQUIREMENT TO FILE EXCHANGE ACT REPORTS. The Company is not
and immediately following this offering will not be subject to the
reporting requirements of the Securities Exchange Act of 1934 (the
"Exchange Act"). Accordingly, the Company will not file quarterly and
annual reports on forms 10-Q and 10-K in accordance with the provisions of
the Exchange Act nor will it be subject to the regulations promulgated by
the Securities and Exchange Commission pursuant to the Exchange Act. There
can be no assurance that at any time in the future the Company will become
subject to the reporting requirements of the Exchange Act and investors may
have less access to financial and other information concerning the Company
than they would if the Company were subject to the reporting requirements
of the Exchange Act.
RISK FACTORS RELATING TO THIS OFFERING
1. NO ASSURANCE OF ACTIVE PUBLIC MARKET FOR THE COMPANY'S SHARES.
There is currently a limited and sporadic public market for the Company's
shares, and there can be no assurance a more active market will develop at
the conclusion of this offering or, if developed. that such a market will
continue. Purchasers of the Company's Shares may, therefore, have
difficulty in selling them should they desire to do so. The number of
shares available for public trading is very limited compared to the total
number of outstanding shares, most of which are "restricted securities"
which cannot presently be publicly traded.
2. NO UNDERWRITER. The Shares are being offered by the Company
through the efforts of its officers and directors and no underwriter has
been retained to assist in offering the Shares. The officers of the Company
who will participate in the selling effort have no experience in the offer
and sale of shares on behalf of an issuer, and, consequently, may be unable
to effect the sale of the Shares. There is no assurance the Company is
capable of selling all, or any, of the Shares offered.
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3. IMMEDIATE SUBSTANTIAL DILUTION - PRESENT SHAREHOLDERS OWN
CONTROLLING INTEREST AT LOWER COST THAN PUBLIC. Present "inside"
shareholders of the Company have acquired their controlling interest in the
Company for substantially less than the offering price of $0.15 per Share.
Assuming the maximum offering of 4,200,000 shares are sold. present
officers, directors and other controlling shareholders will own
approximately 32% of the issued and outstanding shares. Purchasers in this
offering will own approximately 68% of the outstanding shares for aggregate
cash consideration of $630,000.
4. PUBLIC WILL BEAR RISK OF LOSS. The capital required by the
Company to carry on its business is being sought principally from the
proceeds of this offering. Therefore, public investors will bear most of
the risk of the Company's operations until such time as it attains
profitable operations, if ever.
5. PROCEEDS OF OFFERING MAY BE INADEQUATE. There is no minimum
number of Shares required to be sold in this offering, nor is there an
escrow of funds. The net proceeds of this offering (assuming all Shares
offered are sold) are budgeted for a four to six month period and,
therefore, are sufficient to conduct only a limited amount of activity.
Continued operation of the Company thereafter will be dependent on its
ability to procure additional financing via additional share offerings.
There is no assurance that any number of Shares will be sold or that any
additional financing can be obtained on terms favorable to the Company.
6. USE OF PROCEEDS NOT SPECIFIC. The proceeds of this offering have
been allocated only generally. Accordingly, investors will entrust their
funds with management on whose judgment investors must depend, with only
limited information about management's specific intentions.
7. NO DIVIDENDS. No dividends have been paid on the Common Stock
since inception and none are contemplated at any time in the foreseeable
future. See "Description of Securities Dividends."
8. OFFERING PRICE ARBITRARILY DETERMINED. The offering price of the
Shares was established arbitrarily by the Company. There is no direct
relationship between the offering price and the assets or shareholders'
equity of the Company or any other recognized criterion of value.
9. NO COMMITMENT TO PURCHASE SHARES. No entity, including the
Company, has any obligation to purchase any of the Shares offered.
Consequently, no assurance can be given that any Shares will be sold. There
is no minimum number of Shares required to be sold in the offering and if
only a small number of Shares are sold the purchasers will have invested in
a company without sufficient capital to conduct its operations. Subscribers
will not be entitled to any refund of their subscriptions in such event.
See "Offer to Subscribe."
10. SHARES ELIGIBLE FOR FUTURE SALE. 2,004,079 outstanding Shares of
the Company (or 98% of the total number of outstanding shares) are
"restricted securities" and under certain circumstances may in the future
be sold in compliance with Rule 144 adopted under the Securities Act of
1933, as amended. Future sales of these shares under Rule 144, could
severely depress the market price of the Shares being offered hereby. Rule
144 provides, among other things, that persons holding restricted
securities for a period of two years may each sell in brokerage
transactions every three months an amount equal to 1% of the Company's
outstanding shares or the average weekly reported volume of trading during
the four calendar weeks preceding the filing of a notice of proposed sale.
whichever is greater. Substantially all of these shares will become
eligible for sale pursuant to Rule 144 beginning in August, 1997.
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<PAGE>
CAPITALIZATION
The pro forma capitalization of the Company as of August 15, 1995
(based upon its unaudited financial statements) and as adjusted to reflect
the sale of the maximum number of Shares offered hereby is as follows:
Amount After
Outstanding Maximum Sale
----------- ------------
Common stock, par value $.001 per share;
100,000,000 shares authorized;
2,058,519 shares outstanding,
6,258,519 shares (maximum)
to be issued (1) $ 20,585 $ 62,585
Additional paid in capital 279,415 837,415
Total Shareholders' Equity $ 300,000 $ 900,000
(1) For information regarding terms of the Common Stock of the Company
and options to purchase additional shares, see "Description of Securities
- - Options."
THE COMPANY
MEDCARE TECHNOLOGIES, INC.
MedCare Technologies, Inc. (the "Company"), formerly Multi-Spectrum
Group, Inc. (MSGI), was incorporated as Santa Lucia Funding, Inc. (SLFI) in
the state of Utah on January 17,1986, for the purpose of creating a capital
resource fund to seek, investigate and, if warranted in the opinion of its
management, acquire, merge with or participate in a favorable business
opportunity. On January 19, 1990, SLFI merged with MSGI, a Delaware
corporation engaged in the business of operating, marketing and franchising
combined printing centers and office supply outlets. Under the terms of the
merger agreement. Santa Lucia Funding, Inc. was the surviving corporation,
a Utah corporation; however, the name of the Company was changed to
Multi-Spectrum Group, Inc. The outstanding shares of MSGI were converted
into common shares of SLFI at the exchange ratio of 55,305 shares of SLFI
for each common share of MSGI then issued and outstanding. In addition, the
number of common shares authorized was increased from 50,000,000 to
100,000,000 with the par value remaining $.001.
On August 11, 1995 the Company affected a reverse split of its $.001
par value common stock by a ratio of one new share for every one thousand
two hundred old shares: thereby, reducing the total number of shares issued
and outstanding to 58,519. On August 14, 1995, a total of 2,000,000 post
split shares were issued in order to acquire MedCare Technologies, Inc.
MedCare Technologies. Inc. has developed the MedCare UI System, a
non-surgical, non-invasive, non-drug and cost effective method to
significantly reduce and/or completely eliminate the majority of urinary
incontinence cases. The Company plans to test market the program within an
established medical center in the Pacific Northwest. At a Special
Shareholders Meeting held on August 25, 1995 the Shareholders ratified the
name change of the Company from Multi-Spectrum Group, Inc. to MedCare
Technologies, Inc. and amended the Articles of Incorporation to allow the
authorization of 101,000,000 shares of which 1,000,000 shares are to be
Preferred Shares with a par value of $.25. As of the date of this
Disclosure Memorandum there are no Preferred Shares issued and outstanding.
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<PAGE>
MedCare Technologies, Inc. is in the final stage of developing the
MedCare UI System, a non-surgical, noninvasive, non-drug and cost effective
method to significantly reduce and/or completely eliminate the majority of
urinary incontinence cases. The Company plans to test market the program
within an established medical center in the Pacific Northwest. Urinary
incontinence is a bladder disorder that affects approximately 11,000,000
people in the United States, with a market exceeding 510 billion per year.
MANAGEMENT
DIRECTORS
The officers and directors of the Company are as follows:
Name Position
---- --------
Dr. Eric Gable President; Chairman; Director
Kundan Rayat Secretary; Director
Heather Robb Director
It is the intention of the existing Board of Directors to increase the
size of the board at the next stage of development of the Company in order
to strengthen its project financing and legal expertise.
DR. ERIC GABLE is a medical doctor with twenty nine years of
experience. He is the founder of the company and serves as its President
and Chief Executive Officer. Dr. Gable began his medical career in 1967 as
a captain in the Canadian Armed Forces and received a commendation for the
development of a Preventative Medicine Program during a time when such
programs were rare. During the period between 1970 and 1980, Dr. Gable
developed the largest medical practice in British Columbia, Canada, through
the extensive training and utilization of registered nurses. His protocol
was subsequently used as the basis of a completely new course of
instruction at the University of British Columbia. From 1982 to 1995, Dr.
Gable developed a second medical practice which was recently sold for the
highest price ever paid in British Columbia.
MR. KUNDAN S. RAYAT has over forty five years of business experience
as an owner/operator in a diverse range of businesses ranging from
automotive to heavy construction on three different continents. Since 1985,
Mr. Rayat has primarily devoted his time to venture capital investing in
numerous start up ventures and providing seasoned senior management advice
to the companies that he invests in.
HEATHER ROBB is on the Board of Directors, Management Team and
Teaching Faculty of the Leyline Center for Spiritual Development in
Vancouver, British Columbia. She teaches Energy Awareness, how to take
self-responsibility and how to take charge of
self-creation/self-development. Previously she was a human resources
consultant and adult education teacher working with corporations and
individuals to maximize their organizational and personal effectiveness
through training in such areas as supervisory skills, team building,
negotiating skills, time management, conflict resolution, situational
leadership, customer service and stress management.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially as of the date
of this Memorandum by (I) each person known to the Company to own of record
or beneficially 5% or more of the 2,058,519 outstanding shares of Common
Stock of the Company, (ii) each Director of the Company, and (iii) all
officers and directors of the Company as a group, as of the date of this
Memorandum and as adjusted to reflect share holdings after the sale of the
maximum number of Shares offered hereby.
Ownership No. Shares % No. Shares %
Name and Position Pre Issue Post Issue
- ----------------- --------- ----------
Dr. Eric Gable 1,750,000 85% 1,750,000 28%
Kundan Rayat 0 0
Heather Robb 0 0
MARKET FOR COMMON STOCK
There is a limited and sporadic market for the common stock of the
Company, which is currently listed on the "electronic bulletin board"
maintained by the National Association of Securities Dealers, Inc. The
following table sets forth the range of high and low prices for the common
stock for the fiscal quarters indicated. These prices are without mark-up,
mark-down or commission and may not represent actual transactions.
1994 HIGH LOW
- ---- ---- ----
First Quarter . . . . . . . . . . $-0- -0-
Second Quarter. . . . . . . . . . -0- -0-
Third Quarter . . . . . . . . . . -0- -0-
Fourth Quarter. . . . . . . . . . -0- -0-
1995
First Quarter . . . . . . . . . . $.10 $.01
Second Quarter. . . . . . . . . . .10 .01
There are approximately 54,440 Shares of common stock of the Company
available for public-trading compared to an aggregate of 2,058,519 Shares
outstanding. See "Risk Factors - Shares Eligible for Future Sale."
As of August 11, 1995 there were approximately 136 record holders of
the Company's common stock.
DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorizes the issuance of
100,000,000 shares of common stock having a par value of $.001 per share
and 1,000,000 shares of Preferred stock having a par value of $.25 per
share.
COMMON STOCK
The holders of shares of common stock (I) have equal pro-rata rights
to dividends from funds legally available therefor, when, as and if
declared by the Board of Directors of the Company; (ii) are entitled to
share pro-
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rata in all of the assets of the Company available for distribution to
holders of common stock upon liquidation, dissolution or winding up of the
affairs of the Company; (iii) do not have preemptive, subscription or
conversation rights (although the Board of Directors may create such
subscription rights) and there are no redemption or sinking fund provisions
applicable thereto; and (iv) are entitled to one non- cumulative vote per
share on all matters which shareholders may vote on at all meetings of
shareholders. All shares of common stock outstanding are fully paid and
non-assessable and all shares of common stock which are the subject of this
Offering, when issued, will be fully paid and .non-assessable.
The Board of Directors of the Company may, at its discretion,
determine that any unissued securities of the Company shall be offered for
subscription solely to the holders of Common Stock of the Company or solely
to the holders of any class or classes of such stock, in such proportions
based on stock ownership as the Board may determine.
PREFERRED STOCK
Following the approval by the shareholders and amendment of the
Articles of Incorporation, 1,000,000 shares of preferred stock of the
corporation may be issued from time to time in one or more classes or
series, each of which shall have a distinctive designation or title as
shall be fixed by the Board of Directors. No Preferred Shares have been
issued as of the date of this filing.
NON-CUMULATIVE VOTING
The holders of shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more than 50% of
such outstanding shares voting for the election of directors can elect all
of the directors to be elected, if they so choose, and in such event, the
holders of the remaining shares will not be able to elect any of the
Company's directors.
OPTIONS
Currently there are no options issued and outstanding.
DIVIDENDS
The payment by the Company of dividends, if any, in the future rests
within the discretion of its Board of Directors and will depend, among
other things, upon the Company's earnings, its capital requirements and its
financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends. Based upon the Company's present financial
status and its contemplated financial requirements, the Company does not
contemplate or anticipate paying any dividends on its common stock in the
foreseeable future.
TRANSFER AGENT AND WARRANT AGENT
The Company's Transfer Agent is Holladay Stock Transfer, Inc., located
at 4350 East Camelback Road, Suite 100F, in Phoenix, Arizona, 85018.
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PLAN OF DISTRIBUTION
The offering is being conducted by the Company through its officers
and Directors who will not be paid in excess of their regular compensation
for such services. No broker-dealers or other persons shall be employed by
the Company in connection with this offering. No sales commissions or other
compensation will be paid by the Company in connection with the sale of the
Shares.
All subscription payments should be made payable to "MedCare
Technologies, Inc." When subscriptions have been accepted by the Company,
checks and payment for the Shares will be deposited in the Company's
corporate account and will be utilized for the purposed described herein.
See "Use of Proceeds." Once accepted by the Company, subscriptions are not
cancelable by the subscriber and funds paid for Shares are not refundable.
The subscription price was arbitrarily determined by the Company and
does not bear any relationship to the assets, book value or other
recognized criteria or value.
The offering is being conducted pursuant to Rule 504 of Regulation D
under the Securities Act of 1933, as amended. The Shares are not
"restricted securities" as that term is defined under such Act and may be
resold without restriction by persons who are not affiliates of the Company
as that term is defined in the Act.
Each investor subscribing to the Shares offered hereby will be
required to execute a subscription agreement which, among other provisions,
will contain representations as to the investor' s qualifications to
purchase the Shares and his ability to evaluate and bear the risk of an
investment in the common stock of the Company and will contain an
acknowledgment of the receipt of the opportunity to make inquiries of the
Company and to obtain additional information from the Company's management.
LITIGATION
The Company is not a party to any material pending legal proceedings.
FURTHER INFORMATION
The Memorandum does not purport to restate all of the relevant
provisions of the documents referred to or pertinent to the matters
discussed herein, all of which must be read for a complete description of
the terms of the matters relating to an investment in the Shares. These
documents are available for inspection during regulation business hours at
the offices of the Company in Vancouver, B.C., and upon written request
copies of the documents, not annexed to or contained with this Memorandum.
will be provided to prospective investors. Each prospective investor is
invited to ask questions of and receive answers from the Officer of the
Company, and to obtain such information concerning the terms and conditions
of the offering to the extent the Company possesses the same or can acquire
it without unreasonable effort or expense as such prospective investor
deems necessary to verify the accuracy of the information in this
Memorandum. An appointment for such purposes will be arranged upon request.
13
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<PAGE>
FINANCIAL STATEMENTS
The following unaudited financial statements have been prepared from
the books and records of the Company without footnotes and not in
accordance with generally accepted accounting principles.
MEDCARE TECHNOLOGIES, INC.
BALANCE SHEET
AUGUST 15, 1995
(UNAUDITED)
ASSETS
ASSETS
Intangible Assets (Rights to MedCare UI System) $300,000
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
100,000,000 Authorized; Issued
and Outstanding 2,058,519 $ 20,585
ADDITIONAL PAID IN CAPITAL 279,415
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 300,000
14
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MEDCARE TECHNOLOGIES, INC.
SUBSCRIPTION AGREEMENT
The undersigned hereby subscribes for the number of shares of common
stock (the "Shares") of MedCare Technologies, Inc. (the "Company") set
forth below at the purchase price of $0.15 per share and encloses a check
payable to the order of the Company in the amount set forth below to cover
the aggregate subscription price.
The undersigned has received and read the Disclosure Memorandum of the
Company dated August 31, 1995. The undersigned acknowledges that a purchase
of the Shares involves a high degree of risk and the undersigned has the
financial ability to suffer a total loss of the undersigned's investment
without incurring significant financial hardship.
The undersigned has had the opportunity to ask questions of and
receive answers from the Officer of the Company, and to obtain information
concerning the terms and conditions of the offering to the extent the
Company possesses the same or can acquire it without unreasonable effort or
expense, and the undersigned has availed himself or herself of such
opportunity to the extent he or she deems desirable.
Shares will be registered in the name or names set forth below.
________________________________ ________________________________
Name(s) of Shareholder Signature
(Please type or print)
________________________________ ________________________________
Street Address Social Security No. or Tax I.D. No.
________________________________ ________________________________
City, State, Zip Total No. of Shares Being Purchased
________________________________ ________________________________
Area Code and Telephone Number Total Purchase Price Being Tendered
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<PAGE>
EXHIBIT 8:
504 MEMORANDUM
OF 6/22/96
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No. ______
Name of Offeree: _______________________
PRIVATE PLACEMENT MEMORANDUM
MEDCARE TECHNOLOGIES, INC.
(a Utah Corporation) ("Company")
50,000 SHARES OF COMMON STOCK
$.001 Par Value
$4.75 Per Share
MINIMUM INVESTMENT
1,000 Shares
$4,750.00
PRINCIPAL EXECUTIVE OFFICES
400 Burrard Street, Suite 1408
Vancouver, B.C. V6C-3G2
(604) 643-1765
The date of this Memorandum is June 22nd, 1996
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<PAGE>
MEDCARE TECHNOLOGIES, INC.
Type of securities offered: Share of the Company's common
stock, $0.001 par value
Number of Securities offered: 50,000 shares
Price per security: $4.75 per share
Total proceeds: If all shares sold: $237,500.00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees
of the Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION. NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL THE SHARES
OR AUGUST 15TH, 1996. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM
NUMBER OF SHARES IN ORDER TO SELL SHARES IN THE OFFERING. THE COMPANY
MAY, IN ITS DISCRETION, CONDUCT MULTIPLE CLOSINGS. (SEE "DESCRIPTION OF
THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE
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REPRODUCED OR USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN
TO THE COMPANY THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED
DOCUMENTATION IF THE OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE
OFFERING.
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL
BE THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION.
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE
OFFEREE IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN
WRITING. THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A
LIMITED NUMBER OF INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT PERMITTED UNDER APPLICABLE LAW OR ANY FIRM OR
INDIVIDUAL WHO DOES NOT POSSESS THE QUALIFICATIONS DESCRIBED IN THIS
MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF UTAH OR OTHER STATES
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS NO PUBLIC
MARKET FOR SECURITIES OF THE COMPANY. EVEN IF SUCH MARKET EXISTED
PURCHASERS OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE
BEING ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO SALE OR
DISTRIBUTION AND PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS
THE SHARES ARE REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE
APPLICABLE STATE STATUTES (UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION IS AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED
TO BEAR THE ECONOMIC RISK OF THEIR
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTMENT. NO ONE SHOULD INVEST
IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE INVESTMENT.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK FACTORS
INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX, ACCOUNTING
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<PAGE>
OR OTHER EXPERT ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL,
ACCOUNTANT AND OTHER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING,
AND RELATED MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR
THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE
DIRECTED FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER
ORAL OR WRITTEN) IN CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION
AS IS CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS
THERETO AND DOCUMENTS REFERRED TO HEREIN. ONLY INFORMATION OR
REPRESENTATIONS CONTAINED HEREIN AND THEREIN MAY BE RELIED UPON AS HAVING
BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT A OF THIS MEMORANDUM.
WHICH CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS,
EACH INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[X] Is in the development stage.
[ ] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other ( Specify ) ____________________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following
states:
State State File No. Effective Date
----- -------------- --------------
NO REGISTRATION HAS BEEN FILED.
This Offering Circular, together with Financial Statements and other
Attachments, consists of a total of 23 pages (including cover page).
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<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 12
Description of Securities 13
Terms of the Offering 13
Directors, Officers and key Personnel of the Company 14
Remuneration of Directors and Officers 15
Principal Stockholders 15
Reports 16
Legal Matters 16
Litigation 16
Additional Information 16
State Restrictions 18
EXHIBITS
EXHIBIT A SUBSCRIPTION AGREEMENT
This is an original unpublished work protected under copyright laws of
the United States and other countries. All Rights Reserved. Should
publication occur, then the following notice shall apply: Copyright 1996
MedCare Technologies, Inc., All Rights Reserved. No part of this document
may be reproduced, stored in a retrieval system or transmitted, in any
form or any means, electronic, mechanical, photocopying, recording or
otherwise, without the prior written permission of MedCare Technologies,
Inc.
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<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety
by express reference to the Memorandum and the exhibits referred to
therein. Each prospective investor is urged to read this Memorandum in
its entirety.
ISSUER: MedCare Technologies, Inc., a Utah corporation (the "Company"),
is the issuer of the Shares. The address of the Company is 1408-400
Burrard Street, Vancouver, BC V6C-3G2.
TERMS OF THE OFFERING: The Company is offering up to 50,000 of its
common stock, par value $.001 per share ( the "Shares"). The Minimum
investment for an Investor is 1,000 Shares or $4,750.00 The Company, in
its sole discretion, may accept subscriptions for up to an aggregate of
50,000 or $237,500,000 until August 15th, 1996, or until such earlier
date as the Company determines that this Offering shall be terminated.
In its sole discretion, the Company may elect to terminate this Offering
even if subscriptions for Shares have been received and accepted by the
Company. See "Terms of the Offering" and "Subscription for Shares".
COMPANY'S BUSINESS: The Company is engaged in treatment of patients
suffering from urinary and fecal incontinence using a non-surgical,
non-drug and non-invasive treatment protocol in a clinical setting.
RISK FACTORS: The offering involves speculative investment with
substantial risks, including those associated with an unproven startup
venture, risks associated with the industry and economic risks associated
with clinics in different geographic locations and the uncertainty of
obtaining managerial staff to generate income and control costs in
different locations. Although the Company will use its best efforts to
protect the investments of the Investors, there is no assurance that the
Company's efforts will be successful. Accordingly. a prospective Investor
should not view the Company or its officers, directors, employees or
agents as guarantors of the financial success of an investment in the
Shares. See "Risk Factors".
LIMITED TRANSFERABILITY OF THE SHARES: The Shares have not been
registered under the 1933 Act or the securities laws of any state. The
Shares of common stock purchased pursuant to this Offering will not be
"restricted" shares because the shares are offered under Rule 504 and
this offering is excluded from the provisions of Regulation D pertaining
to restricted shares. This does not mean. however, that a public market
exists for the Shares. A limited public market exists now, but may not
exist in the future. See "Risk Factors", "Terms of the Offering".
LIMITATION OF LIABILITY: Except for the amounts paid by Investors for
their purchase of any Shares, and as required by Utah State law, no
investor will be liable for any debts of the Company or be obligated to
contribute any additional capital or funds to the Company. See "Risk
Factors".
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<PAGE>
SUITABILITY STANDARDS: Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
USE OF PROCEEDS: The Company plans to use the money received from this
offering to cover the costs involved with setting up offices, working
capital, and promoting and marketing the Company's products and services.
The funds will not be deposited in an escrow account and will be
available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: MedCare Technologies, Inc.
State and date of incorporation: Utah State
January 17th, 1986
Street address of principal office: 400 Burrard Street, Suite 1408
Vancouver, BC V6C-3G2
604-643-1765
Fiscal Year: December 31
Person(s) to contact with respect
to offering: Mr. Harmel S. Rayat
PRODUCTS
The Company has developed the MedCare UI system as a cost effective, non-
invasive protocol for the care and treatment of urinary incontinence.
Urinary incontinence (UI) is the involuntary loss of bladder control and
represents a significant cause of disability and dependence. Incontinence
is one of the most prevalent, yet severely unrecognized problems in
health care today. And as society ages, the physical, emotional and
financial costs to those suffering and the costs to their caregivers, as
well as the health care system, is expected to increase dramatically.
The psychosocial impact of UI imposes a tremendous burden on individuals,
their families and health care providers. Patients experience odor,
dampness, discomfort, depression, withdrawal from daily activities and a
significant quality of life problem. Social interaction with friends and
family and even sexual activity is restricted or avoided in the presence
of incontinence. Sadly, many UI sufferers eventually confine themselves
to a life of exile in their own homes. In fact, UI has also been cited as
one of the major reasons why people institutionalize elderly family
members.
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<PAGE>
Despite the prevalence of incontinence, it is widely under diagnosed and
under reported because of the social stigma attached to UI. Many
individuals are either too ashamed or too embarrassed to report the
problem to their doctor or to a health care professional. Instead, a
large number of people prematurely turn to the use of absorbent materials
and supportive aids without having their condition properly diagnosed and
treated.
The MedCare UI System takes into account the individual's specific needs
and circumstances including their clinical, cognitive, functional and
residential status to offer a comprehensive program for all UI sufferers.
Through the Company's wholly owned operating subsidiary, Manon
Consultants Ltd. the MedCare UI treatment program has a two year track
record and uses a combination of electromyographic (EMG) biofeedback,
bladder retraining, coping strategies for situations that precipitate
incontinence, clinical visits and results in the reduction or complete
elimination of 70% to 100% of the most commonly found urinary
incontinence symptoms.
MATERIAL CONTRACTS
The Company has no contracts at the present time.
MARKETING APPROACHES
The Company plans to market its UI clinics through a combination of
radio, TV, print, direct mail seminars, doctor referral and guest
interviews by Company representatives in the local media.
RISK FACTORS
An investment in the Shares involves a high degree of risk. No
prospective Investor should acquire the Shares unless he can afford a
complete loss of his investment. The risks described below are those
which the Company deems most significant as of the date hereof. Other
factors which may have a material impact on the operations of the Company
may not be foreseen. In addition to the other factors set forth elsewhere
in this Memorandum, prospective Investors should carefully consider the
following specific risk factors:
A. OPERATING RISKS
GENERAL. The economic success of an investment in the Shares
depends, to a large degree, upon many factors over which the Company has
no control. These factors include general economic, industrial and
international conditions; inflation or deflation; fluctuation in interest
rates; the availability of, and fluctuations in the money supply. The
extent, type and sophistication of the Company's competition; and
government regulations.
LACK OF OPERATIONS. The Company engages in limited business
operations at the present time. However, upon completion of the Offering,
the Company plans to use the proceeds to expand its clinical system in
certain key markets.
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<PAGE>
DEVELOPMENT STAGE COMPANY. The Company was organized in 1986. The
Company has undertaken no business operation of any sort or type.
Accordingly, the Company is a development stage company as defined by
Statement of Financial Accounting Standards No.7.
DEPENDENCE ON KEY PERSONNEL. The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To
the extent that any of its management personnel is unable or refuses to
continue association with the Company, a suitable replacement would have
to be found. There is no assurance that the Company would be able to find
suitable replacements for such personnel, or that suitable person.
LACK OF ADEQUATE CAPITAL. Additional capital will be required upon
the successful opening of the first few clinics. In the absence of any
additional funding, the Company's operations may be affected negatively.
Therefore, the Company's management will be careful in choosing those
locations that represent the best chances of success and, accordingly,
the best chances of raising future funding.
INHERENT BUSINESS RISKS. The business that the Company plans to
engage in involves substantial and inherent risks associated with a
development company with limited financial resources.
B. INVESTMENT RISKS
SPECULATIVE INVESTMENT. The Shares are a very speculative
investment. There can be no assurance that the Company will attain its
objective and it is very likely that the Company will not be able to
advance any business activities and Investors could lose their entire
investments.
ARBITRARY PURCHASE PRICE. The purchase price for the Shares has
been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No assurance is or can be given that the
Shares, although transferable, could be sold for the purchase price, or
for any amount. There currently exists a limited market for resale of the
Shares.
RESTRICTION OF TRANSFERABILITY. While the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the
Shares for a substantial period of time are advised against purchasing
Shares. The Shares are not registered under the 1933 Act or under the
securities laws of any state, but are being offered by the Company under
the exemption from registration provided by Rule 504 under Regulation D
and related state and foreign exceptions.
IMMEDIATE DILUTION FOR INVESTORS. An investor in this offering will
experience an immediate and substantial dilution.
"BEST EFFORTS" OFFERING. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to
purchase or take down any of the Shares offered
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pursuant to this Offering. No escrow account is maintained and no minimum
amount is required to be sold. Funds will be available to the Company
upon receipt.
MANAGEMENT AND OPERATION EXPERIENCE. The Company's officers,
directors and other personnel have engaged in a variety of businesses and
have been involved in business financing, operations and marketing, but
their experience in these fields is limited. There is no assurance that
such experience will result in the success of the Company.
OTHER RISKS. No assurance can be even that the Company will be
successful in achieving its stated objectives, that the Company's
business is undertaken by the Company, will generate cash sufficient to
operate the business of the Company or that other parties entering into
agreements relating to the Company's business will meet their respective
obligations.
DIVIDENDS. The Company's Board of Directors presently intends to
cause the Company to follow a policy of retaining earnings, if any, for
the purpose of increasing the net worth and reserves of the Company.
Therefore, there can be no assurance that any holder of Common Stock will
receive any cash. stock or other dividends on his shares of Common Stock.
Future dividends on Common Stock, if any, will depend on the future
earnings, financing requirements and other factors.
ADDITIONAL SECURITIES AVAILABLE FOR ISSUANCE. The Company's
Certificate of Incorporation authorizes the issuance of 100,000,000
shares of Common Stock. At this time, 6,300,185 shares of Common stock
have been issued. Accordingly, investors purchasing shares in this
offering will be dependent upon the judgement of management in connection
with the future issuance and sale of shares of the Company's capital
stock, in the event purchasers can be found for such securities.
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $1,000.00 for legal fees, accounting
fees, filing fees, printing costs and other expenses. If the maximum
number of Shares are sold, the Company anticipates that the net proceeds
to it from the Offering will be as follows:
MAXIMUM
ITEM SHARES SOLD
---- -----------
Gross Proceeds of Offering $237,500.00
OFFERING EXPENSES
-----------------
Cost of Offering 1,000.00
TOTAL PROCEEDS RECEIVED: $236,500.00
OPERATING EXPENSES
------------------
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Equipment Purchases $75,000.00
Advertising & Marketing 75,000.00
Working Capital 86,5000.00
TOTAL
NET FUNDS AVAILABLE TO COMPANY $236,5000.00
============
The Company estimates that the costs of the Offering will be as follows:
(i) legal fees of approximately $500.00, (ii) accounting fees of
approximately $400.00 and (iii) printing and other miscellaneous costs of
approximately $100.00. The sales commissions will be paid only to NASD
broker-dealer and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Shares are sold, will
be sufficient to sustain the planned marketing and development activities
of the Company for a period of 6 months, depending upon the number of
Shares sold in the offering and other factors. Even if all the Shares
offered hereunder are sold, the Company will require additional capital
in order to fund continued development activities and capital
expenditures that must be made. The Company's business plan is based on
the premise that additional funding will be obtained through funds
generated from operations, the exercising of the options by shareholders,
additional offerings of its securities, or other arrangements. There can
be no assurance that any securities offerings will take place in the
future, or that funds sufficient to meet any of the foregoing needs or
plans will be raised from operations or any other source.
DESCRIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
GENERAL. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 6,300,185 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
VOTING RIGHTS. Each share of the 6,300,185 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
DIVIDENDS. The Company has never paid a dividend and does not
anticipate doing so in the never future.
OPTIONS. The Company currently has 800,000 options outstanding in
relation to its common stock.
MISCELLANEOUS RIGHTS AND PROVISIONS. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund
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provisions, and are not liable to further call or assessment. The Shares,
when paid for by investors, will be fully paid and nonassessable. Each
share of the Company's common shares is entitled to a pro rata share in
any asset available for distribution to holders of equity securities upon
the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 50,000 Shares
at a purchase price of $4.75 per share of the Company's common stock. The
Company may, in its sole discretion, terminate the offering at any time.
The Offering will close on the earliest of August 15th, 1996 or the
election of the Company when all of the Shares are sold. in no event
later than August 15th, 1996. The minimum subscription is $4,750.00
(1,000 Shares) per Investor, although the Company, in its sole
discretion, may accept subscriptions for lesser amounts.
The Shares are being offered and sold by the Company under the exemption
from registration contained in Rule 504 under Regulation D and related
exemptions from state registration requirements. Rule 504 permits the
Company to offer and sell its stock in an amount not exceeding $1,000,000
to an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii) imposed
a limited disclosure obligation of all issuers such as the Company which
was intended to ensure that investors in a Rule 504 transaction were
clearly advised of the restricted character of the securities being
offered for sale. This requirement was eliminated in July, 1992 at which
time the Securities and Exchange Commission adopted an amendment to Rule
504 that eliminated all limitations on the manner of offering of stock
under that rule and/or the resale of stock purchased in reliance on that
rule. Therefore, following adoption of the 1992 amendment, the securities
being offered and sold by the Company pursuant to the present Offering
are available for immediate resale by nonaffiliates of the issuer.
The Shares are being ordered on a "best efforts" basis by the Company and
certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed
$1,000 as detailed in the Use of Proceeds.
DIRECTORS, OFFICERS AND KEY PERSONNEL OF THE COMPANY
OFFICERS AND DIRECTORS. The following information sets forth the
names of the officers and directors of the Company, their present
position with the Company and biographic information:
NAME POSITION HELD SINCE
- ---- -------- ----------
Harmel S. Rayat President & Director October, 1995
Kundan S. Rayat Director & Secretary August, 1995
Valerie Boeldt-Umbright Director October, 1995
Diane Naziato Director October, 1995
Narinder Thouli Director & Treasurer October, 1995
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HARMEL S. RAYAT (35)- President and Chief Executive Officer. Mr. Rayat is
one of the co-developers of the MedCare UI System. Mr. Rayat has been in
the venture capital industry since 1981 and is the president of Hartford
Capital Corporation, a company that specializes in providing early stage
funding and investment banking services to emerging growth corporations.
VALERIE BOELDT-UMBRIGHT (31) - Director. Mrs. Boeldt-Umbright is a
registered nurse, with a Bachelors of Science degree in community health
education from Northern Illinois University. With over two years of
actual management experience in the day to day operation of the
incontinence Clinic in Chicago, Mrs. Boeldt-Umbright has supervised
personnel dealt with insurance and reimbursement matters, marketing and
physician interaction and referrals. She has instructed patients in
biofeedback; for their pelvic floor muscles, established individualized
neuromuscular reeducation programs, written new clinical protocols and
articles for publication and has worked as a member of a university team
to provide excellent care and medical treatment for patients.
NARINDER THOULI (32) - Director/Treasurer. Mr. Thouli has 5 years of
experience in medical technology companies, primarily as a consultant to
emerging market product developers. He is experienced in marketing, human
resources, research and development and clinical and regulatory affairs.
DIANE NUNZIATO (49) - Director. Ms. Nunziato has a Bachelors of Science
and a Masters of Clinical Science from the University of Western Ontario,
as well as numerous certifications in courses ranging from adult
learning, clinical supervision and instruction, group dynamics, learning
theories, and management. Ms. Nunziato has been instrumental in
developing and refining the clinical protocols for the MedCare UI System
and has in-depth knowledge of every aspect of establishing a clinical
system, including marketing, billing, medical products and equipment.
patient and physician interaction, and the training and supervision of
personnel.
KUNDAN S. RAYAT (68) - Director/Secretary. Mr. Rayat has over 45 years
of experience as an entrepreneur and owner of a diverse range of
businesses ranging from automotive to heavy construction on three
different continents. Since 1985, Mr. Rayat has primarily devoted his
time to venture capital investing in numerous start up ventures and
provides seasoned senior management advice to emerging market companies
as a consultant.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of
the date of this Memorandum by (i) each person known to the Company to
own of record or beneficially 5% or more of the 6,300,185 outstanding
shares of Common Stock of the Company, (ii) each Director of the Company,
and (iii) all officers and directors of the Company as a group, as of the
date of this Memorandum and adjusted to reflect share holdings after the
sale of the maximum number of Shares offered hereby.
E-153
<PAGE>
<TABLE>
<CAPTION>
No of No. of
Shares Shares
Person or Group (Pre) Percent (Post) Percent
- --------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Harmel S. Rayat 2,000,000 31.7% 2,000,000 31.5%
5131 Highgate Street
Vancouver, B.C., VSR 3G9
</TABLE>
<TABLE>
<CAPTION>
No of No. of
Shares Shares
Person or Group (Pre) Percent (Post) Percent
- --------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Cede & Co 483,008* 7.67% 483,008* 7.61%
P.O. Box 222
Bowling Green Street
New York. NY. 10274
Philadep & Co. 379,169* 6.02% 379,169* 5.97%
1900 Market Street
2nd Floor
Philadelphia PA, 19103
</TABLE>
* Held in clearing company for the benefit of others
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive no
additional compensation for their services as Directors. The Company
intends, in the future, to pay Directors who are not employees of the
Company, compensation of $500 per Director's Meeting, as well as
reimbursements of any out of pocket expenses incurred in the Company's
behalf.
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of MedCare Technologies, Inc. and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior
notice, access during reasonable business hours to such books and
records, and the right to inspect and copy them. Within 120 days after
the close of each fiscal year, reports will be distributed to the
shareholders which will include financial statements (including a balance
sheet and statements of income, shareholder's equity, and cash flows)
prepared in accordance with generally accepted accounting principals,
with a reconciliation to the tax information supplementary supplied,
accompanied by a copy of the accountant's report.
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Boulevard, Suite 108, Phoenix,
Arizona 85028-1612 will pass upon certain matters for the Company.
E-154
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or other
legal proceedings.
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this memorandum
contains a fair presentation of the subjects discussed herein and does
not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons
to whom offers are made will be furnished with such additional
information concerning the Company and other matters discussed herein as
they, or their purchaser representative or other advisors, may reasonably
request. The Company shall, to the extent such information is available
or can be acquired without unreasonable effort or expense, endeavor to
provide the information to such persons. All Offerees are urged to make
such personal investigations, inspections or inquiries as they deem
appropriate.
Questions or requests for additional information may be directed to
Harmel S. Rayat at (604) 643-1765. Requests for additional copies of this
Memorandum or assistance in executing subscription documents may be
directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offing exemption from registration pursuant to A.R.S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR
RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION
THEREFROM IS AVAILABLE.
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within
the meaning of A.R.S. 44-1801(17), and I am acquiring these securities
for myself, not for other persons. If qualifying as a non-accredited
investor, I further represent that this investment does not exceed 20% of
my net worth (excluding principal residence, furnishings therein and
personal automobiles).
E-155
<PAGE>
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's
Limited Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH
QUALIFICATIONS IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
THE QUALIFICATIONS BY SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE COLORADO SECURITIES ACT OF 1981, IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR
REVIEWED BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE
ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION OF THE CONTRARY IS
UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE
STATEMENT OF MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY
TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE
MATERIAL TERMS AND DOCUMENTS PURPOSED TO BE SUMMARIZED HEREIN.
Purchaser Statement:
E-156
<PAGE>
I understand that this Offering of Shares has not been reviewed by
the Attorney General of the State of New York because of the Offeror's
representation that this intended to be a non-public Offering pursuant to
the Regulation D Rule 505 or 506, and that if all of the conditions and
limitations of Regulation D are not complied with, the Offering will be
resubmitted to the Attorney General for amended exemption. I understand
that any literature used in connection with this Offering has not been
previously filed with the Attorney General and has not been reviewed by
the Attorney General. This Investment Unit is being purchased for my own
account for investment, and not for distribution or resale to others. I
agree that I will not sell or otherwise transfer these securities unless
they are registered under the Federal Securities Act of 1933 or unless an
exemption from such registration is available. I represent that I have
adequate means of providing for my current needs and possible personal
contingencies of financial problems, and that I have no need for
liquidity of this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant,
or my Offeree representative and myself, and that, upon reasonable
notice, the books and records of the issuer will be available for
inspection by investors, at reasonable hours at the principal place of
business.
E-157
<PAGE>
EXHIBITS
E-158
<PAGE>
MedCare Technologies, Inc.
SUBSCRIPTION DOCUMENT
l. The undersigned hereby subscribes for _____________ shares of common
stock (hereinafter "Shares"), as described in the Private Offering
Memorandum dated June 22, 1996 ("Memorandum"), of MedCare Technologies,
Inc., a Utah corporation (the "Company"), being offered by the Company
for a purchase price of $4.75 per share and tenders herewith the sum of
$______________ in payment therefor, together with tender of this
Subscription Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of _________________________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. That the Company has a very limited financial and operating
history;
d. That the Shares have not been registered under the Securities
Act of 1933, as amended, in reliance upon exemptions contained
in that Act, and that the Shares have not been registered under
the securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as
the basis for the exemption from the registration requirements
of the Securities Act of 1933 and of the applicable state's
securities laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business manners to evaluate the
merits and risks of an investment in the Shares;
E-159
<PAGE>
c. That the undersigned subscriber is able to bear the economic
risk of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents
and warrants that he is aware of the high degree of risk
involved in making investment in the Shares:
e. That the undersigned subscriber's decision to purchase the
Shares is based solely on the information contained in the
Private Offering Memorandum and on written answers to such
questions as he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares
directly from the Company and understands that neither the
Company nor the Offering is associated with; endorsed by nor
related in any way with any investment company, national or
local brokerage firm or broker dealer. The undersigned
subscriber's decision to purchase the Shares is not based in
whole or in part on any assumption or understanding that an
investment company, national or local brokerage firm or other
broker dealer is involved in any way in this Offering or has
endorsed or otherwise recommended an investment in these
Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint
worth with my spouse at the time of purchase, exceeds
$200,000;
[ ] I am a natural person who had an individual income in
excess of $50,000 or joint income with my suppose in
excess of $50,000 in each of the two most recent years and
who reasonably expects an income in excess of those
amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial
and business matters as to be capable of evaluating the merits
and risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares, and hereby represents and warrants
that he has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits
and risks of an investment in the shares and of making an
informed investment decision and will not require a purchaser
representative.
E-160
<PAGE>
5. The undersigned understands and agrees that this subscription is
made subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until August
15th, 1996 in which to accept or reject it. If no action is
taken by the Company within said period, the subscription shall
be deemed to have been accepted. In each case where the
subscription is rejected, the Company shall return the entire
amount tendered by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time,
execute and deliver such documents or other instruments as may
be requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the
Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with
full power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying
or confirming changes in the Subscription Document so that such
document is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Document this _____ day of _____________________, 1996.
Number of Shares __________________________
Total amount tendered $____________________
INDIVIDUAL OWNERSHIP: _________________________________
Name (Please Type or Print)
_________________________________
Signature
_________________________________
Social Security Number
E-161
<PAGE>
JOINT OWNERSHIP: _________________________________
Name (Please Type or Print)
_________________________________
Signature
_________________________________
Social Security Number
OTHER OWNERSHIP _________________________________
Name (Please Type or Print)
By:_______________________________
Signature
__________________________________
Title
_________________________________
Employer Identification Number
ADDRESS: ___________________________________________________________
Phone: (Residence)_______________; Phone (Business) ________________
I, _______________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and
complete to the best of my knowledge.
Date: __________________, 1996. _________________________________
Signature
E-162
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ____________________________ on the _____ day of
_______________, 1996.
_________________________________
Signature
ACCEPTANCE
This Subscription is accepted by MedCare Technologies, Inc., as of
the _____ day of _______________, 1996.
MedCare Technologies, Inc.
By ______________________________
Harmel Rayat, President
E-163
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 44,975
<SECURITIES> 0
<RECEIVABLES> 640
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 842,894
<PP&E> 20,902
<DEPRECIATION> 8,575
<TOTAL-ASSETS> 900,836
<CURRENT-LIABILITIES> 24,114
<BONDS> 0
0
0
<COMMON> 6,300
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 900,836
<SALES> 1,729
<TOTAL-REVENUES> 1,729
<CGS> 0
<TOTAL-COSTS> 138,766
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (137,037)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
