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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Fiscal Year ended February 28, 1997.
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[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______ to _______.
Commission File No. 0-21891
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ATLANTIC CENTRAL ENTERPRISES LIMITED
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(Name of small business issuer in its charter)
BERMUDA N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Cedar House, 41 Cedar Avenue, Hamilton, Bermuda HM 12
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (441) 295-2244
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, par value $.01
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such re-
ports), and (2) has been subject to such filing requirements for the past 90
days. YES [X] NO [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. YES [X] NO [ ]
State issuer's revenues for its most recent fiscal year:
$3,485,667 for the Fiscal Year ended February 28, 1997.
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The aggregate market value of 2,662,396 shares of registrant's voting common
stock held by non-affiliates of the Registrant was $1,144,830 as of April 2,
1998, based upon the closing bid price of $0.43 per share for the Common Stock
in the over-the-counter market on such date.
Number of shares of common stock outstanding as of March 31, 1998:
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2,662,396 shares of common stock.
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Documents Incorporated By Reference: None.
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ATLANTIC CENTRAL ENTERPRISES LIMITED
FORM 10-KSB ANNUAL REPORT
Table of Contents
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Item No. Page
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PART I:
1. Description of Business ......................................... 3
2. Description of Property ......................................... 25
3. Legal Proceedings ............................................... 25
4. Submission of Matters to a Vote of Security Holders ............. 27
PART II:
5. Market for Common Equity and Related Stockholder Matters ........ 28
6. Management's Discussion and Analysis or Plan of Operation ....... 29
7. Financial Statements ............................................ 41
8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 41
PART III:
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ............ 42
10. Executive Compensation .......................................... 45
11. Security Ownership of Certain Beneficial Owners and Management .. 46
12. Certain Relationships and Related Transactions .................. 47
13. Exhibits and Reports on Form 8-K ................................ 48
Consolidated Financial Statements ..................................... F-1
SIGNATURE PAGE
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PART I
ATLANTIC CENTRAL ENTERPRISES LIMITED (THE "COMPANY" OR "ACE") HAS
EXPERIENCED SIGNIFICANT NET LOSSES SINCE INCEPTION, FOR THE FISCAL YEAR ENDED
FEBRUARY 28, 1997 INCURRED A LOSS FROM OPERATIONS OF APPROXIMATELY $10,316,000
AND UTILIZED APPROXIMATELY $4,173,000 IN CASH FOR OPERATING ACTIVITIES, AND AT
FEBRUARY 28, 1997 HAD A WORKING CAPITAL DEFICIT OF APPROXIMATELY $874,000 AND
A STOCKHOLDERS' EQUITY OF APPROXIMATELY $306,000. THE COMPANY HAS SERIOUS
LIQUIDITY PROBLEMS PRIMARILY DUE TO UNSUCCESSFUL ATTEMPTS THROUGH ITS
SUBSIDIARY, VISTA TECHNOLOGIES INC. ("VISTA"), TO RAISE ADDITIONAL CAPITAL AND
SIGNIFICANT COSTS ASSOCIATED WITH FAILED ATTEMPTS TO PENETRATE NORTH AMERICAN
VISION CORRECTION MARKETS. AS A RESULT OF THE ABOVE FACTORS, THE REPORT OF
MOORE STEPHENS, P.C. ON THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE FISCAL
YEAR ENDED FEBRUARY 28, 1997 CONTAINS A PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT
CONCERNING THE ABILITY OF THE COMPANY TO CONTINUE AS A GOING CONCERN. THE
CONSOLIDATED FINANCIAL STATEMENTS DO NOT INCLUDE ANY ADJUSTMENTS THAT MIGHT BE
NECESSARY IF THE COMPANY IS UNABLE TO CONTINUE AS A GOING CONCERN. FOR A
DISCUSSION OF MANAGEMENT'S PLANS AND OTHER RELATED FACTORS, SEE "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" IN ITEM 6 BELOW AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO LATER IN THIS REPORT.
UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE DATA IN THIS REPORT
HAVE BEEN ADJUSTED RETROACTIVELY TO REFLECT A 1-FOR-10 EXCHANGE RATIO AS TO
PHARMA PATCH PLC SHARES PURSUANT TO THE REORGANIZATION OF PHARMA PATCH AND
ATLANTIC CENTRAL ENTERPRISES LIMITED EFFECTIVE AS OF JANUARY 20, 1997.
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Atlantic Central Enterprises, Ltd. (the "Company" or "ACE") was
incorporated under the laws of Bermuda on February 2, 1996 under the name
Bamburgh Limited. Thereafter, on April 2, 1996, the name was changed to
"Atlantic Central Enterprises Limited".
On January 20, 1997, ACE completed a reorganization with Pharma Patch
Public Limited Company, an Irish company ("Pharma Patch"). The reorganization
involved Pharma Patch transferring to ACE all of its assets and having ACE
assume all of Pharma Patch's liabilities, in exchange for all the then
outstanding common stock of ACE. Immediately after the transfer Pharma Patch
commenced a voluntary liquidation and distributed all ACE's shares to its
shareholders. As a result of the reorganization, Pharma Patch shareholders
received one common share of ACE for every 10 shares of Pharma Patch owned.
This reorganization qualifies as a tax-free reorganization under Section
368(1)(1)(F) of the U.S. Internal Revenue Code of 1986, as amended.
As a result of the restructuring, ACE is the successor in interest of
Pharma Patch. Accordingly, "ACE" or the "Company" will be used
interchangeably to refer to ACE and Pharma Patch when describing operational
history unless otherwise specifically indicated.
The principal office of the Company is located at Cedar House, 41 Cedar
Avenue, Hamilton, Bermuda HM 12, telephone number (441) 295-2244.
REORGANIZATION
On January 20, 1997, the shareholders of Pharma Patch approved the
following plan of reorganization with Atlantic Central Enterprises ("ACE"):
ACE was initially capitalized in August 1996 by issuing 1,200,000 shares
of common stock to Pharma Patch for $12,000 in cash.
Subsequent to the reorganization, ACE issued an additional 450,000
shares of its common stock in exchange for the stock held by the stockholders
of Pharma Patch and dissolved the corporate charter of Pharma Patch.
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These transactions resulted in the elimination of the 16,541,570
ordinary shares of Pharma Patch and created 1,654,157 shares of common stock
(one share of ACE common stock for every 10 Ordinary shares of Pharma Patch)
in ACE with a par value of $16,542. As a result of the difference between
Pharma Patch's ordinary shares issued at par value ($2,343,914) and ACE's
common stock issued at par value ($16,542) the premium in excess of par value
increased, in 1997, by $2,327,372 (Pharma Patch's par value per ordinary
share was Irish Pounds .01 and ACE's par value per common share is US$ .01).
All per share amounts in this report have been restated to reflect this
reorganization.
Pharma Patch was incorporated under the laws of the Republic of Ireland
in January 1992. Prior to July 1993, Pharma Patch had no significant assets
or operations. Prior to fiscal 1997 Pharma Patch was mainly involved in the
research and development of transdermal drug delivery systems and skin
permeation technology. Pharma Patch developed and patented proprietary
technology and secured licensing and product feasibility agreements through
research in this area.
On November 15, 1995, Pharma Patch sold substantially all of its
operating assets to Technical Chemicals and Products, Inc. ("TCPI") for a gain
of approximately $16.4 million. These assets included 11 U.S. patents relating
to transdermal drug delivery and skin permeation technology, license rights to
skin penetration enhancers and electronically assisted drug delivery,
proprietary information and trade secrets related thereto, certain licensing
and product feasibility agreements entered into by Pharma Patch's and all of
Pharma Patch's fixed assets. TCPI also assumed the sublease of the research
facility occupied by Pharma Patch.
In consideration for the purchased assets, TCPI issued an aggregate of
786,214 shares of its common stock with a fair value of $11,919,000 and
satisfied the $5,000,000 promissory note previously issued by Pharma Patch to
Flora, Inc. As a result of this transaction, Pharma Patch owned 9.9% of
TCPI's outstanding common shares and ceased performing research and
development work and other operations in the areas of skin penetration
enhancers and drug delivery systems.
On January 16, 1996, Pharma Patch entered into a supplemental agreement
with TCPI, which amended certain provisions of the November 1995, asset
purchase agreement. TCPI had filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission with respect to the sale of 1,800,000
TCPI common shares (the "Offering"). Pursuant to the terms of the supplemental
agreement, Pharma Patch executed a lock-up letter with the representative of
the TCPI Underwriters providing that it would not sell or otherwise dispose of
any of its shares of common stock for a period to expire 180 days following
the closing date of the Offering without their prior consent. As consideration
for the execution of the lock-up agreement, TCPI (i) terminated an existing
lock-up agreement covering TCPI common stock owned by Pharma Patch, executed
in connection with the asset purchase agreement; (ii) effective as of closing
date of the Offering, terminated the voting trust agreements, shareholders'
agreement and irrevocable proxy, executed in connection with the asset
purchase agreement which, among other things, limited Pharma Patch's ability
to vote or dispose of its shares of common stock; (iii) allowed Pharma Patch
to offer for sale 100,000 shares of this common stock in the Offering (plus up
to an additional 110,000 shares if the Underwriters over-allotment option were
exercised); (iv) effective as of the closing date of the Offering, issued to
Pharma Patch a two-year warrant to purchase 100,000 shares of common stock at
an exercise price equal to the per share Offering price; and (v) file a
Registration Statement on Form S-3 to register all of the remaining shares of
common stock owned by Pharma Patch after the Offering.
On March 21, 1996, ACE completed the acquisition of 61.3% of the voting
interest of Vista Technologies, Inc. ("Vista"). Vista provides
photo-refractive keratectomy (PRK) and other laser vision correction ("LVC")
facilities and services to the health care industry.
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ACE acquired its position in Vista by executing a stock purchase
agreement for 200,000 newly issued shares of Vista common stock for a cash
price of $500,000. ACE and Vista executed an additional agreement under which
Vista provided 2,060,000 newly issued shares of its common stock to ACE plus
500,000 Vista Class C common stock purchase warrants. In exchange, Vista
received a $750,000 interest-free note due six months after the transaction
date and 200,000 restricted shares of TCPI common stock previously held by ACE
with a fair value on the date of the transaction of $3,550,000 (original cost
basis to ACE of $3,032,000). Vista paid the $750,000 note in full during the
first quarter of fiscal 1997. ACE also received an option to acquire 250,000
Vista shares at $2.50 per share. In a separate transaction, ACE agreed to
provide 4,500,000 newly issued Ordinary Shares of Pharma Patch (450,000 common
shares of ACE) in exchange for a total of 900,000 shares of Vista's
outstanding common stock owned by three shareholders. A summary of the
consideration for both components of the Vista transaction include the
following:
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Cash $ 500,000
Note payable 750,000
TCPI investment (200,000 shares) 3,032,000
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Sub-total 4,282,000
Pharma Patch common stock (4,500,000 shares) 2,250,000
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$ 6,532,000
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The cost in excess of net assets acquired of approximately $4.5 million
was calculated utilizing the original carrying value of the TCPI investment
($15.16 per share). ACE was amortizing such cost in excess of net assets
acquired over a 15-year period. At February 28, 1997, the Company's
management determined that the goodwill was impaired. As a result, the
Company wrote off goodwill of approximately $4,300,000 after it determined
that the unamortized balance of goodwill could not be recovered through
projected future discounted cash flows over its remaining life [See Note 2 of
the Notes to Consolidated Financial Statements].
During the year ACE exercised its options to purchase an additional
250,000 shares of Vista for cash consideration of $625,000. ACE also
purchased additional 13,800 shares on the open market for cash consideration
of $37,663.
Since March 21, 1996, ACE's interest in Vista has been diluted by the
issuance of additional Vista stock. At February 28, 1997, ACE owned 54.14% of
the issued and outstanding shares of Vista.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern and realization of assets and
settlement of liabilities and commitments in the normal course of business.
The Company has experienced significant net losses, a loss from continuing
operations of approximately $10,316,000, has a working capital deficit of
approximately $874,000 and utilized approximately $4,173,000 in cash for
operating activities for the year ended February 28,1997. In addition, Vista
has serious liquidity problems primarily due to unsuccessful attempts to raise
money, both at the parent level and the subsidiary level and significant costs
associated with the Vista's failed attempts to penetrate the North American
vision correction market resulting in losses from operations. The Company and
its subsidiaries are developing business plans which when implemented would
develop opportunities in the laser vision correction and automotive
maintenance markets in North America and/or Europe. Vista's management is
developing a business plan which takes advantage of new trends in the laser
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vision correction business in both North America and Europe. Vista plans to
concentrate on its four successful centers in Italy and Sweden in the 1997-
1998 fiscal year and focus on the reduction of expenses at the head office
level. The Company also plans to sell a portion of its marketable securities,
obtain additional debt financing and focus on revenue growth of its existing
operations.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
continuation of the Company as a going concern is dependent upon the success
of these plans. There can be no assurance of the success of these plans.
As of February 28, 1997 ACE has an accumulated deficit of $18,692,005,
total assets of $8,118,894 and total shareholders' equity of $306,293.
ACE's majority owned subsidiary, Vista, has an accumulated deficit of
$22,142,284, total assets of $4,330,537, total shareholders deficiency of
$2,094,820 and received a Going Concern qualification report from its auditors
for the twelve months ended March 31, 1997 (see Vista's report on Form 10KSB
for its fiscal year ended March 31, 1997 for additional information). ACE,
including Vista, has not yet achieved profitable operations and there is no
assurance that profitable operations, if achieved, could be sustained on a
continuing basis. Further, Vista's future operations are dependent on the
success of the commercialization efforts and market acceptability of the Vista
business plan and other potential business ventures of ACE, together with the
value derived from the TCPI investment securities.
VISTA TECHNOLOGIES INC.
Vista Technologies Inc., through its operating subsidiaries in the
United States and Europe, provides access to advanced excimer laser vision
correction ("LVC") equipment and related support services (collectively "LVC
Services") for use by licensed ophthalmologists in the treatment of refractive
vision disorders. Vista currently has five lasers in use in Europe and one in
the United States.
Physicians use computer-controlled excimer lasers at Vista's centers to
treat refractive vision disorders such as nearsightedness (myopia)and
astigmatism and to eliminate or reduce the need for corrective lenses. Vista
provides individual physicians and group ophthalmic practices with shared
access to laser equipment, thus eliminating capital costs, investment risk and
maintenance of such equipment by the health care professional. LVC Services
provided by Vista also include various support services, such as physician and
staff training, technical support services, equipment maintenance, billing and
accounting and other administrative services. The Company realizes revenues
for the use of its LVC equipment and services by charging fees at the time
each LVC corrective procedure is performed with use of Vista's equipment.
Photorefractive keratectomy ("PRK") involves the use of an excimer laser
to reshape the cornea, thereby adjusting its refractive power. The excimer
laser can also be used to treat a number of pathological superficial corneal
disorders in a procedure called phototherapeutic keratectomy ("PTK"). Two
manufacturers, Summit Technology, Inc. ("Summit") and VISX, Incorporated
("VISX"), received U.S. Food and Drug Administration ("FDA") approval in late
1995 and early 1996, respectively, for use of their excimer lasers to perform
PRK procedures to correct low to moderate nearsightedness and earlier received
FDA approval for use of excimer laser for PTK procedures. In addition to such
procedures, excimer lasers can also be used to perform a procedure known as
laser in situ keratomileusis ("LASIK"), which may be more predictable in
treating high myopia, but to date has not been specifically approved in the
United States by the FDA.
Vista's European operating subsidiaries have owned and operated excimer
laser facilities in Italy and Sweden since 1992 and 1994, respectively. In
May 1996, Vista Laser Centers of the Southwest, Inc.("Vista-Southwest")
commenced operations at a excimer laser facility in Scottsdale, Arizona.
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Vista-Southwest in October 1997 subsequently authorized a change in its
corporate name to Icon Vision Laser Centers SW, Inc. The Company held an
investment interest in Vista-Southwest prior to October 1996, at which time
Vista's ownership of Vista-Southwest increased to 94%.
In anticipation of U.S. Food and Drug Administration ("FDA") approval of
excimer lasers to perform PRK procedures, Vista developed a strategic
expansion plan in June 1995 to organize and sponsor additional companies to
provide LVC Services in the United States and Canada through regional joint
venture alliances with certain prominent ophthalmologists (the "Regional Joint
Ventures"). During the quarter ended December 31, 1996, Vista's negotiations
to acquire interests in additional LVC operations, based primarily in Canada,
were abandoned and Vista sold all of its interest in a Regional Joint Venture
formed during 1996 to service the Northern California market. Unsuccessful
efforts by Vista's former management to obtain additional private placement
equity financing necessary to finance Vista's Regional Joint Venture expansion
plans and to support general and administrative expenses in North America were
terminated during March 1997.
Vista's management intends to reactivate a strategic expansion plan if a
debt compromise plan with Vista's creditors is proposed and accepted and if
significant additional capital is obtained; there can be no assurance that
Vista will be successful in accomplishing either of these objectives. Pending
further developments, Vista has been advised that its controlling stockholder,
ACE , plans to pursue a strategic plan of negotiating to acquire or develop
interests in the laser vision correction facilities and services in North
America. Vista has been advised that if ACE can successfully implement a
strategy of North American expansion in the field of laser vision correction,
it anticipates that Vista will be provided the right to acquire such
operations at an amount equal to ACE's cost if Vista completes a debt
compromise plan with its creditors and if significant additional capital is
obtained by Vista.
At March 31, 1997, Vista had a negative working capital of $3,118,789
and a stockholders' deficit of $2,094,820. Vista has been dependent during
most of its fiscal year ended March 31, 1997 upon stock sales of approximately
$1,500,000 and in subsequent periods upon advances from its controlling
stockholder, ACE, for funds necessary to sustain operations in North America
and Vista's reporting obligations as a publicly-held corporation. Net
advances due to ACE of $723,000 are classified as unpaid short-term
obligations as of March 31, 1997, and have subsequently increased to
approximately $1,100,000 as of September 30, 1997. There can be no assurance
that ACE will continue to provide advances to Vista or that Vista will be
successful in obtaining capital from other sources.
RECENT DEVELOPMENTS
FIRST AMERICAN AMO
In May 1997 ACE entered into an agreement to form a new corporation
called First American AMO ("AMO"). ACE agreed to fund AMO up to $450,000
prior to any separate outside funding of AMO. ACE has also agreed to seek out
additional outside funding for AMO for continued growth. ACE owned 83% of the
issued and outstanding common stock of AMO upon signing this agreement. As of
January 30, 1998 ACE has advanced AMO $275,359 of its $450,000 obligation.
AMO has its headquarters in Palm Harbor, Florida. It is an automotive
maintenance organization that improves the efficiencies of fixing a car. AMO
is assigned a collision claim from an insurance company and comes up with the
lowest cost estimate by having its own adjusters negotiate with a network of
established body shops. Motorists receive a lifetime warranty on the repairs
as long as they own their vehicle.
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Insurance companies and consumers benefit from the fast turn-around time
of five days, as opposed to the industry average of seven to ten and the
reduction in claims administration costs by AMO having its own adjusters. AMO
has achieved this reduced turn-around time by placing a personal computer with
each insurer so it is directly on-line with AMO. Body shops are also on-line
with the company with the ability to transmit digital photos of the required
repairs for immediate, and flexible assessment by AMO's adjusters.
AMO is currently servicing five insurance companies and is negotiating
with an additional eleven to come on-line in 1998. The Company began its
collision management operations in September 1997. AMO is planning to develop
its fleet management service in March of 1998 with customers and contracts
already targeted.
AMO's President is Mr. Jeffrey Dickson. He worked for Miami-based
American Bankers Insurance from 1970 to 1983, becoming executive vice
president, and then six years with Capital Holdings Inc. in Louisville KY. He
was also president of Insurance America Co., a personal lines insurer that was
a joint venture of Bank of America and Capital Holdings. Eric Seidel, who is
VP Marketing for AMO and Vic Grechniw, VP Operations for AMO both come from
extensive backgrounds in fleet management.
ICON VISION CENTERS INC.
In August 1997, ACE organized ICON Vision Centers Inc., as a wholly
owned subsidiary, in Ontario, Canada to negotiate the acquisition of interests
in additional laser vision correction facilities. ICON Vision Centers, Inc.
is currently developing a business plan which, if implemented, would cause
ICON Vision Centers to develop opportunities in North America and/or Europe
through acquisitions or start-up development.
INTERNET VENTURE
ACE entered into an agreement with a third party in August 1997, to fund
the development of various internet business ventures up to a total of
approximately $57,000. Currently ACE is re-evaluating the proposed ventures
and the direction of this investment.
VISTA TECHNOLOGIES INC. -- BACKGROUND INFORMATION
VISION DISORDERS AND ALTERNATE FORMS OF CORRECTIVE TREATMENT
The human eye is approximately 25 millimeters in diameter and functions
much like a camera, with a lens in front and a light sensitive screen, the
retina, in the rear. Images enter the human eye through the cornea, a
transparent domed window at the front of the eye. In a properly functioning
eye, the cornea bends (refracts) incoming images, causing the images to focus
on the retina. The inability of the cornea to properly refract incoming
images results in blurred vision and is called a refractive disorder.
Myopia (nearsightedness), hyperopia (farsightedness) and astigmatism are
three of the most common refractive disorders resulting from an inability of
the optic system to properly focus images on the retina. The amount of
refraction is dependent on the shape, specifically the curvature, of the
cornea. In a nearsighted (myopic) eye, images are focused in front of the
retina; in a farsighted (hyperopic) eye, images are focused behind the retina;
and in an astigmatic eye, images are not focused at any one single point.
Conventional methods of correcting refractive disorders are by
prescription of eyeglasses and contact lenses. Over the last 15 years,
refractive vision disorders have also been treated by several surgical
techniques. These include radial keratotomy ("RK"), in which small incisions
approximately 400 to 450 microns deep in a radial configuration are made
around the periphery of the cornea to cause a flattening of the cornea. Other
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surgical techniques are keratomileusis, which involves freezing the cornea and
reshaping it, and automated lamellar keratoplasty ("ALK"), which involves
using a microkeratone to remove microscopic amounts of corneal tissue.
Industry sources estimate that 200,000 RK procedures were performed in the
United States in 1994. Because RK is a manual procedure and not performed
with a computer-controlled device, RK is highly dependent on the surgical
skill of the ophthalmologist performing the procedure. Moreover, because RK
involves incisions into the corneal tissue, it weakens the structure of the
cornea which may have adverse consequences as patients age. RK has never
undergone a controlled clinical study under an FDA protocol because no medical
device, other than a scalpel, is used in the procedure. Compared to RK, the
Company believes that laser surgery involves reduced surgical risk, does not
weaken the corneal tissue, is less invasive and is less dependent on the
ophthalmologist's skill.
LASER VISION CORRECTION SYSTEMS
Excimer lasers are incorporated in a fully integrated ophthalmic
surgical workstation for use by ophthalmologists to perform procedures to
treat refractive and other ophthalmic disorders. The excimer laser system
delivers pulses of ultraviolet laser light to ablate (remove) submicron layers
of tissue from the surface of the cornea in a computer-assisted, predetermined
pattern to reshape the cornea. Most of the laser light generated by the
excimer system is absorbed by the removed corneal tissue during a procedure.
As a result, the laser light does not penetrate interior portions of the eye
and does not create substantial amounts of heat in the surrounding tissue.
These attributes make the excimer laser system well suited to corneal surgery.
Advanced LVC equipment supplied by various manufacturers has been
commercially available since approximately 1990 for use in foreign countries,
including Canada and various countries in Europe, among others. Two U.S.
manufacturers, Summit and VISX, received pre-market approval from the FDA in
October 1995 and March 1996, respectively, for use of excimer laser systems to
perform photorefractive keratectomy ("PRK") to treat low to moderate myopia
(nearsightedness). PRK is a form of LVC treatment involving the use of an
excimer laser to reshape the cornea, thereby adjusting refractive power of the
eye. Excimer lasers manufactured by Summit and VISX have also been approved
for use in the United States and other countries to treat a number of
pathological superficial corneal disorders in a procedure called
phototherapeutic keratectomy ("PTK").
Other LVC procedures exist and are currently approved for use with
lasers outside of the United States that have not received pre-market approval
by the FDA as of the present date. These include the use of excimer lasers
to perform a procedure known as laser in situ keratomileusis ("LASIK") and
holmium lasers for laser thermalkeratoplasty ("LTK") and laser sclerostomy
("LS") procedures. LASIK is primarily prescribed for treatment of hyperopia
(farsightedness), astigmatism and extreme myopia; LTK may be prescribed for
instances of mild hyperopia and astigmatism; and LS is used for treatment of
symptoms of glaucoma. In May 1996, the FDA advised U.S. eye care
professionals that LASIK and bilateral surgery (treatment of both eyes at the
same time) are outside the scope of currently FDA approved labeling for
excimer lasers; although the FDA noted that physician discussions with
patients and decisions to conduct either of those procedures are considered
the practice of medicine outside of the direct scope of FDA regulation, the
FDA cautioned that it expects excimer laser equipment manufacturers and health
care practitioners to advertise and promote the use of FDA approved lasers in
the United States only within the scope of their FDA approved use, i.e.
currently for PRK and PTK.
All of these LVC procedures are normally performed on an outpatient
basis and require from 15 to 30 minutes in addition to pre-operative
consultations and post-operative care. Depending upon the severity of the
patient's pre-treatment vision disorder, improved vision resulting from LVC
procedures either eliminates or significantly reduces the patient's need to
wear eyeglasses or contact lenses.
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Physicians associated with Vista's operating subsidiaries to date have
focused primarily on PRK treatment to correct low and mild myopia. Vision
care professionals associated with Vista and its operating subsidiaries are
also trained in other LVC procedures, establish medical and operational
standards relating to LVC Services and train other ophthalmologists and
optometrists.
EXCIMER LVC SYSTEMS AND PROCEDURES
PRK: Photorefractive keratectomy ("PRK") is a procedure performed
with a excimer laser system to treat primarily nearsightedness. When
performing PRK with the excimer laser, the ophthalmologist determines the
exact correction required (which is measured by the same type of examination
used to prescribe eyeglasses or contact lenses) and programs the correction
into the system's computer. The ophthalmologist removes the thin surface
layer of the cornea (the epithelium) and positions the patient for the laser
procedure. The average PRK procedure consists of approximately 150 laser
pulses, each of which lasts several billionths of a second over a period
ranging for 15 to 40 seconds. Cumulative exposure to the laser light is less
than one second. The entire procedure, including patient preparation and
post-operative dressing, generally lasts no more than thirty minutes.
Following the PRK procedure, the ophthalmologist may prescribe topical
pharmaceuticals to promote corneal healing and to alleviate discomfort. A
series of patient follow up visits is scheduled with the ophthalmologist or an
optometrist to monitor the corneal healing process, to verify that there are
no complications and to test the correction achieved by the PRK procedure.
Patients undergoing PRK generally experience discomfort for
approximately 24 hours, and blurred vision for approximately 48 to 72 hours
after the procedure. Although most patients experience improvement in
uncorrected vision within a few days of the procedure, it generally takes from
two to six months for the correction to stabilize and for the full benefit of
the procedure to be realized. An individual typically has one eye treated in
a session, with the second eye treated three to six months thereafter.
Although a patient usually experiences a substantial improvement in
clarity of vision within a few days following the PRK procedure, it generally
takes from two to six months for the full benefit of the procedure to occur.
The PRK procedure is used primarily to correct the vision of patients with
myopia (or nearsightedness) ranging from -1.5 to up to -7.00 diopters,
although the PRK procedure has also been performed in foreign countries on
higher diopter nearsighted and, occasionally, farsighted and astigmatic
patients. Approximately 90% of all myopic patients are nearsighted up to
- -6.00 diopters and use of the PRK procedure to correct the vision of
nearsighted patients of up to -6.00 diopters therefore has received the
greatest degree of testing.
LASIK: Laser assisted in situ keratomileusis ("LASIK") is a
procedure performed with an excimer laser system primarily to treat extreme
cases of myopia. LASIK, although a more unusual and delicate surgical
procedure than PRK, offers advantages in that the epithelium is not touched by
the laser and therefore promotes quicker healing. The ophthalmologist uses a
microkeratone to open a flap on the surface of the cornea, laser energy is
used to ablate corneal cells on the exposed surface, and the flap is then
folded back into place. Glare and central islands are practically
non-existent after LASIK since ablation occurs in the stroma layer (under the
surface epithelium layer). Due to the corneal flap, subsequent retouches are
facilitated with minimal recovery time.
LASIK may be more predictable in treating high levels of myopia, but the
LASIK procedure not been specifically approved in the United States by the
FDA. Nevertheless, Vista believes that certain physicians in the U.S. are
performing LASIK procedures. The FDA has cautioned eye care professionals in
the U.S. to advertise and promote the use of FDA approved lasers only within
the scope of their FDA approved use, i.e. currently for PRK and PTK.
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PTK: Phototherapeutic keratectomy ("PTK") is a procedure performed
with the excimer system to treat corneal pathologies. In this procedure,
submicron layers of tissue are ablated from the surface of the cornea in order
to remove diseased, scarred or sight-inhibiting tissue. The goal of PTK is
not necessarily to cure the corneal pathology, but to alleviate symptoms
associated with the pathology. The FDA granted pre-market approvals for use
in the United States of PTK procedures with Summit excimer laser equipment in
February 1995 and for VISX equipment in October 1995.
OTHER: Excimer lasers may also be used to treat glaucoma by a
procedure known as Partial Excimer Traheculectomy ("PET"). The PET procedure
involves the use of the excimer laser to create a penetrating filter through
the scleral tissue (the tough, fibrous tissue covering all of the eye except
the cornea), which causes the permeation of fluids from within the eye, thus
reducing pressure levels. Vista believes that one laser manufacturer has
received an Investigational Device Exemption from the FDA to conduct clinical
trials for the PET procedure in the United States.
HOLMIUM LVC SYSTEMS AND PROCEDURES
LTK: Another recently developed LVC technology is the holmium laser
system. The holmium system delivers high intensity pulses of infra red light
to an eye by means of a fiber optic cable and a single-use, hand-held probe
that directly contacts the eye at the exact spots chosen by the
ophthalmologist. Vista is aware of two manufacturers that have developed
holmium laser systems. Vista believes that both of those companies are in the
process of conducting clinical trials for the FDA to demonstrate the safety
and efficacy of the holmium laser to perform laserthermal keratoplasty
("LTK"). LTK is a refractive procedure performed to treat farsightedness and
astigmatism in which peripheral corneal tissue is thermally shrunk, causing
the central portion of the cornea to steepen.
LS: Laser Sclerostomy ("LS") is a surgical procedure performed with
the holmium system to treat the symptoms of glaucoma by making an opening in
the front chamber of the eye. Summit has received FDA pre-market approval to
sell its holmium system in the U.S. for treatment of glaucoma.
OTHER LASER SYSTEMS
Vista is aware of three companies that have reportedly developed solid
state lasers, ophthalmic laser surgical systems that apply a beam of high
intensity light to remove tissue from the inside, as opposed to the surface
of, the cornea. Solid state lasers are designed to ablate tissue inside the
cornea without violating the cornea's surface by computer guiding the laser
beam to the inner corneal tissue and vaporizing the targeted tissue. Solid
state lasers have not been approved for use in the United States and the
Company believes these systems are still in the development stage.
BUSINESS OF VISTA
Vista's LVC Services are conducted by three operating subsidiaries,
Vista Vision S.p.A. based in Italy ("Vista-Italy"), Vista Vision Scandinavia
A.B. based in Sweden ("Vista-Sweden"), and Vista Laser Centers of the
Southwest, Inc. based in Arizona ("Vista-Southwest"). European operations of
Vista-Italy and Vista-Sweden are operated under the trade name and style of
Vista Vision(SM) centers and North American operations are currently conducted
under the trade name and style of Icon Vision Laser Centers(SM).
As of March 31, 1997, Vista owned approximately 74.73% of Vista-Italy
which operates three LVC centers in Italy; 100% of Vista-Sweden which operates
two LVC centers in Sweden; and 94% of Vista-Southwest which operates one
center in Arizona. All of these LVC facilities operated for the full fiscal
year ended March 31, 1997 except that the Arizona center was established in
May 1996 and one of the Italian centers was opened in July 1996. A center
formerly operated by a joint venture subsidiary in England was closed in June
1995 and Vista-Italy discontinued its Pisa center in May 1996.
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The following chart summarizes certain information as to the number of
LVC surgical procedures performed at Vista's operating subsidiaries for the
periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Italy (Note a) ............................. 1,663 1,367 911
Sweden (Note b) ............................ 1,139 658 524
United States (Note c) ..................... 373 -- --
----- ----- -----
Totals....................................... 3,175 2,025 1,435
===== ===== =====
</TABLE>
___________________________________
(a) Represents three centers, including the Milan Center opened in 1992, a
Rome Center opened in January 1995 and the Palermo Center opened in July
1996. Does not include procedures at a center in Pisa closed in May
1996 or an abandoned joint venture for a center in Viareggio to replace
the Pisa center.
(b) Represents two centers, the Stockholm center purchased in June 1994 and
the Malmo center opened in August 1995.
(c) Represents a center in Arizona opened in May 1996.
REVENUE RECOGNITION
Vista's operating subsidiaries derive revenues by billing physicians at
the time of equipment use, with such fees normally based upon a negotiated
fixed fee per LVC procedure or a negotiated percentage of the gross procedure
fees charged to patients by the physician. Physicians generally charge
patients for their services on gross procedure fee basis (each eye and the
related pre-operative and post-operative care and any corrective adjustment
representing one procedure), and the gross procedure fee is required by law to
be established by the health care professional. However, to insure recovery
of estimated costs of operations and a reasonable margin, Vista's prior
consent is required if the physician desires to charge less than a stated
minimum gross procedure fee where Vista's revenue is based upon a percentage
of that fee as opposed to a fixed amount.
The gross procedure fee is generally defined to include all charges to
the patient for services of one or more professionals to perform an LVC
procedure for one eye, which typically includes professional services for the
procedure, post-operative care and re-operative care procedures, if required,
plus all charges to the patient for equipment use, medical supplies and
related items. The gross procedure fee is influenced by various factors such
as competitive pricing for LVC procedures in the relevant market, the
experience of the physician and by special requirements for each patient's
condition. Generally speaking, gross procedure fees charged by professionals
for PRK treatment currently range from approximately $1,400 to $1,600 per eye
in the United States and from approximately $1,000 to $1,750 per eye in
Europe, although there can be no assurance these levels will be maintained for
the long term.
Fees charged in turn by Vista to individual physicians may vary
depending upon the skill and experience of the physician, the volume of his or
her anticipated use of LVC equipment and services offered by Vista, the
individual policies of each operating center and competitive conditions in the
local market. Such policies and methods may be changed from time to time,
which could adversely affect the amount of revenues generated.
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During the fiscal year ended March 31, 1997, revenues payable to
Vista-Italy and Vista-Sweden generally averaged $900 and $1,750 per procedure,
respectively, and most of these fees were based on a fixed fee per procedure
basis. Certain operating expenses of Vista-Italy and Vista-Sweden under
cooperative agreements for use of facilities and equipment use are in turn
based upon the number of procedures performed. Generally, the average per
procedure fees realized by Vista in Italy and Sweden during the fiscal year
ended March 31, 1997 were approximately 10% above the average per procedure
fees earned in the prior fiscal year.
Fees payable to Vista-Southwest during the fiscal year ended March 31,
1997 generally ranged from $750 to $1,000 per procedure and were based on a
percentage, typically 60%, of the gross procedure fee charged by the
physician.
Payment is usually collected in cash or by credit card before the
procedure is performed; however certain of Vista's European operations
commenced a program during 1996 to offer extended payment terms if the
patient's credit is approved.
Health insurance providers generally consider LVC procedures to be
elective surgery and do not provide insurance or other third-party
reimbursement.
RELATIONS WITH PROFESSIONALS
Vista maintains consulting arrangements with certain professionals
experienced in LVC care to advise Vista as to current developments in surgical
procedures and technology developments, establishing ethical and operating
standards and for assistance in training other health care professionals.
Dr. J. Charles Casebeer, formerly a director of Vista, acts as a
consultant to Vista's Vista-Southwest subsidiary operations (see "Other
Vista-Southwest Transactions with Affiliates" below).
LVC EQUIPMENT
Vista is not involved in the research, development or manufacture of
refractive laser systems, and is dependent on unrelated manufacturers for the
supply of laser equipment and systems. Vista believes there are four U.S.
companies that have conducted or are conducting clinical trials with excimer
lasers for refractive surgery: in addition to Summit and VISX, these include
Chiron Corp. and LaserSight Incorporated. Summit and VISX have received FDA
pre-market approval to commercially sell and market in the United States their
excimer lasers for PRK treatment of low and mild myopia and for PTK
procedures.
The current cost of an excimer laser ranges from approximately $475,000
to $525,000, plus sales tax. For laser equipment purchased from VISX or
Summit, the manufacturer generally requires an additional royalty equal to
$250 per PRK procedure to be paid to Pillar Point Partners, a partnership
between VISX and Summit that holds certain patent rights with respect to their
excimer laser technology. The purchase price typically includes a one or two
year warranty on all parts except the optics (mirror and glass components)
which generally carry a 30-day warranty. Annual maintenance and service fees
are contracted for separately at the time of purchase and range from
approximately $40,000 to $60,000 per year, but these estimates may vary with
usage. Due to the equipment cost, Vista believes that most ophthalmologists
interested in LVC surgery will not be able or willing to purchase a laser,
seek financing for the purchase and/or arrange for required maintenance of the
laser equipment.
Vista's European subsidiaries currently own or lease and maintain five
VISX excimer lasers. Vista-Southwest leases a VISX excimer laser. The
Company has one laser in storage due to newer technology, the cost of which
was written off in the fiscal year ended March 31, 1996 in the amount of
$446,636 for the impairment of an idle asset.
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MARKET POTENTIAL FOR LVC SERVICES
It is estimated that in excess of 100 million people in the U.S., and a
much larger number worldwide, use eyeglasses or contact lenses to correct
common vision disorders, with over 60 million of these individuals suffering
from nearsightedness. U.S. consumers spent an estimated $13.8 billion in
eyeglass and contact lens purchases in 1993. While excimer laser procedures
can treat people who are farsighted or are astigmatic, both the existing
technology and application for regulatory approvals for those uses are in an
earlier stage than for use of excimer lasers for treatment for
nearsightedness.
Refractive disorders generally are corrected with conventional methods
such as eyeglasses and contact lenses. Alternative treatments for permanently
reshaping the cornea to relieve nearsightedness, farsightedness and
astigmatism include surgical methods, the most popular of which has been RK,
discussed earlier in this Report. RK is used primarily to correct
nearsightedness, but is known to have potential limitations such as:
(i)weakening the cornea, (ii) potential for infection and (iii) producing
inconsistent visual correction results. However, RK procedures are generally
substantially less expensive than LVC procedures. Vista believes that the
market potential for alternative refractive care utilizing excimer laser
systems is commercially significant. Many eyeglass or contact lens wearers are
potential candidates for laser refractive surgery. Generally speaking, Vista
believes that younger persons are more apt to elect refractive surgery than
older people who have become accustomed to eyeglasses or contact lenses over
an extended period. However, the degree to which Vista's LVC Services can
penetrate the potential market for vision correction will depend on a variety
of factors including, but not limited to, medical and public acceptance of
laser vision correction procedures and alternative technologies. None of these
factors is under the immediate control of Vista nor is any predictable at this
time.
FDA PRE-MARKET APPROVAL OF LVC EXCIMER SYSTEMS
Excimer laser systems are regulated as medical devices by the United
States Food and Drug Administration ("FDA") and require pre-market clearance
or pre-market approval (referred to as a "PMA") by the FDA prior to commercial
sale and use in the U.S. Medical devices in the U.S. are classified into one
of three classes on the basis of the controls deemed necessary by the FDA to
reasonably ensure safety and effectiveness. Class III devices, which include
medical lasers, generally are those which must receive PMA by the FDA to
ensure their safety and effectiveness and include, among other devices, new
devices which have been found not to be "substantially equivalent" to existing
legally marketed devices.
A PMA application must be supported by valid scientific evidence which
typically includes extensive preclinical and clinical trial data to
demonstrate the safety and effectiveness of the device. If human clinical
trials of a device are required, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or distributor of the
device) will have to file an Investigational Device Exemption
("IDE")application prior to commencing human clinical trials. The IDE
application must be supported by data, typically including results of animal
and laboratory testing. If the IDE application is approved, human clinical
trials may begin at a specific number of investigational sites with a specific
number of patients, as approved by the FDA.
A PMA application must contain the results of clinical trials, the
results of all relevant bench tests, laboratory and animal studies, a complete
description of the device and its components, a detailed description of
methods, facilities and controls used to manufacture the device and certain
other information. FDA review of a PMA application generally takes one to two
years from the date the PMA is accepted for filing, but may take significantly
longer. The review time is often significantly extended by the FDA asking for
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more information, including additional clinical trials for clarification of
information provided in the submission. When conditions have been fulfilled
to the satisfaction of the FDA, it will issue a PMA approval letter,
authorizing commercial distribution of the device for certain applications.
If the FDA's evaluation is not favorable, the FDA will deny approval of the
PMA application or issue a "not approvable letter". There are devices for
which FDA approval has been sought which have never been approved for
marketing in the U.S. The FDA may approve a device for some procedures but not
others, or for certain classes of patients and not others. Modifications to a
device that is an approved PMA also may require approval by the FDA of PMA
supplements or new PMAs.
SAFETY AND EFFICACY
The first PRK procedure for the treatment of nearsightedness using an
excimer laser system was performed in 1989, and the first PTK procedure for
the treatment of a corneal pathology using an excimer system was performed in
1988. A large majority of PRK and PTK procedures to date have been performed
only since 1990. PRK to correct myopia has been performed in at least 35
countries outside the U.S. prior to 1996.
Some potential medical risks have been identified in connection with
the use of LVC surgery and there may be other risks which will not be known
until the procedure has been more widely used and monitored over an extended
period of time.
Possible concerns with respect to the safety and efficacy of LVC excimer
laser systems for refractive surgery include predictability and stability of
results and potential complications, such as modest decreases in best
corrected vision and side effects from PRK, PTK, LASIK and LTK. Other possible
effects include postoperative discomfort; corneal haze during healing (an
increase in the light scattering properties of the cornea); glare/halos
(undesirable visual sensations produced by bright lights); decrease in
contrast sensitivity (diminished vision in low light); temporary increases in
intraocular pressure in reaction to post procedure medication; modest
fluctuations in astigmatism and modest decreases in best corrected vision
(i.e., with eyeglasses); unintended over or under corrections; instability,
reversal or regression of effect; corneal scars (blemishing marks left on the
cornea); corneal ulcers (inflammatory lesions resulting in loss of corneal
tissue); and corneal healing disorders (compromised or weakened immune system
or connective tissue disease which causes poor healing).
Summit has reported that two year follow-up data accumulated by Summit
during its Phase III PRK clinical trials indicate all of the individuals
undergoing PRK experienced an improvement in visual acuity without corrective
eyewear. Prior to PRK, 95% of the eyes in this group were 20/200 or worse. Of
the eyes treated, approximately 91% improved to 20/40 or better, the legal
requirement to obtain a driver's license in most states without corrective
eyewear, while the remaining 9% experienced improved vision without corrective
eyewear, but still required corrective eyewear to achieve 20/40 vision or
better.
GOVERNMENTAL REGULATION
The manufacturing, labeling, distribution, marketing and promotion of
medical devices such as excimer lasers to which Vista and its affiliated
companies provide access are subject to extensive and rigorous government
regulation in the United States and in certain other countries.
Excimer lasers in the United States are required to be the subject of an
approved PMA application. Summit and VISX have received approval of PMA
applications for use of their excimer lasers in PRK and PTK procedures for the
treatment of low to mild myopia. There can be no assurance that FDA approval
will be received by equipment manufacturers for use of PRK for other
refractive disorders, such as extreme myopia, astigmatism and
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hyperopia (farsightedness) or that other LVC procedures, such as LASIK, will
ever be approved by the FDA. Failure to receive such approvals could have the
effect of limiting the market for LVC procedures in the United States.
Users of medical devices in the United States are subject to continuing
FDA obligations. Medical devices are required to be manufactured in accordance
with regulations setting forth current Good Manufacturing Practices ("GMP"),
which require that devices be manufactured and records be maintained in a
prescribed manner with respect to manufacturing, testing and control
activities. It is the FDA's view that with respect to excimer lasers, users,
as well as manufacturers, are required to comply with FDA requirements with
respect to labeling and promotion. The Medical Device Reporting regulation
adopted by the FDA would require that the user provide information to the FDA
whenever there is evidence to reasonably suggest that one of its devices may
have caused or contributed to a death or serious injury, or that there has
occurred a malfunction that would be likely to cause or contribute to a death
or serious injury if the malfunction were to recur. Users of medical devices
are subject to periodic inspections by the FDA. Failure to comply with
applicable FDA requirements could subject one or more Regional Joint Ventures
subject to FDA regulation in the United States to enforcement action,
including product seizures, recalls, withdrawal of approvals, and civil and
criminal penalties, any one or more of which could have a material adverse
effect.
Medical device laws and regulations are also in effect in Europe and
other foreign countries. These range from comprehensive device approval
requirements to requests for product data or certifications. The number and
scope of these requirements are increasing. The failure of Vista's European
operating subsidiaries to comply with applicable foreign medical device laws
and regulations may have a material adverse effect on the Company's business.
Federal, state and foreign laws and regulations regarding the
manufacture and marketing of medical devices are subject to change. For
example, the FDA is currently considering significant changes to its GMP and
to other regulations. Vista cannot predict what impact, if any, such changes
might have on its business.
The operations of Vista's subsidiaries are also subject to extensive
rules and regulations, both in the United States and foreign countries at the
federal, provincial, state and local level, affecting the health care industry
and the delivery of health care. These include laws and regulations
prohibiting the practice of medicine and optometry by persons not licensed to
practice medicine or optometry, prohibiting the unlawful rebate or unlawful
division of fees and limiting the manner in which prospective patients may be
solicited.
Current regulatory requirements and restrictions that relate to
corporate entities involved in the ownership and operation of healthcare
facilities include prohibitions against: the corporate practice of medicine
except by an entity owned by healthcare professionals and/or wherein the
professionals exercise control over medical judgments; patient referrals by
healthcare professionals (including ophthalmologists and optometrists) to a
facility owned or compensated by such referring professional (either
generally, or sometimes by defining such payments as "kick backs"); and "fee
splitting" between healthcare professionals and corporate entities. Other
laws in both the United States and foreign countries specifically regulate the
nature and compensation provisions of employment or management relationships
that healthcare professionals may have with a corporate-owned facility, may
affect the form of business entity to be utilized, may limit payments either
to the entity or to healthcare professionals to the "fair market value" of
their contributions, or affect the manner of marketing the service performed
at the healthcare facility. Additional regulations in some jurisdictions also
now affect, or in the future may affect, the administration and use of LVC
Services, including requirements for certificates of need and/or other
licensing and registration of medical equipment.
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Laws and regulations affecting the manner in which LVC Services may be
marketed, administered or compensated for vary significantly from jurisdiction
to jurisdiction. In some instances these laws and regulations are ambiguous,
and sometimes regulators fail to provide adequate guidelines. Vista believes
that its operating subsidiaries have adopted strategies that enables each of
them to offer and administer LVC Services in compliance with applicable
regulatory requirements in their areas of operations. However, federal, state
and foreign regulatory attention may continue to be directed to the practice
of medicine, and any changes in applicable law or regulations, or in
governmental agency and judicial interpretations of such laws and regulations,
could cause one or more of these strategies currently in compliance with
applicable laws to cease to comply.
The use of excimer lasers and other medical equipment is also subject to
numerous government laws and regulations relating to such matters as safe
working conditions, environmental protection, fire hazard control and disposal
of potentially hazardous substances.
INSURANCE AND INDEMNIFICATION
Health insurance providers in the United States generally consider LVC
procedures to be elective surgery and do not provide insurance reimbursement.
In other countries, reimbursement programs vary by country and region, and
reimbursement is not generally available for locations at which Vista's
European subsidiaries currently operate.
Use of laser systems by health care professionals using laser equipment
and other LVC Services may give rise to claims against Vista or its affiliates
by persons alleging injury. Vista's subsidiaries generally do not currently
have malpractice liability insurance due to limited capital resources.
Vista believes that claims alleging defects in laser systems will be
covered by manufacturers' warranties and the manufacturer's product liability
insurance, and that Vista and its affiliates could take advantage of such
insurance by adding such suppliers to potentially adverse lawsuits. There can
be no assurance that laser suppliers will carry product liability insurance or
that any such insurance will be adequate to protect Vista.
Generally speaking, the policy of Vista's operating subsidiaries and
Regional Joint Ventures are to require that ophthalmologists who perform laser
procedures by use of LVC equipment maintain their own professional liability
insurance. There can be no assurance that such insurance will be adequate to
cover claims asserted against Vista, in which event Vista's business may be
materially adversely affected.
PROPRIETARY RIGHTS
Vista has no licenses, patents, registered trademarks or registered
copyrights. Vista's U.S. operations have adopted the service mark" Icon
Vision Laser Centers"(SM) and its European operating subsidiaries conduct
business under the name of "Vista Vision"(SM).
COMPETITION
The vision care industry is extremely competitive and includes numerous
companies that are substantially larger than Vista and have greater financial,
marketing and technical resources. Vista believes principal competitive
factors affecting revenues include market acceptance of LVC procedures by both
patients and vision care professionals, performance, success relative to
alternative refractive correction methods, pricing, regulatory requirements,
quality of equipment and convenience to the patient and physicians, some of
which are factors beyond Vista's control.
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Vista competes with other surgical and non-surgical forms of treatments
for refractive disorders, including eyeglasses, contact lenses, manual
refractive surgery (such as RK), corneal transplants and possibly other new
technologies currently under development. Continued use of eyeglasses and
contact lens are expected to be the most popular methods of treating
refractive vision disorders due to low immediate cost and the avoidance of
surgery.
The market for access to excimer lasers is highly competitive and the
Company competes in its various geographic markets with other businesses
formed since 1990 offering similar access to LVC equipment and services in
Europe, Canada and the United States. These competitors are pursuing a
variety of business and marketing strategies, such as marketing directly to
consumers through optical chains or affiliating with hospitals or physician
group practices. Other companies which currently provide access to laser
equipment include: Beacon Eye Institute Inc.; Refractive Centers
International, Inc.; Vision International, Inc.; Laser Vision Centers, Inc.;
Global Vision, Inc.; Sight Resources, Inc.; Sterling Vision, Inc.; The Laser
Centre; 20/20 Laser Centers, Inc.; and LCA Vision, Inc. Additional
competition also exists or may develop from hospital affiliated groups,
physician group practices and private ophthalmologists electing to purchase
refractive laser systems, some of whom are believed to operate equipment for
which royalties are not payable to a laser manufacturer.
The ability of Vista and its Regional Joint Ventures to compete
successfully may also depend in the future on their ability to adapt to
technological changes and advances in the treatment of refractive vision
disorders. There can be no assurance that, as the market for excimer laser
surgery and other treatments of refractive disorders develops, that equipment
owned and/or leased by Vista and its affiliates will not become obsolete, and
if this occurs, there can be no assurance that Vista will be able to secure
new equipment to allow Vista and its affiliates to compete effectively.
FORMER INVESTMENT OF VISTA IN TECHNICAL CHEMICALS AND PRODUCTS, INC.
As part of an agreement between Vista and ACE generating additional
financing for Vista in March 1996, Vista received 200,000 restricted shares of
Technical Chemicals and Products, Inc. ("TCPI") common stock from ACE's
predecessor at a value of $2,662,500, or $13.31 per TCPI share. TCPI's common
stock is publicly-traded in The Nasdaq Stock Market under the trading symbol
TCPI. At the time this transaction was completed, shares of TCPI acquired by
Vista were restricted as to resale under federal securities laws and were
valued for financial statement purposes at a 25% discount from the public
market price.
TCPI filed a registration statement on Form S-3 to register certain
shares of TCPI common stock, including the 200,000 shares owned by Vista. The
resale of these shares pursuant to such registration was subject to a lock-up
agreement. Under that lock-up, Vista agreed it would not sell, contract to
sell, grant any option for the sale of, or otherwise directly or indirectly
dispose of Vista's shares of TCPI common stock during the period expiring 180
days following the closing of a public offering of securities by TCPI on May
2, 1996 without the prior consent of the representative of the underwriters of
TCPI's public offering. Vista sold most of its TCPI Shares in late November
1996 at prices ranging from $7.50 to $8.00 per share.
TRANSACTIONS RELATING TO VISTA-SOUTHWEST AND AFFILIATES
FINANCING AND OTHER TRANSACTIONS INVOLVING VISTA-SOUTHWEST AND VISTA
In March, 1996, Vista issued 250,000 shares of its common stock with an
estimated value of approximately $270,500 at the date of issuance as a
subscription to 350,000 shares of Series B convertible preferred stock in
Vista-Southwest. Effective July 18, 1996, Vista also acquired rights to
100,000 Vista-Southwest Series A preferred shares from Refractive
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Services-800, Inc., a third party, in exchange for 100,000 shares of Vista's
common stock with an estimated value of approximately $99,000 at the date of
issuance. A proxy to vote Vista's preferred shares in Vista-Southwest was
granted by Vista to Vista-Southwest's operating management and their
affiliates. During the period from January 1996 to September 30, 1996, Vista
also advanced loans of $383,634 to Vista-Southwest used to finance a portion
of Vista-Southwest's requirements for operations, acquisition of equipment and
facilities, and a planned public offering of its securities.
Vista subsequently elected to convert all of its rights to 450,000
shares of Vista-Southwest preferred stock into 450,000 shares of
Vista-Southwest common stock, and Vista-Southwest management and their
affiliates released the right to vote such shares by proxy.
On October 1, 1996, Vista and Vista-Southwest agreed to extinguish
Vista's account receivable of $383,634 for prior advances to Vista-Southwest
in exchange for the transfer to Vista of 250,000 shares of Vista common stock
then owned by Vista-Southwest. This transaction increased Vista's net
investment in Vista-Southwest by $145,634. As of March 31,1997, Vista had
advanced an additional $210,846 to Vista-Southwest as additional investment in
Vista-Southwest common stock.
As of October 1, 1996, Vista agreed to purchase a $100,000
Vista-Southwest promissory note and 10,000 Vista-Southwest Class B warrants
exercisable at $4.00 per share until March 31, 1999 from Atlantic Central in
exchange for a $100,000 note payable by Vista to Atlantic Central. The
Company concurrently agreed with Vista-Southwest to surrender the $100,000
Vista-Southwest note for cancellation in exchange for 100,000 shares of
Vista-Southwest common stock effective October 1, 1996.
As a result of these transactions, Vista owned 550,000 shares of
Vista-Southwest common stock, representing 94% of the Vista-Southwest
outstanding capital stock as of March 31, 1997, before giving effect to shares
Vista may acquire as a result of additional advances by Vista to
Vista-Southwest after October 1, 1996. Vista advanced $210,846 to
Vista-Southwest during the period from October 1996 through March 31, 1997 and
an additional $120,000 during the period from April 1997 through May 30, 1997.
Vista-Southwest abandoned a proposed initial public offering in late
1996 and abandoned a proposed private placement offering in May 1997. As
such, the ability of Vista-Southwest to sustain its operations will be
dependent upon additional advances from Vista and/or its controlling
stockholder, Atlantic Central, until such time as Vista-Southwest achieves
sufficient cash flow from internal operations or additional capital from third
parties to support its working capital requirements, as to which there can be
no assurance.
OTHER VISTA-SOUTHWEST TRANSACTIONS WITH AFFILIATES
In addition to investments in Vista-Southwest by Vista, Vista-Southwest
since its inception through March 31, 1997 has sold to management and their
affiliates and to certain physicians associated with Vista-Southwest a total
of 35,000 shares of Vista-Southwest common stock at $1.00 per share ($35,000)
and 315,000 Class A warrants at $0.10 per warrant ($31,500), exercisable at $1
per share expiring on the earlier of May 15, 2000 or upon a merger of sale of
Vista-Southwest's business approved by a majority of its stockholders.
Vista-Southwest also received $25,000 from the sale of units to an
unaffiliated third party consisting of a $25,000 in principal amount of an 11%
convertible note and 2,500 Vista-Southwest Class B common stock purchase
warrants exercisable at $4 per share expiring on March 31, 1999.
Vista-Southwest subsequently redeemed the units issued to this unaffiliated
third party for $25,000 plus interest.
Dr. J. Charles Casebeer, a former director of Vista from February 1996
to September 23, 1997, has served as Chairman of the Board and a director of
Vista-Southwest since its inception in early 1996. A corporate affiliate of
Dr. Casebeer owns 17,031 shares of Vista-Southwest common stock and Class A
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warrants to purchase up to 153,279 additional Vista-Southwest common shares at
an exercise price of $1.00 per share expiring on the earlier of May 15, 2000
or upon a merger of sale of Vista-Southwest's business approved by a majority
of its stockholders.
Vista-Southwest entered into a Consulting Agreement dated as of July
1,1997 with Dr. Casebeer under which he agreed to provide consulting services,
attend and participate in LVC care presentations and seminars with medical
professionals and medical groups, manage training and education seminars, and
render services concerning the establishment of ethical standards and
procedures at care facilities. Vista paid consulting payments of $5,000 per
month to Dr. Casebeer under this agreement until he resigned as a Vista
director in October 1997. Dr. Casebeer is also entitled to receive separate
compensation as an officer of Vista-Southwest and from his patients for
performing LVC procedures and rendering other medical services to his
patients.
Vista-Southwest entered into an Asset Purchase and Lease Assumption
Agreement with a corporate affiliate of Dr. Casebeer dated January 30, 1996
and amended on July 8, 1997 (the "Asset Agreement"). Under the Asset
Agreement, Vista-Southwest agreed to purchase an excimer laser system and
office equipment from Dr. Casebeer's corporate affiliate for a purchase price
of $75,000 in cash, a $96,591 promissory note with annual interest at
8%originally due May 31, 1996, and the assumption of outstanding obligations
under an equipment lease on the laser, including future lease payments not to
exceed $328,409. Vista subsequently replaced this laser with newer
technology resulting to a charge to Company's statement of operations in the
amount of $446,636 for the impairment of an idle asset. As of March 31,1997,
$80,000 of the note payable to Dr. Casebeer's affiliate for $96,591 had been
paid and the remaining unpaid balance has been forgiven.
Vista-Southwest also assumed real estate obligations for the lease of
its facilities in Scottsdale, Arizona from a corporate affiliate of
Dr.Casebeer as of February 1, 1996. This lease expires on December 31, 1997
and currently provides for the lease of approximately 3,254 square feet at a
rental of $4,699 per month. Vista-Southwest permits Casebeer-Hale
International, Inc., an affiliate of Dr. Casebeer, free use of these
facilities in connection with their medical practice. Dr. Casebeer
compensates Vista-Southwest for use of its LVC equipment and services on
substantially the same basis as are charged by Vista-Southwest to other
physicians.
SUSPENSION OF NORTH AMERICAN EXPANSION PROGRAM AND OTHER RECENT TRANSACTIONS
Vista developed a business strategy in June 1995 to expand its LVC
Services business in North America by organizing and sponsoring separate
corporations as regional enterprises (the "Regional Joint Ventures") in which
Vista would obtain an equity interest and long-term fee-based consulting
arrangements. Vista planned to seek affiliations for each of its Regional
Joint Venture subsidiaries with experienced LVC eye care professionals; each
Regional Joint Venture would be expected to seek third-party financing with
Vista's assistance to provide equipment and other LVC support services to
vision care professionals in targeted regional markets operating under the
name "Vista Laser Centers" (subsequently changed to "Icon Vision Laser
Centers").
To date, Vista-Southwest is the only Regional Joint Venture sponsored by
Vista which is operating an active business and in which Vista owns an equity
interest. Due to former management's inability to obtain additional financing
from third parties, negotiations to affiliate Vista with physicians and
acquire existing facilities at three locations in Canada, together with
proposed third-party financing activities, have been abandoned and Vista has
disposed of its investment in another enterprise formed to develop the
Northern California market. Accordingly, there are two Regional Joint Venture
entities owned by Vista which currently have no business operations (Vista
Laser Centers of Michigan, Inc. and Vista Laser Centers of the Northwest,
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Inc.) and Vista has disposed of all of its interest in two other Regional
Joint Ventures entities then doing business as Vista Laser Centers of the
Northeast and Vista Laser Centers of the Pacific.
From July 1995 through May 1996, a foreign corporate investor,
Refractive Services 800, Inc., invested $520,000 in seed capital for preferred
shares in five Regional Joint Ventures formed by Vista to finance initial
organizational expenses and costs of negotiating agreements with vision care
physicians and seeking additional financing. Vista also made equity
investments in these five Regional Joint Ventures by issuing shares of Vista
common stock to such entities in exchange for additional preferred shares of
the Regional Joint Venture. On July 18, 1996, Vista acquired the equity
interest owned by Refractive Services-800, Inc. in the five Regional Joint
Ventures in exchange for 520,000 shares of Vista common stock. All of the
preferred shares owned by Vista in each Regional Joint Venture were later
converted by Vista into common stock of the respective Regional Joint Venture.
Shares of Vista common stock issued to Regional Joint Venture entities other
than Vista Laser Centers of the Northeast subsequently were reacquired by
Vista.
As to the four Regional Joint Ventures for which Vista has either
abandoned acquisition and related third-party financing negotiations and/or
disposed of its interest, all of Vista's net investments of $1,934,171 in such
enterprises were written off during the fiscal year ended March 31, 1997.
Vista remains contingently responsible as a guarantor of real estate and
equipment financing obligations for two of such entities in the aggregate
amount of approximately $3,035,000 at March 31, 1997 (see Notes 7(d) and 7(e)
of the Notes to Consolidated Financial Statements at March 31, 1997) and Vista
holds $260,800 in note receivables from the Pacific entity.
Vista's management intends to reactivate a strategic expansion plan if a
debt compromise plan with Vista's creditors is proposed and accepted and if
significant additional capital is obtained; there can be no assurance that
Vista will be successful in accomplishing either of these objectives. Pending
further developments, Vista has been advised that its controlling stockholder,
Atlantic Central, plans to pursue a strategic plan of negotiating to acquire
or develop Regional Joint Ventures in the United States for laser vision
correction facilities and services. Vista has been advised that if ACE can
successfully implement a strategy of North American expansion in the field of
laser vision correction, it anticipates that Vista will be provided the right
to acquire such operations at ACE's cost if Vista completes a debt compromise
plan with its creditors and if significant additional capital is obtained.
Transactions that occurred with respect to four Regional Joint Ventures
abandoned or disposed of by Vista are summarized as follows:
INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC.
In November 1995, Vista issued 200,000 shares of its common stock at an
estimated value of $217,600 in exchange for 200,000 shares of 5% Series B
convertible preferred stock in Vista Laser Centers of Michigan, Inc.
("VLC-Michigan"). Effective July 18, 1996, Vista also acquired 100,000
VLC-Michigan Series A preferred shares from Refractive Services-800, Inc. in
exchange for 100,000 shares of Vista's common stock with an estimated value of
approximately $99,000 at the date of issuance. Vista subsequently elected to
convert all 300,000 shares of VLC-Michigan preferred stock into 300,000 shares
of VLC-Michigan common stock.
VLC-Michigan filed documents for a proposed initial public offering in
early 1996 that was abandoned in late 1996 following a determination that VLC-
Michigan securities would not be approved for listing on The Nasdaq SmallCap
Market. During December 1996, negotiations for VLC-Michigan to acquire an
existing laser vision correction services business based in Windsor, Ontario,
and to enter into related agreements with affiliates of the physician who
owned the Windsor business, were terminated. VLC-Michigan accordingly
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<PAGE>
refunded stock subscriptions previously received from affiliates of that
physician. Vista also caused 200,000 shares of Vista's common stock owned by
VLC-Michigan to be exchanged for the redemption of 200,000 shares of
VLC-Michigan common stock then owned by Vista and Vista agreed to assume
responsibility for refunding a $9,500 stock subscription received from Dr.
J.Charles Casebeer, a former director of Vista. As a result of these
transactions, Vista owns all of the capital stock in VLC-Michigan which is not
currently an operating company.
During the period from March 1996 through October 1996, there were
various advances made by Vista to VLC-Michigan for its initial public offering
expenses aggregating approximately $84,236 plus approximately $426,600 of
advances to finance equipment deposits and operating expenses of the
businesses that VLC-Michigan proposed to acquire and develop. In November
1996, $100,000 of such cash advances was repaid to Vista. Vista has attempted
to obtain an accounting and/or refund of the remaining $410,800 of such
advances and to date has recovered approximately $108,000. As of March 31,
1997, the remaining $302,800 receivable has been written off.
INVESTMENT IN VISTA LASER CENTERS OF THE NORTHWEST, INC.
In May 1996, Vista issued 500,000 shares of its common stock at an
estimated value of $494,500 in exchange for 500,000 shares of 5% Series B
convertible preferred stock in Vista Laser Centers of the Northwest, Inc.
("VLC-Northwest"). Effective July 18, 1996, Vista also acquired 100,000
VLC-Northwest Series A preferred shares from Refractive Services-800, Inc. in
exchange for 120,000 shares of Vista's common stock with an estimated value of
approximately $118,800 at the date of issuance. Vista subsequently elected to
convert all 600,000 shares of VLC-Northwest preferred stock into 600,000
shares of VLC-Northwest common stock.
During October 1996, VLC-Northwest and a corporate affiliate of Dr.
Donald G. Johnson, then an officer and director of Vista, terminated
negotiations that contemplated the possible future acquisition by
VLC-Northwest of an existing laser vision correction services business from
Dr. Johnson's corporate affiliate. Dr. Johnson subsequently resigned as
Chairman of the Board and a director of Vista in June 1997. VLC-Northwest
refunded Dr. Johnson's original cash investment in VLC-Northwest due to the
termination of these negotiations. Vista caused 500,000 shares of Vista's
common stock owned by VLC-Northwest to be exchanged for the redemption of
500,000 shares of VLC-Northwest common stock then owned by Vista. As a result
of these transactions, Vista owns all of the capital stock in VLC-Northwest
which is not currently an operating company.
During the period from August 1996 through November 1996, there were
various advances made by Vista to VLC-Northwest for its initial public
offering expenses aggregating approximately $73,000 plus approximately
$220,000 of advances to finance equipment deposits and operating expenses of
the business that VLC-Northwest proposed to acquire and develop. In November
1996, Vista received repayment of $189,016 of such prior advances. During
January 1997, Vista paid $4,936 to an affiliate of Dr. Johnson in
reimbursement of funds advanced for the account of VLC-Northwest.
As of March 31, 1997, all of the remaining $73,000 in advances and
$96,000 of Vista's equity investment in VLC-Northwest had been written off.
INVESTMENT IN VISTA LASER CENTERS OF THE PACIFIC, INC.
In May 1996, Vista issued 500,000 shares of its common stock at an
estimated value of $487,850 in exchange for 500,000 shares of 5% Series B
convertible preferred stock in Vista Laser Centers of the Pacific, Inc.
("VLC-Pacific"). Effective July 18, 1996, Vista also acquired 100,000
VLC-Pacific Series A preferred shares from Refractive Services-800, Inc. in
exchange for 100,000 shares of Vista's common stock with an estimated value of
approximately $99,000 at the date of issuance. Vista subsequently elected to
convert all its 600,000 shares of VLC-Pacific preferred stock into 600,000
shares of VLC-Pacific common stock.
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To accommodate the request of VLC-Pacific in its efforts for a proposed
public offering of its securities, during December 1996 Vista and VLC-Pacific
mutually agreed: (i) to terminate a consulting services agreement between
Vista and VLC-Pacific; (ii) Vista accepted 500,000 shares of its common stock
owned by VLC-Pacific in exchange for the cancellation of 500,000 shares of
VLC-Pacific common stock then owned by Vista; and (iii) Vista agreed to accept
a 9% promissory note issued by VLC-Pacific in the principal amount of $100,000
for the repurchase of the remaining 100,000 shares of VLC-Pacific common stock
then owned by Vista. VLC-Pacific also issued a 9% promissory note in the
principal amount of $160,838 to evidence its obligations for repayment of
advances in that amount by the Company to VLC-Pacific. Each of the
VLC-Pacific promissory notes are due on the earlier of December 31, 1998 or
ten days after successful completion of an initial public offering by
VLC-Pacific.
As a result of these transactions, Vista had disposed of all of its
equity interest in VLC-Pacific capital stock as of December 31, 1996. The
notes receivable from VLC-Pacific are recorded on Vista's consolidated balance
sheet at an estimated realizable value of $260,838 as of March 31,1997 and its
remaining investment of $171,442 in VLC-Pacific has been written off.
INVESTMENT IN VISTA LASER CENTERS OF THE NORTHEAST
In May 1996, Vista issued 450,000 shares of its common stock at an
estimated value of $445,500 in exchange for 500,000 shares of 5% Series B
convertible preferred stock in Vista Laser Centers Metro Inc., subsequently
doing business as Vista Laser Centers of the Northeast ("VLC-Northeast").
Effective July 18, 1996, Vista also acquired 100,000 VLC-Northeast Series A
preferred shares from Refractive Services-800, Inc. in exchange for 100,000
shares of Vista's common stock with an estimated value of approximately
$99,000 at the date of issuance.
In January 1997, Vista, ACE's predecessor, VLC-Northeast and certain
members of VLC-Northeast operating management and their affiliates entered
into a settlement agreement to terminate all relationships between the
parties. Vista sold all of its equity investment in VLC- Northeast for the
sum of $1.00 and agreed to assign to a non-related entity for the sum of $1.00
all prior advances and loans by Vista to VLC-Northeast in the aggregate amount
of $511,460. Vista further agreed: (i) to pay $50,000 as a settlement of
prior obligations to VLC-Northeast; (ii) to pay VLC-Northeast an amount equal
to $75,000 plus $6,271 in interest accrued on certain promissory notes
previously issued by VLC-Northeast to ACE's predecessor (and secured by a
pledge of certain shares of Company common stock owned by VLC-Northeast),
against the receipt from Atlantic Central of releases in favor of Vista and of
all collateral security claims to shares of Vista's common stock owned by
VLC-Northeast; (iii) to advance $50,000 to an escrow fund for use by VLC-
Northeast under prescribed conditions for expenses relating to its future
capital-raising expenses, which advances were to be repaid to Vista in the
event VLC-Northeast completed additional debt or equity financings in the
aggregate amount of at least $500,000; and (iv) to pay $275,000 (of which
$200,000 was to be deposited into an escrow account) from proceeds of a
financing of at least $2 million by Vista.
VLC-Northeast agreed to release its license to use Vista's service marks,
to change the name of VLC-Northeast and signage to eliminate use of the
"Vista" name by VLC-Northeast (subject to a non-assignable license to VLC-
Northeast for use of certain promotional and marketing materials of the
Company within the greater Toronto, Ontario area so long as such materials do
not use the word "Vista" or Vista's associated logo), and to return for
cancellation 450,000 shares of Vista's common stock currently owned by
VLC-Northeast at the time all escrow funds were deposited by Vista. Of the
$200,000 in funds to be deposited into an escrow account, $50,000 was to be
released to VLC-Northeast upon completion of actions necessary for termination
of its use of the name "Vista" and Vista's service marks by July 1, 1997, and
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the remaining $150,000 was to be released to VLC-Northeast at the rate of
$25,000 per month, except that any undisbursed escrow funds were to be
refunded to Vista in the event VLC-Northeast completed additional debt or
equity financings in the aggregate amount of at least $500,000.
Vista paid $150,000 under the settlement and will be obligated to
deposit an additional $275,000 from proceeds of any private placement offering
of at least $2 million by Vista. Vista has also agreed to remain obligated as
a guarantor of certain equipment lease and premises lease obligations of
VLC-Northeast aggregating approximately $1,605,000 as of March 31, 1997,
subject to the agreement of VLC-Northeast to use its best efforts to obtain a
release of such guarantees in the event of a change in control of
VLC-Northeast or should Vista successfully complete a private placement
offering of at least $2 million, failing which VLC-Northeast will agree to
indemnify Vista for any liabilities incurred as a result of the guarantees.
As a result of these transactions, Vista did not own an equity interest
in VLC-Northeast capital stock and has written off its investments in
VLC-Northeast as of March 31, 1997.
The obligation of VLC-Northeast to return 450,000 shares of the
Company's common stock for cancellation was contingent upon Vista's payment of
$275,000 from proceeds of a private placement offering of at least $2 million
by Vista. Negotiations by Vista to obtain private placement financing pending
at the time of its settlement agreement with VLC-Northeast were subsequently
abandoned, and VLC-Northeast has claimed that it has no obligation to return
the 450,000 shares to Vista.
EMPLOYEES
ACE's corporate offices, as of February 28, 1998, employ the services of
seven employees and consultants who are involved in business development,
management, administration and accounting functions of the company. ACE's
operating subsidiary, AMO, employs seven people in Palm Harbor, Florida all
who are engaged in sales, management and administration of the company. ICON
employs one individual for administration purposes and two people in Windsor
for the management of a retail optical store.
Vista's corporate operations as of September 30, 1997 employ the
services of four employees and consultants, all of whom serve on a part-time
basis and are involved in management, administrative or accounting functions.
Vista's operating subsidiaries employ ten persons in Italy, 11 persons in
Sweden and five persons in the United States, all of whom are engaged in
management or administrative activities. Management believes that the
Company's relationship with its employees is satisfactory. Vista plans to
engage the services of a new President in the future, but has not yet
identified an acceptable candidate for that position.
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<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company and its subsidiaries do not own any real property. The
following table summarizes information as to facilities utilized by Vista and
its operating subsidiaries.
<TABLE>
<CAPTION>
Size and Lease
Location Use Expiration Date
- -------------------------- ------------- -------------------------
<S> <C> <C>
UNITED STATES FACILITIES:
Vista Technologies Inc.
Scottsdale, Arizona Corporate 3,254 square feet;
office expires December 31, 1997
and LVC Center
EUROPEAN FACILITIES:
Vista Vision SpA:
Milan, Italy ................ LVC center 430 square feet;
expires January 2000 (renewed every 3 years
unless notice given six months in advance)
Rome, Italy ................. LVC center 1,600 square feet;
expires November 2000
Palermo, Italy .............. LVC center shared use of facilities under operating
agreement on month-to-month basis
Vista Vision Scandinavia AB:
Stockholm, Sweden ........... LVC center shared use of facilities under operating
agreement on month-to-month basis
Malmo, Sweden ............... LVC center shared use of facilities under operating
agreement with Gustav Adolf Clinic expiring
on May 15, 1998 renewed every 3 years
unless notice given 12 months in advance)
</TABLE>
ACE has a monthly rental of $2,000 for office space and facilities in
Toronto, Canada at which two of ACE's and one of Vista's executive officers
are located. VISTA's principal office in Scottsdale, Arizona is leased by its
operating subsidiary at a monthly rental of $4,699 for a term expiring on
December 31, 1997.
The Company and Vista believes that its facilities are in good
operating condition and repair and are adequate for their existing
requirements. See Note 12 of the Notes to Consolidated Financial Statements
elsewhere herein for additional information concerning lease obligations of
the Company and Vista.
ITEM 3. LEGAL PROCEEDINGS
VISTA LITIGATION WITH FORMER EXECUTIVE OFFICERS
In June 1997, Vista was named as the defendant in a civil action
entitled Thomas A. Schultz and Allen J. Simon vs. Vista Technologies Inc.,
filed in the Superior Court of the State of California, Santa Clara County,
case number CV766644. The complaint alleges that Vista breached written
employment agreements with each of the two plaintiffs, both of whom were
terminated as employees of Vista on March 6, 1997, and seeks damages of
$231,073 plus interest and costs for Thomas A. Schultz, damages of $241,902
plus interest and costs for Allen J. Simon, and restoration of stock options
previously issued to the plaintiffs under the terms of their employment
agreements.
Vista's written employment agreement with Thomas A. Schultz was dated
January 31, 1996 and subsequently amended. Mr. Schultz was elected President
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and Chief Executive Officer of Vista on February 16, 1996. His employment
agreement provided he would be entitled to severance benefits if his
employment was involuntarily terminated, other than for cause, death or
disability, equal to (i) a lump-sum payment equal to his annual base salary of
$175,000, (ii) continuation of insurance benefits for life, health, dental and
long-term disability for a period of 12 months after employment termination,
and (iii) continued vesting of his outstanding stock options for a period of
12 months after employment termination. Vista's written employment agreement
dated November 1, 1996 with Allen J. Simon, who was elected Vista's Executive
Vice President and Chief Operating Officer on November 11, 1996, provided he
would be entitled to severance benefits if his employment was involuntarily or
constructively terminated, other than for cause, death or disability, equal to
(i) a lump-sum payment equal to his annual base salary of $175,000, and (ii)
continuation of insurance benefits for life, health, dental and long-term
disability for a period of 12 months after employment termination.
Vista intends to vigorously contest claims of the plaintiffs for damages
based upon Vista's claim that their employment was terminated for cause.
However, these proceedings are at a preliminary stage and no discovery has
taken place. Special counsel engaged to represent Vista accordingly has
advised it cannot render an opinion as to whether the likelihood of an adverse
determination would be remote, reasonably possible or probable, until
discovery proceedings have been conducted. Vista has established a reserve
for these legal proceedings, but an adverse determination in these proceedings
would have a material adverse effect on the current financial condition of
Vista.
LEGAL PROCEEDINGS AS TO VISTA-ITALY
In view of an adverse judgment entered in December 1993 in the Circuit
Court of St. Louis County, Missouri against Vista-Italy in favor of
LaserVision Centers, Inc. ("LVCI"), Vista has recorded an accrued liability of
$175,000 on its consolidated balance sheet for damages awarded against
Vista-Italy by the judgment. Attempts by Vista-Italy from 1994 through
November 1996 to vacate the judgment and appeal the decision in Missouri state
courts were unsuccessful.
In March 1997, LVCI instituted legal proceeding in Italy to enforce
collection of the judgment entered by the Missouri court. Vista-Italy intends
to contest these proceedings on the basis that the Missouri default judgment
is not entitled to enforcement in Italy and Vista-Italy is exploring the
possibility of asserting counterclaims. These proceedings in Italy are in the
preliminary stages, and special counsel engaged to represent Vista-Italy has
advised it cannot yet render an opinion as to whether the likelihood of an
adverse determination would be remote, reasonably possible or probable. As
noted above, Vista has established a reserve for these legal proceedings and
an adverse determination in these proceedings would not have a material
adverse effect on the financial condition of Vista-Italy.
FRAUDULENT SHARE ISSUANCES AND LEGAL PROCEEDINGS AGAINST FORMER COUNSEL
On December 12, 1997, management of the Company discovered that one of
its former U.S. counsel fraudulently caused 960,000 newly issued and freely-
tradeable shares of the Company's common stock to be issued to his affiliate
or to his brokerage account in Canada during the period from March 25, 1997
through July 31, 1997 without the prior authorization or knowledge of the
Company's board of directors and management. The Company's current legal
counsel believes that it is probable the Company will incur a loss contingency
for the 960,000 shares of its common stock fraudulently issued without
consideration at the sole instructions of former counsel. The Company has
assigned a value of $400,000 for the 960,000 shares fraudulently issued and
will charge operations with the value calculated using the market value on the
day the shares were issued.
The Company has instituted civil legal proceedings seeking a judgement
for compensatory damages in the amount of approximately $750,000 in legal fees
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<PAGE>
and costs paid by the Company to its former counsel during the period from
1993 to 1997 while he fraudulently represented himself to be a licensed
attorney, damages for the 960,000 fraudulently issued shares of the Company's
common stock, and other compensatory, punitive and exemplary damages. The
Company also intends to seek the return and cancellation of the 960,000 shares
or other restitution equivalent to the estimated fair value of the 960,000
shares.
Based upon extensive investigation of documents and other information
provided to current counsel with respect to these proceedings, it is the
Company's counsel's opinion that the Company has meritorious causes again its
former counsel and that it is probable the Company ultimately will be
successful in obtaining final judgments in the Company's favor against former
counsel for an amount in excess of $1,250,000. The ability of the Company to
realize on any such judgements, if successfully obtained, will be dependent
upon the Company's ability to locate and levy upon assets of the former
counsel. At hearings held in December 1997 and January 1998, orders of
preliminary injunction were issued by a U.S. Federal district court and a
court in British Columbia restraining the transfer of assets from accounts
with any financial institutions maintained by its former counsel and certain
corporate entities controlled by him. Pursuant to those orders, approximately
$220,000 of cash and securities in accounts maintained by the former counsel
have been frozen and have subsequently been delivered to the Company for
liquidation.
The Company also is investigating potential claims against other third
parties than may have aided and abetted its former counsel with respect to one
or more of the causes of action asserted by the Company in the pending
litigation proceedings. In addition to the former counsel and two entities
believed to be under his control, the Company's transfer agent has been named
and served as a defendant in the pending litigation proceedings. A motion to
dismiss the proceedings against the transfer agent was denied by the federal
district court in this case, and the transfer agent has filed an answer
denying liability. Based upon information obtained to date, it is Company's
counsel's opinion it is probable the Company has a meritorious cause of action
against the transfer agent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Pharma Patch's ADRs were traded on The Nasdaq Small Cap Market
["NASDAQ"] and on the Boston Stock Exchange ("BSE") through August 16, 1995
under Pharma Patch's symbol of "SKINY". Effective August 17, 1995 the ADR's
were de-listed from NASDAQ and the BSE and were thereafter quoted on the NASD
Electronic Bulletin Board. The ADRs of Pharma Patch were converted in the
reorganization with ACE at an exchange ratio of one share of Atlantic Central
Enterprises Limited common stock for every 10 shares of Pharma Patch. ACE's
common shares began trading on the NASD Electronic Bulletin Board on January
30, 1997 and are quoted under the trading symbol "ALCN". Set forth below is
the closing bid prices for the common shares of the Company (after giving
effect to the reorganization exchange) for the periods indicated.
<TABLE>
<CAPTION>
Closing Bid Prices (US$)
-----------------------
Period High Bid Low Bid
----------------------- ---------- ---------
<S> <C> <C>
1996:
Quarter ended May 31, 1996...... $ 10.00 $ 2.50
Quarter ended August 31, 1996... $ 5.00 $ 1.25
Quarter ended November 30, 1996. $ 3.125 $ 1.875
1997:
Quarter ended February 28, 1997. $ 1.04 $ 0.9375
</TABLE>
As of April 2, 1998, the last reported sale of ACE's common stock as
reported in the over-the-counter market was $0.43 per share and the closing
bid and asked prices were $0.43 bid and $0.81 asked. There were approximately
233 holders of record of ACE's Common Stock as of December 29, 1997.
Additional beneficial owners of the Common Stock hold shares in street name or
other nominee accounts.
No cash dividends have been declared or paid by ACE since its inception.
ACE intends to employ all available funds for development of its business and,
accordingly, does not intend to pay cash dividends in the foreseeable future.
There are no contractual provisions that would prohibit ACE from payment of
dividends on its common stock.
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<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto appearing elsewhere in
this Report.
CERTAIN INFORMATION IN THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF APPLICABLE SECURITIES LAWS THAT INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE ABILITY OF THE
COMPANY TO CONTINUE AS A GOING CONCERN AND TO OBTAIN ADDITIONAL CAPITAL, AS TO
WHICH THERE IS NO ASSURANCE, MARKET ACCEPTANCE OF NEW TECHNOLOGIES, ECONOMIC,
COMPETITIVE, GOVERNMENTAL AND TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S
OPERATIONS, MARKETS, SERVICES AND PRICES, AND OTHER FACTORS DESCRIBED IN THIS
REPORT AND IN PRIOR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SUGGESTED OR
IMPLIED BY ANY FORWARD-LOOKING STATEMENTS AS A RESULT OF SUCH RISKS.
INTRODUCTION, GOING CONCERN AND PLAN OF OPERATION
ACE is a holding company with interests in the laser vision correction
(LVC) centers business through its wholly owned subsidiary, ICON Vision
Centers, Inc. (Ontario, Canada), and through a majority ownership position in
Vista Technologies, Inc. (Nevada). ACE also has interests in the LVC
distribution business through Windsor LASIK Products Corp. and in the
outsourcing of collision work for insurance companies through First American
AMO.
ACE's business plan is to expand its interests in the ownership and
operation of laser vision correction facilities and services, and to acquire
equity interests in, and arrange financing for, new business ventures.
Pursuant to this strategy: (1) in May 1997, ACE formed First American AMO,
based in Florida, to provide insurance companies with access to a network of
third-party preferred providers for automobile repairs and emergency road
service; and (2) in August 1997, ACE organized ICON Vision Centers, Inc.
("ICON") in Ontario, Canada to negotiate the acquisition of interests in
additional laser vision correction facilities. ICON Vision Centers, Inc. is
currently developing a business plan which, if implemented, would cause ICON
Vision Centers to develop opportunities in North America and/or Europe through
acquisitions or start-up development.
As of February 28, 1997 ACE has an accumulated deficit of $18,692,005,
total assets of $8,118,894 and total shareholders' equity of $306,293. ACE's
majority owned subsidiary , Vista has an accumulated deficit of $22,142,284,
total assets of $4,330,537, total shareholders deficiency of $2,094,820 and
received a Going Concern opinion from its auditors for the twelve months ended
March 31, 1997 (see Vista's March 31, 1997 10K for additional information).
ACE, including Vista, has not yet achieved profitable operations and there is
no assurance that profitable operations, if achieved, could be sustained on a
continuing basis. Further, the Company's future operations are dependent on
the success of the commercialization efforts and market acceptability of the
ACE business plan and other potential business ventures of the Company,
together with the value derived from TCPI investment securities.
The Company has experienced significant net losses, a loss from
continuing operations of approximately $10,316,000, has a working capital
deficit of approximately $874,000 and utilized approximately $4,173,000 in
cash for operating activities for the year ended February 28,1997. In
addition, the Company has serious liquidity problems primarily due to
unsuccessful attempts by Vista to raise money, both at the parent level and
the subsidiary level and significant costs associated with Vista's failed
attempts to penetrate the North American vision correction market resulting in
losses from operations.
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<PAGE>
AS A RESULT OF THE ABOVE FACTORS, THE REPORT OF MOORE STEPHENS, P.C. ON
THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED FEBRUARY 28,
1997 CONTAINS A PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT CONCERNING THE ABILITY
OF THE COMPANY TO CONTINUE AS A GOING CONCERN. Management's plans to address
these matters are as follows: The Company and its subsidiaries are developing
business plans which when implemented would develop opportunities in the laser
vision correction and automotive maintenance markets in North America and/or
Europe. Vista's management is developing a business plan which takes
advantage of new trends in the laser vision correction business in both North
America and Europe. Vista plans to concentrate on its four successful centers
in Italy and Sweden in the 1997-1998 fiscal year and focus on the reduction of
expenses at the head office level. The Company also plans to sell a portion
of its marketable securities, obtain additional debt financing and focus on
revenue growth of its existing operations.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
continuation of the Company as a going concern is dependent upon the success
of these plans. There can be no assurance of the success of these plans.
Prior to fiscal 1997 the Company was mainly involved in the research and
development of transdermal drug delivery systems and skin permeation
technology. The Company developed and patented proprietary technology and
secured licensing and product feasibility agreements through research in this
area.
On November 15, 1995, Pharma Patch sold substantially all of the
operating assets of the Company to Technical Chemicals and Products, Inc.
(TCPI) for a gain of approximately $16.4 million.
On March 21, 1996, the Company completed the acquisition of 61.3% of the
voting interest of Vista Technologies Inc.
ACE's current operational expenses are being funded by the sale of a
portion of the TCPI stock acquired in the November 15, 1995 transaction.
Although ACE is primarily involved with LVC facilities and services, through
its subsidiary Vista, management of ACE is also actively involved in
investigating and negotiating other business opportunities to increase
shareholder value.
Vista commenced business operations in February 1994. Vista acquired
controlling equity interests in European subsidiaries during 1994,made
substantial investments in Medical Development Resources, Inc. ('MDRI")and its
subsidiaries in 1994 and 1995, developed a strategic plan in mid-1995 to
sponsor and invest in Regional Joint Ventures to conduct additional businesses
engaged in providing access to laser vision correction ("LVC") equipment and
related services ("LVC Services") in regional markets of North America, and
Vista acquired a controlling interest during 1996 in Vista Laser Centers of
the Southwest, Inc. ("Vista-Southwest"), an operating company based in
Arizona.
Since commencing operations, Vista has financed its business operations,
acquisition and expansion activities primarily from the issuance or sale of
equity securities, debt financing and loans from its controlling stockholder,
ACE. From February 1994 through March 31, 1996, the Company had received
approximately $7,437,500 from the sale of common stock and warrants,
approximately $278,000 from the sale of convertible debt instruments, and had
issued additional common stock and warrants in connection with the acquisition
of other assets and investments. During the fiscal year ended March 31, 1997,
Vista received an additional $1,050,100 from the sale of common stock and
exercise of stock options and warrants, approximately $1,523,000 as loans from
ACE and its corporate predecessor (of which $800,000 has been repaid),
$300,000 from the sale of secured debt, and issued additional shares of common
stock and warrants in connection with the acquisition of other assets and
investments.
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<PAGE>
Vista made significant investments in MDRI and its subsidiaries from May
1994 through March 1995 and in certain Regional Joint Ventures during 1995 and
1996 for which business acquisition and related third-party financing
negotiations have been abandoned. Vista's investment in cash, securities
issued and loans advanced for its investment in MDRI of approximately
$5,643,000 was written-off at March 31, 1995 and additional investments in
cash, securities issued and loans advanced to Regional Joint Ventures of
approximately $1,934,000 were written-off primarily during the fiscal year
ended March 31, 1997.
At March 31, 1997, Vista had an accumulated deficit of $22,142,000
incurred largely as a result of write-offs during fiscal 1995 through fiscal
1997 and losses from operations since 1994. Vista's net losses for the fiscal
year ended March 31, 1997 was $6,999,000. At March 31, 1997, Vista had a
negative working capital of $3,119,000 and a stockholders' deficiency of
$2,095,000. Vista has serious liquidity problems primarily due to
unsuccessful attempts to raise additional capital and significant costs
associated with failed attempts to penetrate North American laser vision
correction markets.
As a result of the above factors, the report of Moore Stephens, P.C. on
the financial statements of Vista for the fiscal year ended March 31, 1997
contains a paragraph expressing substantial doubt concerning the ability of
Vista to continue as a going concern.
Management's plans to address these matters are as follows: The Company
and its subsidiaries are developing business plans which when implemented
would develop opportunities in the laser vision correction and automotive
maintenance markets in North America and/or Europe. Vista's management is
developing a business plan which takes advantage of new trends in the laser
vision correction business in both North America and Europe. Vista plans to
concentrate on its four successful centers in Italy and Sweden in the 1997-
1998 fiscal year and focus on the reduction of expenses at the head office
level. The Company also plans to sell a portion of its marketable securities,
obtain additional debt financing and focus on revenue growth of its existing
operations. The accompanying financial statements do not reflect any
adjustments to the carrying value or classifications of assets or liabilities
which might become necessary if Vista is unable to continue as a going
concern. The continuation of Vista as a going concern is dependent upon the
success of these plans. There can be no assurance that Vista will be
successful in implementing these plans.
Management is currently developing a business plan which will be
evaluated and implemented subject to an analysis intended to take advantage of
new trends in the laser vision correction market in both North America and
Europe. Because of Vista's limited ability to raise capital in this new
industry due to its historical results and the unprofitable nature of the
industry itself, Vista plans to take a conservative approach and hopes to
build mainly on its successful European base of centers in Italy and Sweden.
Efforts by Vista's former management in late 1996 to obtain additional equity
capital were non-productive, no negotiations are currently in process to
obtain additional capital and Vista has been dependent in recent periods upon
advances from its controlling stockholder, ACE, for funds to maintain
operations. Outstanding advances due to ACE are classified as short-term
obligations, totalled $723,000 as of March 31, 1997, and have subsequently
increased to approximately $1,100,000 as of November 6, 1997. There can be no
assurance that ACE will continue to provide advances to the Company or that
Vista will be successful in obtaining capital from other sources.
Vista's business activities are subject to both predictable and
unforeseen risks incident to the creation of new businesses with a limited
history of operations. Prospective investors should consider Vista's current
financial condition, its history of losses from operations, the frequency with
which newly developed businesses encounter unforeseen expenses, difficulties,
complications and delays, and other factors such as the competitive industry
in which Vista operates.
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<PAGE>
RESULTS OF OPERATIONS:
FISCAL YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 29, 1996
The consolidated financial statements include the accounts of ACE and
its wholly and majority owned subsidiaries in Canada and in the United States.
All significant intercompany balances and transactions have been eliminated in
consolidation. The Company has consolidated its results for the year ended
February 28, 1997 with the results of operations of Vista for the year ended
March 31, 1997 in accordance with U.S. GAAP. Results of operations vary
significantly between February 29, 1996 and February 28, 1997 because Vista's
operations were not consolidated with Ace's at February 29, 1996 as the
controlling interest in Vista was not acquired until March 21, 1996.
REVENUES: During the fiscal year ended February 28, 1997 (the "1997
Year"), consolidated revenues from operations were $3,486,000, compared to
$0 in consolidated revenues for the fiscal year ended February 28, 1996 (the
"1996 Year"). Consolidated revenues in the 1997 Year principally included
$1,486,000 attributable to the operations of Vista-Italy, $1,712,000 from the
operations of Vista-Sweden, and $259,000 in revenues at Vista-Southwest
acquired during the 1997 Year. This increase in revenue is a result of ACE
acquiring the controlling interest in Vista in March of 1996. Consolidated
revenues from the 1996 year are included in Loss from Discontinued Operations
and primarily related to feasibility studies conducted by ACE on behalf of
third parties. ACE does not have similar income in the 1997 year.
For the 1996 Year, Vista's consolidated operating results included the
period from January 1995 through December 1995 for its European subsidiaries
to eliminate a three month delay in obtaining European financial statements.
A decision was made by Vista's management in 1996 to bring the operating
reporting periods for its European subsidiaries current with the parent
corporation. This resulted in a change in reporting periods for European
subsidiaries included in the consolidated financial statements so that their
twelve month period from April 1996 through March 1997, included in the 1997
Year, is being compared to European operations for the twelve month period
from January through December 1995 included in Vista's consolidated results
for the 1996 Year. The extra quarter's net results of European operations
from January through March 1996 is accounted for in ACE's consolidated
financial statements at February 28, 1997 as an adjustment to equity.
OPERATING EXPENSES: Costs and expenses of operations for the 1997 Year
were $13,801,000, an increase of $12,000,100 compared to costs and expenses of
operations of $1,801,000 in the 1996 Year. Costs and expenses in the 1997
Year consisted of $8,664,000 in general and administrative expenses, a 382%
increase compared to the 1996 Year of $1,799,000, $4,280,000 in Goodwill
associated with the acquisition of Vista was written off, $777,000 in
depreciation and amortization compared to the 1996 year of $0, and 276,000 in
interest expense compared to the 1996 year of $0. Both Depreciation and
interest expense were included in Loss from discontinued operations for 1996.
General and administrative expenses for the 1997 Year included $3,308,000 for
Vista Corporate Office, $2,058,000 for Ace Corporate Office, $1,300,000 for
Vista-Italy, $1,445,000 for Vista-Sweden, and $553,000 for Vista-Southwest
acquired during the 1997 Year. General and administrative expenses at the ACE
parent Company level included audit, legal, and consulting expenses of
$945,000, printing fees of $673,000 and office costs and salaries of $166,000.
General and administrative expenses at the Vista Head Office level included
the write-off by Vista of $1,934,000 in investments and advances to Regional
Joint Ventures, marketing, audit, legal and consulting expenses of $1,200,000,
salary expenses of $669,000 and travel expenses of $371,000 incurred primarily
as a result of activities relating to negotiations for development of Regional
Joint Ventures.
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<PAGE>
Vista's European subsidiaries realized nominal income from operations
during the year. Cash flow from operations in the 1997 Year were approximately
cash neutral at both Vista-Italy and Vista-Sweden and negative at
Vista-Southwest. Profitable operations from operating subsidiaries in the
future will be dependent upon increasing revenues, as to which there can be no
assurance.
Since March 1997, corporate expenses for salaries, marketing, travel and
legal expenses at the Vista Corporate Office level have been reduced to
approximately $60,000 per month for the quarter ended June 30, 1997, primarily
due to a reduction in staff, termination of negotiations relating to the
proposed acquisition of other LVC entities and abandonment of unsuccessful
private placement financing activities sought by prior management.
OTHER NON-OPERATING EXPENSE AND INCOME: Other non-operating expense
and income totaled a net expense of $2,323,000 for the 1997 Year compared to a
net other income of $72,000 for the 1996 year. The primary portions of the
1997 net expense included a realized loss of $2,096,000 on the sale of
securities, most of which was attributable to a decline in market price for
ACE's investment in TCPI common stock. In addition, 1997 included total
operating interest expense of $304,000 in 1997 while $338,000 in interest
expense was included in Loss from discontinued operations for the 1996 year.
DISCONTINUED OPERATIONS: ACE has no income or expenses from discontinued
operations in the 1997 year compared to a net gain on discontinued operations
of $13,819,000 In 1996. The 1996 gain was a result of the November 1995 TCPI
transaction. The operations of the Company's Subsidiaries involved in the
transaction are being classified as discontinued operations in accordance with
US GAAP.
NET LOSS: Net loss for the 1997 Year was $12,546,000, equal to a net
loss of $7.54 per common share, compared to a net income in the 1996 Year of
$12,091,000, or $15.05 per common share. The primary portion of such a
decrease is due to the Gain on sale of business segment in the 1996 year and
Ace's new investment in Vista for the 1997 year.
INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) operating loss and tax credit carryforwards. ACE had research and
development expenses not claimed for income tax purposes of approximately
$2,870,000, available to reduce taxable income of ACE in future years. Due to
the significant uncertainty relating to the Company's ability to utilize these
expenses to offset taxable income, valuation allowances are recognized to
offset all of the deferred tax assets relating to these expenses. These
unclaimed research and development expenses may be carried forward
indefinitely for income tax purposes.
Vista has net operating losses carryforwards totaling approximately
$8,200,000, which expire between the years 2007 and 2012. As of February 28,
1997, ACE may not have available the Vista NOL's to offset against future ACE
taxable income, however, Vista's NOL are available against future Vista
income. Vista's use of these carryforwards may be limited by Section 382 of
the Internal Revenue Code.
ACE is not required to file a US consolidated income tax return.
Accordingly, the net operating loss carryforwards of Pharma Patch may not be
available to reduced future taxable income as a result of the Company's
reorganization in January of 1997.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
ACE principal capital requirements include cash requirements for Ace's
management and administration and to support the activities of Vista Phoenix
location. Subject to the availability of additional capital, as to which
there can be no assurance, Vista may also incur additional expenditures in the
future for marketing activities and to expand operations by acquiring or
developing additional LVC centers and for additional excimer laser equipment.
Consolidated cash increased by 1,138,000 to $1,807,000 at February 28,
1997 compared to $669,000 at February 29, 1996. This increase in consolidated
cash of $1,138,000 from February 29, 1996 to February 28, 1997 represents the
net proceeds from shares issued for cash, the proceeds of debt of $905,000,
and net proceeds from the sale of TCPI Stock totaling $5,511,000. These
sources of cash were offset by cash requirements of operations of $4,173,000,
the purchase of fixed assets for $727,000, advances to investee companies of
$802,000, the issuance of notes receivable of $411,000 and the repayment of
$339,000 of capital lease obligations.
Between March 1, 1997 and December 31, 1997, ACE sold 175,000 TCPI
shares for net proceeds of approximately $1,676,000. This resulted in a net
loss of approximately $1,000,000. The proceeds were utilized for operations
and to purchase additional investments through December 31, 1997. As of
February 28, 1998, ACE had 43,850 shares of TCPI.
Vista's European operating subsidiaries have achieved at least neutral
cash flow levels of operations for the last two fiscal years. Vista plans to
satisfy its cash needs over the next 12 months by decreasing Vista's expenses
and cash requirements, proposing a debt compromise plan with Vista's
creditors, continuing in the interim to defer payments to Vista's creditors or
possibly converting debt to equity, increasing its revenues at its existing
vision correction centers, selling assets, raising additional capital and/or
incurring additional borrowings. Consolidated revenues for the three month
period ended June 30, 1997 of approximately $1,230,000 (unaudited) reflect an
increase of 56% over the prior year equivalent period. This revenue increase
was attributable to acquisition of Vista's operating subsidiary in Scottsdale,
Arizona ($303,000) and volume increases in Europe ($141,000). For the three
months ended June 30, 1997, total laser vision correction procedures for Vista
were 1,324 versus 695 for the three months ended June 30,1996, reflecting an
increase of 90% in procedures. The consolidated net loss for the three months
ended June 30, 1997 was approximately $250,000 versus a net loss of
approximately $804,000 for the three months ended June 30, 1996. The reduction
in net loss is primarily due to the revenue increases described above and a
reduction in corporate general and administrative expenses. The loss of
approximately $250,000 for the three months ended June 30, 1997 includes a net
loss of approximately $60,000 from Vista's operations in Sweden primarily due
to the opening of a new center and due to a $173,000 loss on sale of TCPI
shares. Therefore, continued revenue increases will be dependent, among other
things, in part upon expanding use of Vista's services by physicians, general
public acceptance of laser surgery to correct refractive disorders, and
competitive factors. For the quarter ended September 30, 1997, revenues were
reduced compared to the quarter ended June 30, 1997 as a result of the normal
seasonal closing of operations during a holiday month in Europe. There can be
no assurance that Vista will be successful in implementing these plans.
ACE's management is focusing its attention at present on increasing
Vista's revenues and reducing negative cash flows as well as exploring other
financing and business opportunities. ACE has been dependant on its
investments in marketable securities to sustain its operations. Vista has
been dependent in recent periods upon advances from its controlling
stockholder, ACE, for funds to sustain Vista's operations. Outstanding
advances due to ACE are classified as short-term obligations, totaled $723,000
as of March 31, 1997, and have subsequently increased to approximately
$1,100,000 as of September 30, 1997. The advances from ACE are secured by
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<PAGE>
Vista's agreement to pledge shares of its European subsidiaries as collateral
security and all of Vista's assets are subject to a security interest granted
to the holder of a note in the principal amount of $300,000 due on June 30,
1997. Vista is currently negotiating an amendment to its secured loan of
$300,000 with the note holder.
There can be no assurance that ACE will continue to provide advances to
Vista or that Vista will be able to obtain additional capital from other
sources. Accordingly, there can be no assurance that Vista will have cash
resources necessary to sustain its operations in the United States for any
specific period of time. Additional financing, if any, may result in
significant dilution to existing Vista stockholders. If adequate funds are
not available from ACE and/or other third parties and if creditors refuse to
agree to future debt compromise plans, then Vista may be required to accept
unfavorable alternatives, including (i) seeking protection from creditors at
the parent company level under the bankruptcy laws, (ii) arrangements with
collaborative partners that may require Vista to relinquish material interests
in its operating subsidiaries that it would not otherwise relinquish, or (iii)
the delay, reduction or elimination of its planned expansion, capital
expenditures, marketing and advertising and other operating expenses.
During fiscal 1997, the Company completed a private placement and issued
60,000 shares for cash consideration of $300,000 and also issued 63,874 shares
in lieu of cash payments of $323,236 to various professionals for services
rendered. On March 21,1996, the Company issued 450,000 shares to three
investors as consideration for 900,000 shares of Vista.
Through its agreement with First American AMO, ACE has agreed to fund
AMO up to $450,000 prior to any separate outside funding of AMO. Between
March 1, 1997 and February 28, 1998, ACE has advanced AMO a total of $310,000.
AMO is planning its expansion and, with the assistance of ACE, is preparing
for the need of new outside financing. There can be no assurance that ACE
will successfully obtain financing from third parties for this venture.
SUBSEQUENT EVENTS
CHANGES IN OFFICERS AND DIRECTORS
Murray D. Watson resigned as Chairman, President, Chief Executive
Officer and Director of ACE effective June 4, 1997. Mr. Watson continues to
serve as President and a director of Vista. Mr. Kevin Quinn resigned as a
Director and Assistant Secretary of ACE effective June 4, 1997.
At the June 4, 1997 meeting of the Board of Directors, ACE elected the
following directors and officers: John McConnaughy as Chairman and Director;
Patrick J. Rooney as President and Chief Executive Officer; Kenneth G. Howling
as Vice President of Finance and Chief Financial Officer; Peter Bebenzer as
Secretary; and Yvonne Powell as Assistant Secretary.
On June 1, 1997, William Hutchinson resigned as a director of the
Company and in October 1997 Mr. Peter Bubenzer resigned as Secretary and
director, Ms. Judith Collins resigned as a director and Ms. Yvonne Powell
resigned as Assistant Secretary. On November 14, 1997, Mr. Kenneth G. Howling
resigned as Vice President of Finance and Chief Financial Officer.
On October 23, 1997 Jeffrey D. Dickson became ACE's Vice Chairman.
On November 14, 1997 Allan Leppik was hired as the Vice President,
Finance and Chief Financial Officer. Mr. Leppik resigned as of February 5,
1998 and is expected to continue to serve the Company as a consultant.
John McConnaughy resigned as an officer and director of the Company on
December 22, 1997.
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<PAGE>
Messrs. Patrick J. O'Sullivan and Jeffrey D. Dickson were elected
directors of the Company as of December 22, 1997 and Patrick J. Rooney was
elected Chairman of the Board in addition to his position as ACE's President
and Chief Executive Officer.
The following set forth certain information as to the current officers
and directors of ACE after giving effect to the above changes.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Patrick J. Rooney 58 President, Chief Executive Officer, Chairman of
the Board; Director
Jeffrey D. Dickson 54 Vice Chairman; Director
Patrick J. O'Sullivan 42 Director
</TABLE>
PATRICK J. ROONEY -- PRESIDENT, CHIEF EXECUTIVE OFFICER, CHAIRMAN AND
DIRECTOR
Patrick J. Rooney, a resident of Bermuda, has served as the President
and Chief Executive Officer of Atlantic Central since June 4, 1997. Prior to
his election as ACE's Chief Executive Officer, Mr. Rooney was engaged for more
than five years primarily as a consultant to EC/American Ltd., previously a
financial consultant to Vista, Atlantic Central, other business enterprises
and certain investors based outside of the United States. From June 1978 to
September 1985, Mr. Rooney was associated with Rooney Pace, Inc., a broker
dealer firm based in New York.
As the result of losing an appeal from his conviction in June 1988 of
filing false income tax return from 1983, Mr. Rooney has been subject from
more than the last five years to the terms of a consent decree order issued on
December 20, 1988 by the U.S. Securities and Exchange Commission which bars
Mr. Rooney from association with any broker or dealer, investment company,
investment adviser or municipal securities dealer. The terms of such order
provide that Mr. Rooney may reapply to the Securities and Exchange Commission
for such association, but he has advised the Company that to date he has not
elected to do so.
JEFFREY D. DICKSON -- VICE CHAIRMAN
Mr. Dickson is currently President and Chief Executive Officer of First
American AMO, Inc. Previously from June 1995 to April 1997, he was President
and COO of Salex Holding Corporation. Mr. Dickson has been involved in the
insurance Industry for 25 years in various senior management positions. He
served as Executive Vice President of the American Bakers Insurance Group,
President of Insurance America and prior to Salex he was the President and
Chief Executive Officer of Interloc Corporation. Mr. Dickson holds a BA in
History from the University of Colorado and is a graduate of the AMP program
at Harvard Graduate School of Business in Cambridge, MA.
PATRICK J. O'SULLIVAN -- DIRECTOR
Patrick J. O'Sullivan is an Irish citizen and has been admitted as a
Barrister at Law in Ireland and as a Solicitor in Australia. He has over 17
years of international investment banking experience and since 1997 has served
as a founder and director of Custom House Capital Limited, an investment
banking firm in Ireland. Custom House Capital Limited specializes in advising
and structuring capital market and investment banking transactions and manages
operations of the International Financial Services Centre in Dublin for
international financial institutions and corporations. From 1995 to 1997, Mr.
O'Sullivan was an Executive Director of Barings International Fund Managers in
the Dublin International Financial Services Centre. From 1990 to 1995, he was
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<PAGE>
one of the founding partners of Scandinavian Partners, a London based
corporate financing company specializing in advising investment banking and
securities firms on investment and securities transactions. From to 1990, Mr.
O'Sullivan was a legal director of Barclays de Zoete Wedd Limited from 1987 to
1989, a Corporate Finance Director for Heritable Investment Bank from 1985 to
1986 and a legal adviser for new issues, merger and acquisitions and asset
management transactions at the Investment Bank of Ireland.
PROMISSORY NOTE
Vista has been negotiating with the holder of a 12% promissory note for
$300,000 due June 30, 1997 who has verbally agreed to extend the maturity date
of the 12% promissory note. A definitive agreement for the 12% promissory
note extension is being negotiated.
CAPITAL STOCK
On December 18, 1996, ACE offered to the holders of Pharma Patch's
outstanding Class A, Class B, Class C and Class D Warrants the opportunity to
exchange up to 32,023 shares of common stock in ACE at a rate of one ACE share
for each 100 Class A, B. C and/or D Warrants. The exchange offered expired on
May 30, 1997 and as a result 15,230 shares of ACE were issued to holders of
Pharma Patch Warrants.
OTHER EVENTS
Management of Atlantic Central Enterprises Limited (the "Company")
discovered for the first time on December 12, 1997 that its former U.S.
counsel, Kevin J. Quinn of Santa Monica, California, fraudulently caused
960,000 newly issued and freely-tradable shares of the Company's common stock
to be issued to Mr. Quinn, his affiliate or to his brokerage account in
Vancouver, Canada, during the period from March 25, 1997 through July 31,
1997. This information was discovered by the Company in the course of
assembling data from the Company's transfer agent for the Company's audited
financial statements. As a result, records of the transfer agent indicate
there are currently 2,662,396 shares outstanding of the Company's common stock
including the 960,000 shares issued without consideration at Mr. Quinn's
fraudulent instructions and without the prior authorization or knowledge of
the Company's Board of Directors and management.
This discovery follows the termination in 1997 of Mr. Quinn's
relationship with the Company. Mr. Quinn acted as U.S. corporate and
securities counsel to the Company and its predecessor, Pharma Patch plc, from
1993 until approximately June 1997. The Company learned of an article in the
November 1997 issue of the California Bar Journal reporting that Kevin J.
Quinn had been suspended from the practice of law in 1993 as a result of a
1992 felony conviction which was recently reduced to a misdemeanor for
embezzlement and that he was permanently disbarred by the California State Bar
in September 1997. Those facts had not been previously disclosed to any
officers or directors of Pharma Patch plc from the time of its inception in
1993 or to the management of Atlantic Central since its inception in 1996.
When confronted with these disclosures, recent correspondence from Mr.
Quinn to the Company's new counsel does not deny his 1992 conviction, his 1993
suspension from the practice of law or that he was disbarred in September
1997. The Company notes that notwithstanding his suspension from the practice
of law since 1993, Mr. Quinn continued through 1997 to be listed as a
practicing attorney in California by the Martindale-Hubbell Law Directory.
The Vancouver brokerage firm that is reported to have received all or
most of the fraudulently issued shares advised the Company on Friday December
12, 1997 that it currently has no position in the Company's securities. The
Company's transfer agent likewise has confirmed that none of the original
registered owners of the Company's common stock are currently listed as record
owners of the Company's common stock. This information leads the Company to
believe, at present, that the fraudulently issued securities all were sold for
Mr. Quinn's account, and the Company is continuing its investigation.
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<PAGE>
The Company has demanded full restitution from Mr. Quinn of all legal
fees and expenses previously paid for Mr. Quinn's account and a restitution or
damages for the fraudulently issues shares. Commencing in December 1997, ACE
instituted litigation proceedings entitled Atlantic Central Enterprises
Limited vs. Kevin J. Quinn, et al in the United States District Court for the
Central District of California, Case No. 97-9420AAH (ANX), and in the Supreme
Court of British Columbia, Vancouver Registry No. C980037 (collectively the
"Quinn Litigation Proceedings"). In the Quinn Litigation Proceedings, the
Company seeks a judgement for compensatory damages in the amount of
approximately $750,000 in legal fees and costs paid by the Company to Mr.
Quinn during the period from 1993 to 1997 while he fraudulently represented
himself to be a licensed attorney, damages for the 960,000 fraudulently issued
shares of the Company's common stock, and other compensatory, punitive and
exemplary damages. The Company has assigned a value of $400,000 for the
960,000 shares fraudulently issued and will charge operations with the value
calculated using the market value on the dates the shares were issued. It is
the Company's intention to pursue legal action where it will seek the return
and cancellation of these 960,000 shares or other restitution equivalent to
the value of those shares. At hearings held in December 1997 and January
1998, orders of preliminary injunction were issued restraining the transfer of
assets from accounts with any financial institutions maintained by Mr. Quinn
and certain corporate entities controlled by Mr. Quinn. Pursuant to those
orders, approximately $220,000 of cash and securities in accounts maintained
by Mr. Quinn have been frozen. Mr. Quinn has filed responsive pleadings in
the Quinn Litigation Proceedings denying liability. Counsel for the Company,
based upon an ongoing investigation of documents and other information, has
expressed the opinion that the Company has meritorious causes of action
against Mr. Quinn. The ability of the Company to realize on any such
judgements, if successfully obtained, will be dependent upon the Company's
ability to locate and levy upon assets of Mr. Quinn.
The Company is also investigating potential claims against other third
parties that may have aided and abetted Mr. Quinn with respect to the one or
more of the causes of action asserted by the Company in the Quinn Litigation
Proceedings. In addition to Mr. Quinn and two entities believed to be under
his control, the Company's transfer agent has been named and served as a
defendant in the Quinn Litigation Proceedings. A motion to dismiss the
proceedings against the transfer agent was denied by the federal district
court in this case, and the transfer agent has filed an answer denying
liability. Based upon information obtained to date, it is Company's counsel's
opinion it is probable the Company has a meritorious cause of action against
the transfer agent.
OFFSHORE SALES OF COMMON STOCK UNDER REGULATION S
During February 1996, Vista and ACE negotiated agreements for Vista to
obtain debt and equity financing from ACE's predecessor, Pharma Patch. In
connection with ACE's acquisition of a controlling interest in Vista, ACE in
March 1996 also acquired 900,000 shares of Vista common stock from third
parties in a transaction exempt from the registration requirements of the
United States securities laws for offshore transactions under Regulation S
promulgated under the Securities Act of 1993 ("Regulation S"). Three Vista
stockholders, including Therapeutic Patch Research N.V. (TPR"), Saliva
Research Limited ("SRL") and Westcliff Partners Inc. ("WPI"), exchanged a
total of 900,000 shares of Vista's outstanding common stock for a total of
450,000 newly issued securities of Pharma Patch in this privately - negotiated
transaction. No fees or commissions to third parties were paid in connection
with this exchange of securities. The Vista securities included in this
exchange had been acquired by TPR, SRL and WPI in December 1995 as a result of
prior transactions financing the operations of Vista through December 1995.
The Company has been advised that TPR, SRL and WPI are clients of Jac J. Lam,
a former director and chief executive officer of Vista.
From March 1996 to May 1996, ACE offered and sold 189,600 shares of its
common stock to 11 investors in an offshore private placement offering exempt
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<PAGE>
from registration under Regulation S of the United States securities laws.
For each ACE share issued in this offering, investors paid a purchase price of
$5.00 per share in cash and surrendered 10 Pharma Patch Class C warrants for
cancellation. The Company received $948,000 in gross proceeds and cancelled
1,896,000 Pharma Patch Class C warrants (the number of warrants is stated
before giving effect to a subsequent 1-for-10 exchange of Pharma Patch shares
for ACE shares in their January 1997 reorganization) from the sale of 189,600
shares of the Company's common stock in the offshore private placement under
Regulation S. The Company incurred fees payable to a placement agent,
Multibreen B.V., in the aggregate amount of $94,800, resulting in net proceeds
to the Company of $853,200 for the shares sold in the Regulation S offering.
OTHER PRIVATE PLACEMENT OF COMMON STOCK
From March 1996 to May 1996, ACE offered and sold 25,400 shares of its
common stock to five investors in a private placement offering, primarily to
United States investors, exempt from registration under the U.S. Securities of
1933 for transactions not involving public offering. For each ACE share
issued in this offering, investors paid a purchase price $5.00 per share in
cash and surrendered 10 Pharma Patch Class C warrants for cancellation. The
Company received $127,000 in gross proceeds and cancelled 254,000 Pharma Patch
Class C warrants (the number of warrants is stated before giving effect to a
subsequent 1-for-10 exchange of Pharma Patch shares for ACE shares in their
January 1997 reorganization) from the sale of 25,400 shares of the Company's
common stock in this private placement. The Company incurred fees payable to
a placement agent, Multibreen B.V., in the aggregate amount of $25,400,
resulting in net proceeds to the Company of $101,600 for the shares sold in
this offering.
OTHER SUBSEQUENT EVENTS
PROMISSORY NOTE - Vista has been negotiating with the holder of a 12%
promissory note for $300,000 who has verbally agreed to extend the maturity
date of the 12% promissory note. Definitive agreements for the 12% promissory
note extension are being prepared and management anticipates that they will be
executed by April 30, 1998.
SALE OF MARKETABLE SECURITIES - Between March 1, 1997 and July 3, 1997,
the Company sold 35,000 shares of TCPI common stock with net proceeds to the
Company of approximately $360,000. Between July 4, 1997 and December 31, 1997,
the Company sold an additional 180,050 shares of TCPI common stock with net
proceeds to the Company of approximately $1,316,000. Proceeds were utilized
for operations and to purchase additional investments through December 31,
1997. The sale of TCPI stock subsequent to March 1, 1997 resulted in a net
loss of approximately $1,000,000 for the Company. As of February 28, 1998,
the Company had 43,850 shares of TCPI.
FIRST AMERICAN AMO - In May 1997, Ace entered into an agreement to form
a new corporation, First American AMO ["AMO"], which is located in Palm
Harbor, Florida. Ace agreed to fund AMO up to $450,000 prior to separate
outside funding of AMO. Ace owns 83% of the issued and outstanding common
stock of AMO upon signing of this agreement. AMO is an automotive maintenance
organization that improves the efficiencies of fixing a car.
ASSET PURCHASE AGREEMENTS - In July 1997, Vista Southwest entered into
an asset purchase and lease assumption agreement whereby Vista Southwest
agreed to purchase certain equipment for a total purchase price of $411,860,
consisting of $50,000 in cash payments, $361,860 in a promissory note with
annual interest of 8%. The principal and interest on the note is due the
earlier of June 30, 1999 or 30 days following the close of an offering of
securities of Vista Southwest or Vista Technologies, Inc. with net proceeds of
not less than $2,000,000. The estimated fair value of the acquired equipment
is $120,000. Therefore, goodwill of approximately $292,000 was recorded on
this transaction.
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<PAGE>
Also in July 1997, ICON Vision Centers, Inc., a wholly owned subsidiary
of the Company, entered into an asset purchase agreement to purchase certain
fixed assets and inventory for a total purchase price of $128,000, consisting
of $25,600 in cash and $102,400 in a non-interest bearing promissory note.
The note has monthly payments of $3,200 and will be paid in full by April 30,
2000. The estimated fair value of the inventory and fixed assets is
approximately $50,000. Therefore, goodwill of approximately $78,000 was
recorded on this transaction.
ADDITIONAL DEBT FINANCING - Subsequent to year end, ACE opened a margin
account with its broker and borrowed funds against its holdings of TCPI
shares. At February 28, 1998, there was no balance owing on the margin
account.
AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", and
SFAS No. 129, "Disclosure of Information About Capital Structure". Both are
effective for financial statements issued for periods ending after December
15, 1997. SFAS No. 128 simplifies the computation of earnings per share by
replacing the presentation of primary earnings per share with a presentation
of basic earnings per share. The statement requires dual presentation of
basic and diluted earnings per share by entities with complex capital
structures. Basic earnings per share include no dilution and is computed by
dividing income available to common stockholders by the weighted average
number of shares outstanding for the period. Diluted earnings per share
reflect the potential dilution of securities that could share in the earnings
of an entity similar to fully diluted earnings per share.
While Vista has not analyzed SFAS No. 128 sufficiently to determine its
long-term impact on per share reported amounts, SFAS No. 128 should not have a
significant effect on historically reported per share loss amounts.
SFAS No. 129 does not change any previous disclosure requirements, but
rather consolidates existing disclosure requirements for ease of retrieval.
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997.
Earlier application is permitted. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. SFAS
No.130 is not expected to have a material impact on Vista.
The FASB has issued FASB No. 131, "Disclosures About Segments of an
Enterprise and Related Information". SFAS No. 131 changes how operating
segments are reported in annual financial statements and requires the
reporting of selected information about operating segments in interim
financial reports issued to stockholders. SFAS No. 131 is effective for
periods beginning after December 15, 1997, and comparative information for
earlier years is to be restated. SFAS No. 131 need not be applied to interim
financial statements in the initial year of its application. SFAS No. 131 is
not expected to have a material impact on Vista.
U.S. DOLLAR PRESENTATION AND FOREIGN CURRENCY FLUCTUATIONS
Except as otherwise stated in this Report, all monetary amounts have been
presented in U.S. dollars.
Vista's European operating subsidiaries in Italy and Sweden currently
represent a significant portion of Vista's revenues and expenses that are
collected and paid in foreign currencies. Vista publishes its consolidated
financial statements in U.S. dollars after translating transactions in foreign
currencies into U.S. dollars. In periods when the U.S. dollar depreciates
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<PAGE>
against the relevant foreign currencies, reported earnings attributable to
transactions in foreign currencies may be materially enhanced. In periods
when the U.S. dollar appreciates against the relevant foreign currencies,
however, reported earnings attributable to transactions in foreign currencies
may be materially reduced. Fluctuations in the exchange rate between foreign
currencies and the U.S. dollar may also affect the book value of Vista's
assets and the amount of its stockholders' equity.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included later in this Report:
<TABLE>
<CAPTION>
ATLANIC CENTRAL ENTERPRISES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS AT FEBRUARY 28, 1997
<S> <C>
Index to Consolidated Financial Statements at February 28, 1997
and for the Year ended February 28, 1997 ........................... F-1
Independent Auditor's Report .......................................... F-2
Consolidated Financial Statements as of February 28, 1997:
Consolidated Balance Sheet at February 28, 1997 ..................... F-3
Consolidated Statement of Operations for the Year
ended February 28, 1997 ........................................... F-5
Consolidated Statement of Changes in Shareholders' Equity
for the Year ended February 28, 1997 .............................. F-6
Consolidated Statement of Cash Flows for the Year
Ended February 28, 1997 ........................................... F-7
Notes to Consolidated Financial Statements .......................... F-9
Not covered by report of independent auditor:
Index to Consolidated Financial Statements at February 29, 1996
and for the Year ended February 29, 1996 ........................... F-33
Consolidated Financial Statements as of February 29, 1996:
Consolidated Statement of Operations for the Year
ended February 29, 1996 ........................................... F-34
Consolidated Statement of Changes in Shareholders' Equity
for the Year ended February 29, 1996 .............................. F-35
Consolidated Statement of Cash Flows for the Year
Ended February 29, 1996 ........................................... F-36
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As reported in ACE's Current Report on From 8-K dated May 28,1997, ACE
changed its independent accountants in May 1997. The accounting firm of KPMG
Peat Marwick LLP acted as principal independent public accountants to audit
the consolidated financial statements of ACE for its fiscal year ended
February 29, 1996. On May 28, 1997, the Company was advised by KPMG Peat
Marwick LLP that the client-auditor relationship between ACE and KPMG Peat
Marwick LLP had been terminated. The report of KPMG Peat Marwick LLP on the
consolidated financial statements of ACE for the fiscal year ended February
29, 1996 did not contain an adverse opinion or a disclaimer of opinion, and
was not qualified is to uncertainty, audit scope, or accounting principles.
The decision to terminate the client-auditor relationship between ACE and KPMG
Peat Marwick LLP was initiated by KPMG Peat Marwick LLP, and ACE's Board of
Directors accordingly did not participate in a decision to change the
Company's independent accountants. In connection with its audit for the
fiscal year ended February 29, 1996 and the subsequent interim period through
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<PAGE>
May 28, 1997, there were no disagreements of ACE with KPMG Peat Marwick LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of KPMG Peat Marwick LLP would have caused them
to make reference thereto in their report on the financial statements for such
year. During the fiscal year ended February 29, 1996 and prior fiscal periods
of ACE, there have been no reportable events (as defined in Regulation S-K
Item 304(a)(1)(v)).
On May 30, 1997, ACE engaged the services of the independent public
accounting firm of Moore Stephens, P.C. to act as the principal independent
accountants as to ACE's consolidated financial statements for its most recent
fiscal year ended February 28, 1997. Prior to engaging Moore Stephens, P.C.,
ACE did not consult its new independent public accountants as to the
application of accounting principles to a specified transaction, either
completed or proposed, or as to the type of audit opinion that might be
rendered on ACE's financial statements. ACE's Board of Directors participated
in and approved the decision to appoint Moore Stephens, P.C. to act as the
principal independent accountants as to the Company's consolidated financial
statements for its most recent fiscal year ended February 28, 1997.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Directors and Officers at February 28, 1997 were as
follows:
<TABLE>
<CAPTION>
Name Age Positions
- -------------------------- --- -----------------------------------------
<S> <C> <C>
Murray D. Watson 53 Chairman of the Board, CEO, President and
Director
Kenneth G. Howling 40 Vice President of Finance and Treasurer
Paul E. Heney 38 Secretary
Kevin J. Quinn 55 Assistant Secretary and Director
Peter Bubenzer 42 Director
William G. Hutchinson 59 Director
Judith Collis 37 Director
</TABLE>
MURRAY D. WATSON
Mr. Watson served as a director, President and CEO of ACE and its
predecessor corporation, Pharma Patch Plc, both publicly-traded companies,
from July 1993 to June 4, 1997, and as a director of Technical Chemical
Products, Inc., a publicly-traded company, from January 1996 to May 1996.
Pharma Patch Plc was an Irish public company engaged in research and
development of both advanced transdermal drug delivery systems and advanced
skin penetration enhancers, a business sold by Pharma Patch in late 1995 to
Technical Chemical Products, Inc. Pharma Patch Plc reorganized by
transferring all of its assets and liabilities to Atlantic Central in January
1997. Prior to July 1993, Mr. Watson had been the President and Chief
Operating Officer of Pharma Patch's predecessor, Medipro Sciences Limited,
from November 1987. Mr. Watson has over 25 years of experience in the
international health care industry, including Vice President, Picker
International, Inc.; President, Odyssey Inc.; and General Manager, American
Hospital Supply Corp. of Canada. As president since 1985 of the M.D.W. Group,
Inc., a privately owned merchant banking company, he has managed a broad
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<PAGE>
spectrum of business ventures. Mr. Watson received his B.A. Science in Civil
Engineering in 1965 from the University of Toronto and his M.B.A. in 1971 from
York University, Toronto, Canada.
KENNETH G. HOWLING, CPA
Mr. Howling served from November 8, 1993 until November 14, 1997 as Vice
President of Finance and Chief Financial Officer of Atlantic Central and its
corporate predecessor, Pharma Patch Plc. From June 1988 until November 1993,
Mr. Howling was employed by Roberts Company Canada Limited in the capacities
of corporate Secretary and Controller from June 1988 until May 1991 and as
General Manager from June 1991 until November 1993. Prior to June 1988, he was
employed for ten years in financial and general management positions with
Smith Kline Beecham, Bencard Allergy Laboratories, McGraw Edison and Price
Waterhouse. Mr. Howling has been involved in acquisitions, corporate
restructuring, cash flow management, human resource management and management
information systems.
He received a Certified Public Accountant license from the State of New
Jersey in 1987 and holds a B.A. degree in Accounting from Upsala College in
East Orange, New Jersey.
PAUL E. HENEY
Mr. Heney was elected ACE's Secretary from February 2, 1996 through June
4, 1997. Mr. Heney is an attorney and has practiced law in the Toronto law
firm of Heney & Associates since 1991.
KEVIN J. QUINN
Mr. Quinn was elected ACE's Assistant Secretary from February 2, 1996
through June 4, 1997, served as a director from November 21, 1996 to June 4,
1997, and served as a director of Pharma Patch from March 1996. See
"Fraudulent Share Issuances and Legal Proceedings Against Former Counsel" in
Item 3 and "Subsequent Events - Other Events" in Item 6 of this Report.
WILLIAM HUTCHISON, B. ENG., P. ENG.
Mr. Hutchison is the Managing Director of Quorum Growth International
Limited, located in Singapore. Quorum is a Canadian headquartered company
providing expansion capital and strategic management expertise to
technology-rich growth companies. Prior to joining Quorum, Mr. Hutchinson was
National Managing Partner for the Information Technology Practice of Ernst &
Young (Canada) and also National Director, Information, Communications and
Entertainment Industries and Chairman of the International Telecommunications
Industries Practice of Ernst & Young; Chairman & CEO of Infomart, Canada's
first computer systems manufacturing firm. Mr. Hutchison has focused much of
his 35 year career in pioneering efforts to help establish Canada's advanced
technology infrastructure. He was Chairman of the Executive Committee that
created CANARIE Inc.; a former Chairman of the Board and he continues as a
director. Other positions Mr. Hutchison has held include Vice Chairman of the
Prime Minister's National Advisory Board for Science and Technology; founder,
Director and Chairman of the Canadian Advanced Technology Association (CATA);
and founder and Director if Precarn Associates, Ltd. Mr. Hutchison received
his B. Eng. In Electrical Engineering in 1962 from McGill University in
Montreal, Quebec.
PETER BUBENZER
Peter Bubenzer was educated in Bermuda and England, studied law at
Exeter University, England graduating in 1978. He joined Gray's Inn and was
called to the Bar in England in 1979 and to the Bermuda Bar in 1980. He
joined Appleby, Spurling & Kempe in October 1980 and became a partner in
December, 1986. He practices in the area of Company law, specializing in
Securities and Fund work, and now is Head of the Company Department of that
firm. He had published various articles and spoken at various conferences on
the topic of Mutual Funds in Bermuda.
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<PAGE>
JUDITH COLLIS
Judith Collis was educated in Bermuda and England and studied at McGill
University, Canada, graduating in 1981 before going on to study law at Bristol
University and King's College, London University, graduating in 1984. She was
called to the Bar in England and Wales in 1985 and to the Bermuda Bar in 1986.
She joined Appleby, Spurling & Kempe as an Associate in 1986 in the Company
Department and became a Partner in the Firm in 1991. She practices in the
area of company law, and is the Head of the Firm's Mutual Fund and Unit Trust
Team, and Deputy Head of the Firm's Security Team.
The consulting agreements between Pharma Patch PLC and corporate
affiliates of Messrs. Watson and Howling were assumed by ACE upon consummation
of the Plan of Reorganization. The compensation arrangements described in the
consulting agreements did not change.
See "Subsequent Events" in Item 6 of this Report for changes in the
Directors and Officers subsequent to February 28, 1997.
The share holdings of officers and directors of ACE after consummation
of the Plan of Reorganization were as follows:
<TABLE>
<CAPTION>
Ordinary Shares Percentage
Beneficially of Outstanding
Owned (1) Shares (2)
---------------- ---------------
<S> <C> <C>
Murray D. Watson ............... 41,628 (3) 2.5%
Kenneth G. Howling ............. 11,300 0.7%
Paul E. Heney .................. 30,250 1.8%
Kevin J. Quinn ................. 11,641 0.7%
Peter Bubenzer ................. -0- --
William G. Hutchinson .......... -0- --
Judith Collis .................. -0- --
All Officers and Directors
as a Group (seven persons) .. 94,819 5.7%
</TABLE>
__________________________
(1) Unless otherwise indicated, all shares are beneficially owned and sole
voting and investment power is held by the person and entity listed in
the table above.
(2) Based on 1,654,157 shares outstanding at February 28, 1997.
(3) Includes 41,628 shares owned by Trident Management Inc. in which Mr.
Watson is a minority shareholder. Mr. Watson disclaims beneficial
ownership of such shares.
MANAGEMENT OF THE COMPANY
There is no family relationship between any of ACE's directors and
executive officers. All directors hold office until the next annual meeting
of stockholders and until their successors are elected. Officers serve at the
discretion of the Board of Directors. There are no arrangements or
understandings between any director and any other person pursuant to which any
person was elected or nominated as a director.
The Board of Directors currently has no committees of the Board.
During the fiscal year ended February 28, 1997 the Board of Directors
held eight meetings and took certain actions by unanimous written consent of
the Board. No director attended fewer than 75% of all meetings of the Board
of Directors.
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<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires ACE's executive officers and directors, and persons who
beneficially own more than 10% of ACE's stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Based upon a review of the copies of such forms furnished to ACE,
responses from ACE's executive officers and directors in reply to monthly
questionnaires, and other information available to ACE, ACE believes that as
of February 28, 1997, all Section 16(a) filing requirements applicable to its
executive officers and directors were complied with.
Certain foreign corporate shareholders hold ACE common stock and
warrants and are believed in certain cases to share common management. Inmost
instances, beneficial ownership of ACE securities held by such foreign
corporate shareholders has not been disclosed to ACE. Based on information
available to ACE, ACE has no reason to believe that any of such parties are
currently required to file reports under Section 16(a) of the Exchange Act.
However, since ACE does not necessarily have access to all information that
may be relevant, ACE expresses no opinion whether any such group of foreign
investors that may share common management may be required to file reports
under Section 16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- --------------------------------
Awards Payouts
--------------------- --------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Fiscal Salary Bonus Compen- Awards Options/ Payouts Compen-
Principal Position Year(1) ($) ($) sation($) ($) SARs(#) ($) sation($)
- ------------------ ------- --------- --------- --------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Murray D. Watson 1997 $158,335(2) -0- $(309,375)(6) -0- -0- -0- -0-
President and 1996 $211,719 -0- $ 309,375 (3) -0- -0- -0- -0-
Chief Executive
Officer (2)
Kenneth G. Howling 1997 $ 70,000(4) -0- $(115,000)(6) -0- -0- -0- -0-
Vice President 1996 $117,917 -0- $ 115,000 (5) -0- -0- -0- -0-
of Finance and
Chief Financial
Officer
</TABLE>
________________________________________
(1) Information set forth in the table represents data for the fiscal years
ended February 28, 1997 ("1997") and February 29, 1996 ("1996").
(2) Mr. Watson resigned as President and Chief Executive Officer of the
Company on March 6, 1997. Compensation set forth in the table for 1997
includes compensation paid to a corporate affiliate of which Mr. Watson
is a minority shareholder. Compensations set forth in the table for
1997 excludes compensation paid to a corporate affiliate of which ACE is
the controlling stockholder, for salary in the amount of $66,665
unrelated to his ACE activities.
(3) Represents 257,813 Ordinary Shares valued at $0.80 per share and 206,250
Ordinary Shares valued at $0.50 per share which were issued to a
corporation in which Watson is a minority shareholder.
(4) Mr. Howling resigned as Chief Financial Officer and Vice President of
Finance of the Company on November 14, 1997. Compensation set forth in
the table for 1997 includes compensation paid to a corporate affiliate
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<PAGE>
of which Mr. Howling is the sole shareholder. Mr. Howling's affiliate
was also compensated during 1997 by Vista, of which ACE is the
controlling stockholder, for salary in the amount of $55,000 unrelated
to his ACE activities, and such other compensation paid by Vista is not
included in the table.
(5) Represents 143,750 Ordinary Shares valued at $0.80 per share issued to a
consulting company in which Mr. Howling is the sole shareholder.
(6) Upon consummation of the Plan of Reorganization, Trident Management,
Inc. ("TMI") and Pinnacle Financial Corporation, corporate affiliates of
Messrs. Watson and Howling, respectively, have returned to ACE the
shares received from the Company as described under the caption "Other
Annual Compensation" for the fiscal year ended February 29, 1996.
THE 1996 STOCK OPTION PLAN
On February 2, 1996, the Company's Board of Directors proposed the 1996
Stock Option Plan [Option Plan} that was approved by the stockholders of the
Company in 1996. The purpose of the Option Plan is to permit the Board or a
Committee of the Board the flexibility of granting options of the Company's
common stock in lieu of cash to compensate officers, directors, employees and
other individuals acting as professionals, consultants and/or advisers to the
Company for services rendered to the Company and its subsidiaries. A total of
350,000 shares of common stock are available for payment of compensation under
the Option Plan. No compensation awards under the Option Plan have been made.
OTHER
ACE currently has no pension, retirement, annuity, savings or similar
benefit plan which provides compensation to its executive officers or
directors except for group health and life insurance plans.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information (except as otherwise
indicated by footnote) as of March 31, 1998 for common stock owned by (i) each
person known by management to beneficially own more than 5% of ACE's
outstanding Common Stock, (ii) each of ACE's directors, and (iii) all
executive officers and directors as a group:
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Name or Group No. of Shares % of Class (1)
- ----------------------------------------- -------------- --------------
<S> <C> <C>
Directors:
Patrick J. Rooney .................... 876,679 (2) 32.9%
Jeffrey D. Dickson ................... -0- --
Patrick J. O'Sullivan ................ -0- --
All officers and directors
as a Group (three persons) ............ 876,679 (3) 32.9%
</TABLE>
____________________________________________
(1) Based on 2,662,396 shares of Common Stock outstanding at February 28,
1998.
(2) Includes shares which may be deemed indirectly beneficially owned,
consisting of 876,679 shares of common stock owned by various
corporations in which Mr. Rooney is not an officer or director and in
which he owns less than a majority of the voting capital stock. None of
such corporations individually owns more than 5% of the Company's
outstanding capital stock. Mr. Rooney disclaims beneficial ownership of
the Company's shares owned by such corporate entities.
-46-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Atlantic Central Enterprises Limited ("ACE") is a Bermuda company with
securities publicly traded in the United States over-the-counter market. In
January 1997, ACE acquired all of the assets and liabilities of Pharma Patch
Plc ("Pharma Patch"), a publicly-traded company with its principal office in
Dublin, Ireland. Pharma Patch Plc was an Irish public company formerly
engaged in research and development of advanced transdermal drug delivery
systems and advanced skin penetration enhancers, a business sold by Pharma
Patch in late 1995 to Technical Chemical Products, Inc. References in this
Report to Atlantic Central as to periods prior to February 1997 include Pharma
Patch as the predecessor-in-interest of Atlantic Central.
As described in more detail below, Atlantic Central acquired a
controlling equity interest in Vista in March 1996 and owned 3,423,800 shares
of Vista's common stock at August 31, 1997, representing approximately 54.1%of
Vista outstanding Vista common stock. Since February 1996, Atlantic Central
has charged Vista for allocations of certain salaries and office expenses
incurred by Atlantic Central in Toronto, Canada for use of a portion of
management time devoted to Vista by Murray D. Watson and Kenneth G. Howling
and their support staff. Atlantic Central has also advanced funds to or for
Vista's account from time to time, of which $800,000 was repaid in cash in
late 1996.
Vista has been dependent in recent periods upon advances from Atlantic
Central for funds to sustain Vista's operations. Outstanding advances due to
Atlantic Central are classified as short-term obligations, totaled $723,000 as
of February 28, 1997, and have subsequently increased to approximately
$1,100,000 as of September 30, 1997. Advances from Atlantic Central are
secured by Vista's agreement to pledge shares of its European subsidiaries as
collateral security for repayment of its obligations to Atlantic Central.
There can be no assurance that Atlantic Central will continue to provide
advances to Vista or that Vista will be able to obtain additional capital from
other sources.
Murray D. Watson served from July 1993 to June 5, 1997 as Chairman of
the Board, Chief Executive Officer and a director of ACE and is currently
employed as an executive officer of another subsidiary of ACE. Mr. Watson has
also served as a director and Vice Chairman of Vista from February 1994 to the
present time, and has served as acting President and Chief Executive Officer
of Vista from March 6, 1997 to July 22, 1997 and from September 9, 1997 to the
present date. Kenneth G. Howling, former Vice President and Chief Financial
Officer of ACE, served as Vista's Treasurer and Chief Financial Officer from
February 16, 1996 to November 14, 1997.
-47-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed with this Report or
incorporated by reference to prior filings.
# Denotes exhibits filed with this Report.
(M) Denotes management contract or compensation plan or arrangement.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -------------------------------------------------------
<S> <C> <C>
# 2.1 Business Transfer Agreement between Registrant and Pharma Patch PLC
dated January 17, 1997.
3.1 Registrant's Memorandum of Association filed with the Bermuda
Registrar of Companies on February 2, 1996, amended by Memorandum of
Increase of Share Capital dated August 16, 1996 and Certificate of
Incorporation on Change of Name dated April 22, 1996 [incorporated
by reference to Exhibit 3.1 filed with Registrant's Amendment No. 1
to Registration Statement on Form S-4, Commission File Number
333-10263].
# 3.2 Registrant's Bye-Laws as adopted on November 20, 1996.
(M) 10.1 Management and Consulting Agreement dated November 16, 1995 between
Pharma Patch PLC and Trident Management Inc. [incorporated by
reference to Exhibit 10.1 filed with Registrant's Amendment No. 1 to
Registration Statement on Form S-4, Commission File Number
333-10263].
(M) 10.2 Management and Consulting Agreement dated November 16, 1995 between
Pharma Patch PLC and Pinnacle Financial Corporation [incorporated
by reference to Exhibit 10.2 filed with Registrant's Amendment No. 1
to Registration Statement on Form S-4, Commission File Number
333-10263].
(M) 10.3 Registrant's 1996 Stock Option Plan [incorporated by reference to
Exhibit 4.1 filed with Registrant's Registration Statement on Form
S-4, Commission File Number 333-10263].
# (M) 10.4 Director and Officer Indemnification Agreement dated February 1,
1994 between Vista Technologies Inc. and Murray D. Watson.
# 10.5 Form of Regulation S Offshore Transaction Subscription Agreement
relating to 1996 private placement offering of Pharma Patch shares
in exchange for cash and surrender of Pharma Patch Class C warrants.
# 10.6 Form of Regulation D Subscription Agreement relating to 1996 private
placement offering of Pharma Patch shares in exchange for cash and
surrender of Pharma Patch Class C warrants.
# 10.7.1 $177,777 in principal amount of 12% Convertible Promissory Notes due
June 15, 1998 issued by Vista Technologies Inc. to G. Lennart
Perlhagen dated June 1, 1995.
# 10.7.2 $100,000 in principal amount of 12% Convertible Promissory Notes due
June 15, 1998 issued by Vista Technologies Inc. to Quintillion B.V.
dated June 15, 1995.
# 10.7.3 Form of Royalty Agreement dated as of June 15, 1995 by Vista Vision
Scandinavia AB in favor of G. Lennart Perlhagen and Quintillion B.V.
# 10.8.1 Form of Term Sheet between the Registrant and Jeffrey Dickson
relating to First American AMO.
# 10.8.2 Promissory Note in the principal amount of $138,698 issued to
Registrant by First American-AMO Inc.
-48-
<PAGE>
# 10.9 Term Sheet dated August 18, 1997 between the Registrant and WSM
Consultants Ltd.
# 10.10 Stock Purchase Agreement dated March 1, 1996 between Vista
Technologies Inc. and Pharma Patch Plc as to the sale of 200,000
shares of Vista common stock for $500,000.
# 10.11 Agreement dated as of March 1, 1996 between Vista Technologies Inc.
and Pharma Patch Plc. as to sale of 2,060,000 shares of Vista common
stock.
# 10.12 Form of Share Exchange Agreement dated March 29, 1996 among Pharma
Patch PLC, Therapeutic Patch Research N.V., Saliva Research Limited
and Westcliff Partners Inc. as to shares of Vista Technologies Inc.
# 10.13.1 12% Promissory Note in the principal amount of $300,000 due June 30,
1997 issued by Vista Technologies Inc. to Castle Rock Partners LP.
# 10.13.2 Security Agreement dated November 11, 1996 by Vista Technologies
Inc. to secure 12% promissory note.
# 10.14 Resolution adopted by Vista Technologies Inc. Board of Directors on
March 6, 1997 granting security interest in capital stock of its
European subsidiaries to secure advances from the Registrant.
# 10.15 Employment Agreement dated as of January 31, 1996 between Vista
Technologies Inc. and Thomas A. Schultz.
# 10.16 Employment Agreement dated November 1, 1996 between the Vista
Technologies Inc. and Allen J. Simon.
# 10.17 Agreement dated January 6, 1997 among Vista Technologies Inc.,
Pharma Patch PLC, RS-800 Inc., Vista Laser Centers of the Northeast
Inc., Dr. Sheldon Herzig, Cherry Sharrer and Cherry Development
Corp.
# 10.18.1 Assignment of Office Lease dated January 31, 1996 among Evergreen
Corporate Center as landlord, Northern Arizona Eye Clinic as
assignor and Vista Laser Centers of the Southwest, Inc. as tenant-
assignee for premises in Scottsdale, Arizona.
# 10.18.2 Office Lease dated December 28, 1992 between Evergreen Corporate
Center as landlord and Northern Arizona Eye Clinic as tenant for
premises in Scottsdale, Arizona.
# 10.19 Exchange Agreement dated October 1, 1996 between Vista Laser Centers
of the Southwest, Inc. and Vista Technologies Inc.
# 10.20 Promissory Note dated July 1, 1997 in the principal amount of
$361,860 issued by Vista Laser Centers of the Southwest, Inc. to
Casebeer Eye Centers, Ltd.
# 21 Subsidiaries of the Registrant.
# 27 Financial Data Schedule at February 28, 1997.
</TABLE>
(b) REPORTS ON FORM 8-K.
(1) During the three months ended February 28, 1997, the
Registrant did not file any Current Reports on Form 8-K with the Securities
and Exchange Commission.
(2) Subsequent to February 28, 1997, the Company filed Current
Reports on Form 8-K, as follows:
(i) The Company filed a Current Report dated as of May 27,
1997 concerning a change in auditors. Reference is made to Item 8 of this
Report.
-49-
<PAGE>
(ii) ACE filed a Current Report dated as of June 4, 1997
concerning changes in management. The report noted that Mr. John E.
McConnaughy, Jr. and Mr. Patrick J. Rooney were elected to ACE's Board of
Directors. Mr. McConnaughy was named Chairman of the Board and Mr. Rooney was
elected President and Chief Executive Officer. That Report also noted that
Mr. Murray D. Watson had resigned as President and a Director and Kevin J.
Quinn had resigned as a director. See "Subsequent Events - Changes in
Officers and Directors" in item 6 of this Report.
(iii) ACE filed a Current Report dated as of June 27, 1997
announcing a changed in the Company's fiscal year-end from February 28 of each
year to end on March 31 of each year commencing with the period ending March
31, 1997.
(iv) ACE filed a Current Report dated as of December 12,
1997 disclosing that management discovered for the first time on December 12,
1997 that its former U.S. counsel, Kevin J. Quinn, fraudulently caused 960,000
newly issued and freely-tradable shares of the Company's common stock to be
issued to Mr. Quinn, his affiliate or to his brokerage account in Vancouver,
Canada, during the period from March 25, 1997 through July 31, 1997. As a
result, records of the Company's transfer agent indicate there are currently
2,662,396 shares outstanding of the Company's common stock including the
960,000 shares issued without consideration at Mr. Quinn's fraudulent
instructions and without the prior authorization or knowledge of the Company's
board of directors and management. That Report also noted that the Company
had discovered for the first time in November 1997 that Mr. Quinn had been
suspended from the practice of law in 1993 as a result of a 1992 conviction
for embezzlement and that he was permanently disbarred by the California State
Bar in September 1997. See "Fraudulent Share Issuances and Legal Proceedings
Against Former Counsel" in Item 3 and "Subsequent Events - Other Events" in
Item 6 of this Report.
-50-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AT FEBRUARY 28, 1997 AND FOR THE YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report ................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheet ............................... F-3
Consolidated Statement of Operations ..................... F-5
Consolidated Statement of Shareholders' Equity ........... F-6
Consolidated Statement of Cash Flows ..................... F-7
Notes to Consolidated Financial Statements ................... F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Atlantic Central Enterprises Limited
Bermuda
We have audited the accompanying consolidated balance sheet of
Atlantic Central Enterprises Limited as of February 28, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the year ended February 28, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated 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 consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Atlantic Central Enterprises Limited as of February 28, 1997, and
the results of their operations, and their cash flows for the year ended
February 28, 1997, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company incurred a net loss of approximately $12,546,000, a loss from
continuing operations of approximately $10,316,000, a working capital deficit
of approximately $874,000 and utilized approximately $4,173,000 in cash for
operating activities for the year ended February 28, 1997. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Moore Stephens, P.C.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
July 3, 1997
F-2
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents ................................ $ 1,806,672
Prepaid Expenses ......................................... 158,245
Accounts Receivable - Trade .............................. 142,281
Accounts Receivable - VAT ................................ 18,479
Notes Receivable ......................................... 125,000
Investment in TCPI - Available for Sale at Market Price .. 2,372,500
------------
Total Current Assets ..................................... 4,623,177
------------
Long-Term Assets:
Property and Equipment - Net ............................. 2,094,812
Long-Term Note Receivable ................................ 410,838
Long-Term VAT Receivable ................................. 178,890
Other Assets ............................................. 78,115
Long-Term Receivable - Related Party ..................... 733,062
------------
Total Long-Term Assets ................................... 3,495,717
------------
Total Current Assets ..................................... $ 8,118,894
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts Payable ......................................... $ 2,633,496
Accrued Expenses ......................................... 1,353,184
Accounts Payable - Related Parties ....................... 365,417
Current Portion of Long-Term Debt ........................ 370,373
Current Portion of Obligations Under Capital Leases ...... 274,510
Note Payable - Current Portion ........................... 500,000
------------
Total Current Liabilities ................................ 5,496,980
------------
Long-Term Liabilities:
Long-Term Debt - Net of Current Portion .................. 766,665
Obligations Under Capital Leases ......................... 1,059,769
Notes Payable - Net of Current Portion ................... 277,777
------------
Total Long-Term Liabilities .............................. 2,104,211
------------
Commitments and Contingencies --
------------
Minority Interest .......................................... 211,410
------------
Shareholders' Equity:
Capital Stock - 50,000,000 Common Shares Authorized,
1,654,157 Common Shares Issued and Outstanding .......... 16,542
Premium in Excess of Par Value ........................... 20,391,325
Foreign Currency Translation Adjustment .................. 159,431
Unrealized Loss on Investment ............................ (1,569,000)
Accumulated Deficit ...................................... (18,692,005)
------------
Total Shareholders' Equity ............................... 306,293
------------
Total Liabilities and Shareholders' Equity ............... $ 8,118,894
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Revenues ................................................. $ 3,485,667
------------
Operating Expenses:
Administrative ......................................... 8,663,704
Writedown of Goodwill .................................. 4,280,107
Depreciation and Amortization .......................... 777,202
Provision for Doubtful Accounts ........................ 91,867
Gain on Sale of Assets ................................. (14,621)
Foreign Exchange ....................................... 3,202
------------
Total Operating Expenses ............................... 13,801,461
------------
Loss from Continuing Operations ........................ (10,315,794)
------------
Other Income and [Expenses]:
Loss on Sale of Marketable Securities .................. (2,096,214)
Interest Expense ....................................... (275,787)
Interest Expense - Related Party ....................... (27,774)
Other Income ........................................... 76,388
Other Expenses ......................................... --
------------
Total Other [Expenses] ................................. (2,323,387)
------------
Loss Before Discontinued Operations .................... (12,639,181)
------------
Discontinued Operations:
Loss from Discontinued Operations ...................... --
Gain of Sale of Business Segment ....................... --
------------
Gain on Discontinued Operations ........................ --
------------
[Loss] Before Equity Investee
and Minority Interest Income [Loss] .................. (12,639,181)
Equity Investee [Loss] ................................... (1,934,171)
------------
[Loss] Income Before Minority [Loss] ................... (14,573,352)
Minority Interest Loss ................................... 2,027,233
------------
Net [Loss] ............................................. $(12,546,119)
============
Per Share Common Stock:
Loss from Continuing Operations ........................ $ (7.54)
Discontinued Operations ................................ $ --
Net Earnings [Loss] .................................... $ (7.54)
Weighted Average Number of Ordinary Shares Outstanding . 1,663,163
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AS OF FEBRUARY 28,
1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital Stock Foreign Unrealized
-------------------- Premium in Currency Gain Total
Number of Excess of Translation [Loss] on Accumulated Shareholders'
Shares Amount Par Value Adjustment Investments Deficit Equity
---------- -------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
February 29, 1996 1,141,603 11,411 17,649,925 (6,518) 3,176,108 (6,249,628) 14,581,298
Issuance of Stock
Payment of
Professional Fees 63,874 639 322,597 -- -- -- 323,236
Shares Issued to
Acquire 900,000
of Vista's
Outstanding
Common Stock 450,000 4,500 2,245,500 -- -- -- 2,250,000
Private Placement 60,000 600 299,400 -- -- -- 300,000
Share Issuance
Cost -- -- (126,705) -- -- -- (126,705)
Unrealized Loss
on Investments -- -- -- -- (4,745,108) -- (4,745,108)
Adjustment for
European Operating
Subsidiaries to
Conform to
Reporting Periods -- -- -- -- -- 103,742 103,742
Net Loss -- -- -- -- -- (12,546,119) (12,546,119)
Return of Shares
by Pinnacle
and Trident (60,780) (608) 608 -- -- -- --
Foreign Currency
Translation
Adjustment -- -- -- 165,949 -- -- 165,949
---------- -------- ------------ ----------- ----------- ------------ -------------
Balance -
February 28, 1997 1,654,157 $ 16,542 $ 20,391,325 $ 159,431 $(1,569,000) $(18,692,005) $ 306,293
========== ======== ============ =========== =========== ============ =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
ATLANTIC CENTRAL ENTERPRISES, LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED FEBRUARY 28, 1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Operating Activities:
Net [Loss] ............................................. $(12,546,119)
------------
Adjustments to Reconcile Net Income to Net
Cash [Used for] Operating Activities:
Writedown of Goodwill ................................ 4,280,107
Depreciation and Amortization ........................ 777,202
Loss on Sale of Marketable Securities ................ 2,096,214
Noncash Expenses ..................................... 219,636
Minority Interest .................................... (2,130,975)
Equity Investee Loss [Income] - Net .................. 1,934,171
Write-Down of Fixed Assets ........................... --
Gain on Sale of Business ............................. --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable - Trade ........................ (75,155)
Accounts Receivable - VAT .......................... 22,455
Related Parties .................................... 89,454
Prepaid Expenses ................................... 67,069
Other Assets ....................................... 247,612
Increase [Decrease] in:
Accounts Payable - Trade ........................... 1,340,535
Accounts Payable - Officers ........................ (54,441)
Accrued Expenses ................................... (166,767)
Other Liabilities .................................. (377,510)
Foreign Currency Translation Adjustment ............ 103,741
------------
Total Adjustments .................................... 8,373,348
------------
Net Cash - Operating Activities - Forward .............. (4,172,771)
------------
Investing Activities:
Net Proceeds from Sale of Marketable Securities ........ 5,510,691
Issuance of Notes Receivable ........................... (260,838)
Purchase of Fixed Assets ............................... (727,447)
Note Receivable ........................................ (150,000)
Cash Acquired in Investment in Vista ................... 249,674
Advances to Investee Companies ......................... (802,430)
------------
Net Cash - Investing Activities - Forward .............. $ 3,819,650
------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED FEBRUARY 28, 1997
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Net Cash - Operating Activities - Forwarded ............ $ (4,172,771)
------------
Net Cash - Investing Activities - Forwarded ............ 3,819,650
------------
Financing Activities:
Issuance of Notes Payable .............................. 300,000
Repayment of Capital Lease Obligation .................. (338,936)
Proceeds from Long-Term Debt ........................... 604,964
Shares Issued for Cash ................................. 276,894
Shares Issued by Financing Activities .................. 425,000
------------
Net Cash - Financing Activities ........................ 1,267,922
------------
Effective of Exchange Rate Change in Cash
and Cash Equivalents ................................... 1,097
------------
Effect of Change in Reporting Periods
of European Subsidiaries ............................... 221,952
------------
Net Increase in Cash and Cash Equivalents .............. 1,137,850
Cash and Cash Equivalents - Beginning of Year ........... 668,822
------------
Cash and Cash Equivalents - End of Year ................ $ 1,806,672
============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest ............................................. $ 275,787
Income Taxes ......................................... $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-8
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation
[A] Atlantic Central Enterprises Limited ("ACE" or "The Company") was
incorporated under the laws of Bermuda on February 2, 1996 under the name
Bamburgh Limited. Thereafter, on April 2, 1996, Bamburgh Limited changed its
name to Atlantic Central Enterprises Limited.
ACE has not conducted any business operations since inception other than in
connection with the reorganization with Pharma Patch Public Limited Company
("Pharma Patch"). The reorganization, which took place on January 20, 1997,
involved Pharma Patch transferring to the Company all of its assets and having
the Company assume all of Pharma Patch's liabilities, in exchange for all the
outstanding common stock of ACE. Immediately after the transfer Pharma Patch
commenced a voluntary liquidation and distributed all the Company's shares to
its shareholders. As a result of the reorganization, Pharma Patch
shareholders received one common share of the Company for every 10 shares of
Pharma Patch owned. This reorganization qualifies under Section 368(1)(1)(F)
of the Internal Revenue Code of 1986, as amended.
ACE is currently engaged, through its subsidiary Vista Technologies, Inc.
("Vista"), in providing photrefractive keratectomy ("PRK") and other laser
vision correction ("LVC") facilities and services to the health care industry.
As a result of the restructuring, ACE is the successor in interest of Pharma
Patch plc. Accordingly, "the Company" will be used interchangeably to refer
to ACE and Pharma Patch when describing operational history unless
specifically indicated.
[B] Going Concern - The accompanying consolidated financial statements have
been prepared in conformity with generally accepted accounting principles,
which contemplates continuation of the Company as a going concern and
realization of assets and settlement of liabilities and commitments in the
normal course of business. The Company has experienced significant net
losses, a loss from continuing operations of approximately $10,316,000, has a
working capital deficit of approximately $874,000 and utilized approximately
$4,173,000 in cash for operating activities for the year ended February 28,
1997. In addition, the Company has serious liquidity problems primarily due to
unsuccessful attempts to raise money both at the parent level and at the
subsidiary level and significant costs associated with the Company s failed
attempts to penetrate the North American vision correction market resulting in
losses from operations. The Company and its subsidiaries are developing
business plans which when implemented would develop opportunities in the
laser vision correction and automotive maintenance markets in North America
and/or Europe. Vista's management is developing a business plan which takes
advantage of new trends in the laser vision correction business in both North
America and Europe. Vista plans to concentrate on its four successful centers
in Italy and Sweden in the 1997-1998 fiscal year and focus on the reduction of
expenses at the head office level. The Company also plans to sell a portion
of its marketable securities, obtain additional debt financing and focus on
revenue growth of its existing operations.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
continuation of the Company as a going concern is dependent upon the success
of these plans. There can be no assurance of the success of these plans.
[C] Reorganization - On January 20, 1997, the shareholders of Pharma Patch
approved the following plan of reorganization with Atlantic Central
Enterprises Limited.
ACE was initially capitalized in August 1996 by issuing 1,200,000 shares of
common stock to Pharma Patch for $12,000 in cash.
Subsequent to the reorganization, ACE issued an additional 450,000 shares of
its common stock in exchange for the stock held by the stockholders of Pharma
Patch and dissolved the corporate charter of Pharma Patch.
F-9
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
[C] [Continued] - These transactions resulted in the elimination of the
16,541,570 ordinary shares of Pharma Patch and created 1,654,157 shares of
common stock (one share of ACE common stock for every 10 ordinary shares of
Pharma Patch) in ACE with a par value of $16,542. As a result of the
difference between Pharma Patch's ordinary shares issued at par value
($2,343,914) and ACE's common stock issued at par value ($16,542) the premium
in excess of par value increased by $2,327,372 (Pharma Patch's par value per
ordinary share was Irish Pounds .01 and ACE's par value per common share is
US$ .01). All per share amounts in this report have been restated to reflect
this reorganization.
[D] Pharma Patch was incorporated under the laws of the Republic of Ireland in
January 1992. Prior to July 1993, Pharma Patch had no significant assets or
operations. Prior to fiscal 1997 the Company was mainly involved in the
research and development of transdermal drug delivery systems and skin
permeation technology. The Company developed and patented proprietary
technology and secured licensing and product feasibility agreements through
research in this area.
[E] On November 15, 1995, Pharma Patch sold substantially all of the
operating assets to Technical Chemicals and Products, Inc. ("TCPI") for a gain
of approximately $16.4 million. These assets included 11 U.S. patents relating
to transdermal drug delivery and skin permeation technology, license rights to
skin penetration enhancers and electronically assisted drug delivery,
proprietary information and trade secrets related thereto, certain licensing
and product feasibility agreements entered into by the Company and all of the
Company's fixed assets. TCPI also assumed the sublease of the research
facility occupied by the Company.
In consideration for the purchased assets, TCPI issued an aggregate of 786,214
shares of its common stock with a fair value of $11,919,000 and satisfied the
$5,000,000 promissory note previously issued by the Company to Flora, Inc.
("Flora") (see note 7). As a result of this transaction, the Company owned
9.9% of TCPI's outstanding common shares and ceased performing research and
development work and other operations in the areas of skin penetration
enhancers and drug delivery systems.
On January 16, 1996, the Company entered into a supplemental agreement with
TCPI, which amended certain provisions of the November 1995, asset purchase
agreement. TCPI had filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission with respect to the sale of 1,800,000 TCPI
common shares (Offering). Pursuant to the terms of the supplemental agreement,
the Company executed a lock-up letter with the representative of the TCPI
Underwriters providing that it would not sell or otherwise dispose of any of
its shares of common stock for a period to expire 180 days following the
closing date of the Offering without their prior consent. As consideration for
the execution of the lock-up agreement, TCPI (i) terminated an existing
lock-up agreement covering TCPI common stock owned by the Company, executed in
connection with the asset purchase agreement; (ii) effective as of closing
date of the Offering, terminated the voting trust agreements, shareholders'
agreement and irrevocable proxy, executed in connection with the asset
purchase agreement which, among other things, limited the Company's ability to
vote or dispose of its shares of common stock; (iii) allowed the Company to
offer for sale 100,000 shares of this common stock in the Offering (plus up to
an additional 110,000 if the Underwriters over-allotment option is exercised);
(iv) effective as of the closing date of the Offering, issued to the Company a
two-year warrant to purchase 100,000 shares of common stock at an exercise
price equal to the per share Offering price; and (v) file a Registration
Statement on Form S-3 to register all of the remaining shares of common stock
owned by the Company after the Offering.
[F] On March 21, 1996, the Company completed the acquisition of 61.3% of the
voting interest of Vista Technologies, Inc. ("Vista"). Vista provides photo
refractive keratectomy ("PRK") and other laser vision correction ("LVC")
facilities and services to the health care industry.
F-10
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
[F] [Continued] - The Company acquired its position in Vista by executing a
stock purchase agreement for 200,000 newly issued shares of Vista common stock
for a cash price of $500,000. The Company and Vista executed an additional
agreement under which Vista provided 2,060,000 newly issued shares of its
common stock to the Company plus 500,000 Vista Class C common stock purchase
warrants. In exchange, Vista received a $750,000 interest-free note due six
months after the transaction date and 200,000 restricted shares of TCPI common
stock previously held by the Company with a fair value on the date of the
transaction of $3,550,000 (original cost basis to the Company of $3,032,000).
The Company paid the $750,000 note in full during the first quarter of fiscal
1997. The Company also received an option to acquire 250,000 Vista shares at
$2.50 per share. In a separate transaction, the Company agreed to provide
4,500,000 newly issued Ordinary Shares in exchange for a total of 900,000
shares of Vista's outstanding common stock owned by three shareholders.
A summary of the consideration for both components of the Vista transaction
include the following:
<TABLE>
<S> <C>
Cash $ 500,000
Note payable 750,000
TCPI investment (200,000 shares) 3,032,000
------------
Sub-total 4,282,000
Pharma Patch plc common stock (4,500,000 shares) 2,250,000
------------
6,532,000
Advances as of February 28, 1997 662,663
------------
Total $ 7,194,663
============
</TABLE>
The cost in excess of net assets acquired of approximately $4.5 million was
calculated utilizing the original carrying value of the TCPI investment
($15.16 per share). The acquisition of Vista was recorded using the purchase
method of accounting resulting in goodwill of $4,500,000 which was being
amortized using the straight-line method over fifteen years beginning in March
of 1996. At February 28, 1997, the Company's management determined that the
goodwill was impaired. As a result, the Company wrote off goodwill of
approximately $4,300,000 after it determined that the unamortized balance of
goodwill could not be recovered through projected future discounted cash flows
over its remaining life [See Note 2].
During the year the Company exercised their 250,000 options to purchase an
additional 250,000 shares of Vista for cash consideration of $625,000. The
company also purchased additional 13,800 shares on the open market for cash
consideration of $37,663.
Since March 21, 1996, ACE's interest in Vista has been diluted by the issuance
of Vista stock to Vista's Regional affiliates. At February 28, 1997, ACE
owned 54.14% of the issued and outstanding shares of Vista.
[G] Regional Joint Ventures -Vista's business strategy during fiscal 1997 was
to expand in North America by organizing and sponsoring independently financed
regional enterprises (Regional Joint Ventures) in which Vista would obtain a
significant equity interest and long-term fee-based consulting arrangements.
F-11
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
Vista's negotiations to acquire interests in additional laser vision center
("LVC") operations, based primarily in Canada, were abandoned, Vista sold all
of its interest in a Regional Joint Venture formed to service the Northern
California market, and the Vista's equity ownership in a Regional Joint
Venture formed in March 1996 and based in Arizona was increased to 94%.
Unsuccessful efforts by Vista's former management to obtain additional private
placement equity financing necessary to finance Vista's Regional Joint Venture
expansion plans and to support general and administrative expenses in North
America were terminated during March 1997.
Vista's management intends to reactivate a strategic expansion plan if a debt
compromise plan with Vista's creditors is proposed and accepted or convert the
debt obligation to an equity position (subject to shareholder approval) and if
significant additional capital is obtained.
There can be no assurance that Vista will be successful in accomplishing these
objectives. Pending further developments, Vista has been advised that its
controlling stockholder, ACE, plans to pursue a strategic plan of negotiating
to acquire or develop Regional Joint Ventures in the United States for laser
vision correction facilities and services. Vista has been advised that if ACE
can successfully implement a strategy of North American expansion in the field
of laser vision correction, Vista anticipates that it will be provided a right
to acquire such operations at ACE's cost if Vista completes a debt compromise
plan with its creditors and if significant additional capital is obtained.
Investments by Vista in Regional Joint Ventures are summarized as follows:
INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC.
In November 1995, Vista issued 200,000 shares of its common stock in
exchange for 200,000 shares of 5% Series B convertible preferred stock in
Vista Laser Centers of Michigan, Inc. (VLC-Michigan), a development stage
enterprise. Effective July 18, 1996, Vista also acquired 100,000
VLC-Michigan Series A preferred shares from a third party in exchange for
100,000 shares of Vista's common stock with an estimated value of
approximately $0.99 a share at the date of issuance. Vista subsequently
elected to convert all 300,000 shares of VLC-Michigan preferred stock into
300,000 shares of VLC-Michigan common stock. VLC-Michigan abandoned a
proposed initial public offering in late 1996. During December 1996,
negotiations for VLC-Michigan to acquire an existing laser vision
correction services business based in Windsor, Ontario, and to enter into
related agreements with affiliates of the physician who owns the Windsor
business, were terminated. VLC-Michigan refunded stock subscriptions
previously received from affiliates of that physician. Vista subsequently
agreed to accept 200,000 shares of its common stock owned by VLC-Michigan
for cancellation, which have been returned to the Company's possession, in
exchange for the cancellation of 200,000 shares of VLC-Michigan common
stock then owned by Vista. Vista also agreed to assume responsibility for
the refund of a $9,500 stock subscription to VLC-Michigan paid by a
director of the Company.
As a result of these transactions, Vista owned 100,000 shares of
VLC-Michigan common stock, representing 100% of the VLC-Michigan
outstanding capital stock, as of February 28, 1997.
During the period from March 1996 through October 1996, there were various
advances made by Vista to VLC-Michigan for VLC-Michigan initial public
offering expenses plus approximately $510,800 of advances to finance
equipment deposits and operating expenses of the businesses that
VLC-Michigan proposed to acquire and develop. In November 1996, the amount
of $100,000 in such cash advances was refunded to Vista. Vista is
currently negotiating to obtain an accounting and/or refund of $410,800 of
such advances as part of a proposed release and settlement of the
obligations of Vista and VLC-Michigan, on the one hand, and affiliates of
the physician who owns the Windsor business, on the other hand. As of
February 28, 1997, $285,800 of the advances have been written off and the
VLC-Michigan cash balance of $125,000 has been consolidated.
F-12<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
INVESTMENT IN VISTA LASER CENTERS OF THE SOUTHWEST, INC.
In March, 1996, Vista issued 250,000 shares of its common stock in exchange
for a subscription to 350,000 shares of 5% Series B convertible preferred
stock in Vista Laser Centers of the Southwest, Inc. (VLC-Southwest), a
development stage enterprise. Effective July 18, 1996, Vista also acquired
rights to 100,000 VLC-Southwest Series A preferred shares from a third
party in exchange for 100,000 shares of Vista's common stock with an
estimated value of approximately $0.99 a share at the date of issuance.
Vista subsequently elected to convert all of its rights to 450,000 shares
of VLC-Southwest preferred stock into 450,000 shares of VLC-Southwest
common stock and management affiliates of VLC-Southwest released the right
to vote such shares by proxy. VLC-Southwest abandoned a proposed initial
public offering in late 1996.
On October 1, 1996, Vista and VLC-Southwest agreed that Vista's account
receivable of $383,634 for advances to VLC-Southwest would be extinguished
in exchange for the surrender of 250,000 shares of Vista's common stock
then held by VLC-Southwest. This increased Vista's investment in
VLC-Southwest by $145,634. The agreement further provides that additional
advances by Vista to VLC-Southwest after October 1, 1996 will be made in
exchange Vista's investment in additional common stock of VLC-Southwest
based upon a share price value of $3.00 per share of VLC-Southwest common
stock. As of March 31, 1997, Vista had advanced an additional $210,486 to
VLC-Southwest as additional investment in VLC-Southwest common stock under
this agreement. The agreement will remain in effect as to additional
advances until the earlier of completion by VLC-Southwest of a private
placement offering of its securities to third parties or termination of
that offering no later than March 31, 1997. As a result of the termination
of the offering by VLC-Southwest, the agreement terminated and advances
made by Vista to VLC-Southwest since October 1, 1996 will not be exchanged
for additional shares of VLC-Southwest at $3.00 per share.
As of October 1, 1996, Vista agreed to purchase a $100,000 VLC-Southwest
note and 10,000 VLC-Southwest Class B warrants from Atlantic Central in
exchange for a $100,000 note payable by Vista. Vista also agreed to
surrender the $100,000 VLC-Southwest note for cancellation in exchange for
100,000 shares of VLC-Southwest common stock effective October 1, 1996.
Under an agreement between Vista and VLC-Southwest, VLC-Southwest is
entitled to use Vista's service mark for Vista laser centers and provides
VLC-Southwest with exclusive rights to establish and operate laser vision
correction service centers at locations within Arizona, Utah, Colorado, El
Paso County in Texas and the City of Las Vegas, Nevada; the exclusive
geographic rights of VLC-Southwest are subject to the establishment and
maintenance of eight centers in those areas according to an agreed schedule
in addition to an existing center operated by VLC-Southwest in Scottsdale,
Arizona. This agreement terminated on June 30, 1997. VLC-Southwest is
using Vista's service mark with Vista's authorization and a revised
agreement providing VLC-Southwest with exclusive geographical rights has
not been executed.
As a result of these transactions, Vista owned 550,000 shares of
VLC-Southwest common stock, representing 94% of the VLC-Southwest
outstanding capital stock as of February 28, 1997, before giving effect to
shares Vista may acquire as a result of additional advances by the Company
to VLC-Southwest after October 1, 1996.
F-13
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
INVESTMENT IN VISTA LASER CENTERS OF THE NORTHWEST, INC.
In May 1996, Vista issued 500,000 shares of its common stock in exchange
for 500,000 shares of 5% Series B convertible preferred stock in Vista
Laser Centers of the Northwest, Inc. (VLC-Northwest), a development stage
enterprise. Effective July 18, 1996, Vista also acquired 100,000
VLC-Northwest Series A preferred shares from a third party in exchange for
120,000 shares of Vista's common stock with an estimated value of
approximately $0.99 a share at the date of issuance. Vista subsequently
elected to convert its 100,000 shares of VLC-Northwest Series A preferred
stock into 100,000 shares of VLC-Northwest common stock.
During October 1996, VLC-Northwest and London Place Eye Centre, Inc.
(LPEC), an affiliate of Dr. Donald G. Johnson, terminated negotiations that
contemplated the possible future acquisition by VLC-Northwest of an
existing laser vision correction services business from LPEC. Dr. Johnson
is the former Chairman of the Board and a former director of Vista.
VLC-Northwest refunded Dr. Johnson's original cash investment in
VLC-Northwest due to the termination of these negotiations. Vista caused
500,000 shares of its common stock held by VLC-Northwest, to be surrendered
in exchange for cancellation of Vista's investment in 500,000 shares of
VLC-Northwest Series B convertible preferred stock.
In November 1996, Vista received repayment of $189,016 for prior advances
to VLC-Northwest (of which $11,011 is payable to VLC-Northwest as credit
for overpayment). During January 1997, Vista paid $64,936 to LPEC, an
affiliate of Dr. Donald G. Johnson, in reimbursement of funds advanced by
LPEC for the account of VLC-Northwest.
As a result of these transactions, Vista owned 100,000 shares of
VLC-Northwest common stock, representing 100% of the VLC-Northwest
outstanding capital stock as of February 28, 1997 As of February 28, 1997,
$48,956 of Vista's advances to VLC-Northwest have been written off and the
VLC-Northwest cash balance of $16,900 has been consolidated.
INVESTMENT IN VISTA LASER CENTERS OF THE PACIFIC, INC.
In May 1996, Vista issued 500,000 shares of its common stock in exchange
for 500,000 shares of 5% Series B convertible preferred stock in Vista
Laser Centers of the Pacific, Inc. (VLC-Pacific). Effective July 18, 1996,
Vista also acquired 100,000 VLC-Pacific Series A preferred shares from a
third party in exchange for 100,000 shares of Vista's common stock with an
appraised value of approximately $0.99 a share at the date of issuance.
Vista subsequently elected to convert all its 600,000 shares of VLC-Pacific
preferred stock into 600,000 shares of VLC-Pacific common stock.
To accommodate the request of VLC-Pacific in its efforts for a proposed
public offering of its securities, during December Vista and VLC-Pacific
mutually agreed: (i) to terminate a consulting services agreement between
Vista and VLC-Pacific; (ii) Vista accepted 500,000 shares of its common
stock owned by VLC-Pacific for cancellation, which have been returned to
Vista's possession, in exchange for the cancellation of 500,000 shares of
VLC-Pacific common stock then owned by Vista; and (iii) Vista agreed to
accept a 9% promissory note issued by VLC-Pacific in the principal amount
of $100,000 for the repurchase of the remaining 100,000 shares of
VLC-Pacific common stock then owned by Vista. VLC-Pacific also agreed to
issue a 9% promissory note in the principal amount of $160,838 to evidence
its obligations for repayment of advances in that amount by Vista to
VLC-Pacific. Each of the VLC-Pacific promissory notes are due on the
earlier of December 31, 1998 or ten days after successful completion of an
initial public offering by VLC-Pacific.
As a result of these transactions, Vista did not own an equity interest in
VLC-Pacific capital stock as of February 28, 1997.
F-14
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
INVESTMENT IN VISTA LASER CENTERS OF THE NORTHEAST
In May 1996, Vista issued 450,000 shares of its common stock in exchange
for 500,000 shares of 5% Series B convertible preferred stock in Vista
Laser Centers Metro Inc., doing business as Vista Laser Centers of the
Northeast (VLC-Northeast), a development stage enterprise. Effective July
18, 1996, Vista also acquired 100,000 VLC-Northeast Series A preferred
shares from a third party in exchange for 100,000 shares of Vista's common
stock with an estimated value of approximately $0.99 a share at the date of
issuance.
In January 1997, Vista, Atlantic Central, VLC-Northeast and certain members
of VLC-Northeast operating management and their affiliates entered into a
settlement agreement to terminate all relationships between the parties.
Vista sold all of its equity investment in VLC-Northeast for the sum of
$1.00 and agreed to assign to a nonrelated entity for the sum of $1.00 all
prior advances and loans by Vista to VLC-Northeast in the aggregate amount
of $511,460. Vista further agreed: (i) to pay $50,000 as a settlement of
prior obligations to VLC-Northeast; (ii) to pay VLC-Northeast an amount
equal to $75,000 plus $6,271 in interest accrued on certain promissory
notes previously issued by VLC-Northeast to Atlantic Central (and secured
by a pledge of certain shares of Company's common stock owned by
VLC-Northeast), against the receipt from Atlantic Central of releases in
favor Vista and of all collateral security claims to shares of Vista's
common stock owned by VLC-Northeast; (iii) to advance $50,000 to an escrow
fund for use by VLC-Northeast under prescribed conditions for expenses
relating to its future capital-raising expenses, which advances are to be
repaid to Vista in the event VLC-Northeast completes additional debt or
equity financings in the aggregate amount of at least $500,000; and (iv) to
pay $275,000 (of which $200,000 is to be deposited into an escrow account)
from proceeds of a private placement offering of at least $2 million by
Vista.
VLC-Northeast has agreed to release its license to use Vista's service
marks, to change the name of VLC-Northeast and signage to eliminate use of
the "Vista" name by VLC-Northeast (subject to a non-assignable license to
VLC-Northeast for use of certain promotional and marketing materials of the
Company within the greater Toronto, Ontario area so long as such materials
do not use the word "Vista" Vista's associated logo), and to return for
cancellation 450,000 shares of Vista's common stock currently owned by
VLC-Northeast at the time all escrow funds have been deposited by Vista.
Of the $200,000 in funds to be deposited into an escrow account, $50,000 is
to be released to VLC-Northeast upon completion of actions necessary for
termination of its use of the name "Vista" and Vista's service marks by
July 1, 1997, and the remaining $150,000 is to be released to VLC-Northeast
at the rate of $25,000 per month, except that any undisbursed escrow funds
are to be refunded to Vista in the event VLC-Northeast completes additional
debt or equity financings in the aggregate amount of at least $500,000.
Vista has paid $150,000 under the settlement and will be obligated to
deposit an additional $275,000 from proceeds of a private placement
offering of at least $2 million by Vista. Vista has also agreed to remain
obligated as a guarantor of certain equipment lease and premises lease
obligations of VLC-Northeast, subject to the agreement of VLC-Northeast to
use its best efforts to obtain a release of such guarantees in the event of
a change in control of VLC-Northeast or should Vista successfully complete
a private placement offering of at least $2 million, failing which
VLC-Northeast will agree to indemnify Vista for any liabilities incurred as
a result of the guarantees.
As a result of these transactions, Vista did not own an equity interest in
VLC-Northeast capital stock and has written off its investments in
VLC-Northeast as of March 31, 1997.
F-15
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[1] The Company and Basis of Presentation [Continued]
MISCELLANEOUS
In assigning values at the times of issuance of Vista's common stock issued
to Regional Joint Ventures and to a third party, Refractive Services-800,
Inc., originally issued to acquire Series A preferred shares in the
Regional Joint Ventures, Vista gave consideration to nonrelated independent
appraisals obtained on the value for the consideration received from the
Regional Joint Ventures in exchange for such common stock, the estimated
market value of Vista's common stock based upon recent private placements,
the quoted price of Vista's common stock in the over-the-counter market,
and the voting and other restrictions on the issued stock.
Vista currently controls all of the board of directors of VLC-Michigan and
VLC-Northwest and controls the board of directors of VLC-Southwest by
virtue of Vista's controlling stock ownership. Vista currently has no
representation on the board of directors of VLC-Pacific or VLC-Northeast.
As of February 28, 1997 ACE has an accumulated deficit of $18,692,005,
total assets of $8,118,894 and total shareholders' equity of $306,293.
ACE's majority owned subsidiary, Vista has an accumulated deficit of
$22,142,284, total assets of $4,330,537, total shareholders deficiency of $
2,094,820 and received a Going Concern opinion from its auditors for the
twelve months ended March 31, 1997 (see Vista's March 31, 1997 10K for
additional information). ACE, including Vista, has not yet achieved
profitable operations and there is no assurance that profitable operations,
if achieved, could be sustained on a continuing basis. Further, the
Company's future operations are dependent on the success of the
commercialization efforts and market acceptability of the Vista business
plan and other potential business ventures of the Company, together with
the value derived from the TCPI investment securities.
[2] Significant Accounting Policies
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in the United States.
[A] Principles of Consolidation - The consolidated financial statements
include the accounts of ACE and its wholly and majority owned subsidiaries in
Canada and in the United States. All significant intercompany balances and
transactions have been eliminated in consolidation.
The Company has consolidated its results for the year ended February 28, 1997
with the results of operations of Vista for the year ended March 31, 1997 in
accordance with U.S. GAAP.
Vista and its subsidiaries in Italy, Sweden, the Netherlands and the United
States have been consolidated at February 28, 1997 using their respective four
fiscal quarters ended March 31, 1997. Vista's subsidiaries in Italy, Sweden
and the Netherlands were consolidated in Vista's March 31, 1996 financial
statements using the subsidiaries' respective fiscal year ends, which were
December 31, 1995. The net income for the three month period ending March 31,
1996 for the Company's subsidiaries in Italy, Sweden and the Netherlands is
reflected in the accumulated deficit for fiscal 1997 as a one-time adjustment
for the European operating subsidiaries to conform reporting periods. ACE
did not consolidate Vista's financial statements for its year ended February
29, 1996, as controlling interest did not exist in Vista until March 1996.
Because majority ownership was considered only temporary, the Vista's
investments in VLC-Michigan, VLC-Northwest and VLC-Southwest were accounted
for by the equity method through September 30, 1996. Subsequent to September
30, 1996, the Company's plans with respect to these entities changed, and
majority ownership is no longer considered temporary. Accordingly, these
entities have been consolidated as of February 28, 1997.
F-16<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[2] Significant Accounting Policies [Continued]
[B] Cash and Cash Equivalents -All short-term, highly liquid investments with
maturities of three months or less at the date of purchase are considered to
be cash equivalents.
[C] Risk Concentrations - Financial instruments that potentially subject the
Company to concentrations of credit risk include cash and cash equivalents
arising from its normal business activities. ACE had $1,806,000 on deposit at
various institutions at February 28, 1997. $147,000 of this amount was
federally insured against institution failure. Vista had approximately
$533,000 on deposit in Italy and Sweden at February 28, 1997. Italy and
Sweden do not have federal insurance on balances maintained in banks. There
is no collateral in relation to deposits.
[D] Investment Securities - Investment securities at February 28, 1997 consist
of equity securities. The Company's equity securities are classified as
available-for-sale securities under the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company's equity securities are recorded at fair value
based on quoted market prices.
The carrying amount of other financial instruments approximates fair value
generally due to the short-term maturity of these instruments. When sold,
the actual cost of these investments is used when calculating any gain
(loss).
[E] Fixed Assets - Fixed assets are recorded at acquisition cost. The Company
provides depreciation and amortization at rates, which are expected to charge
operations with the cost of the assets over their estimated useful lives
ranging from three to ten years.
[F] Impairment - Certain long-term assets of the Company are reviewed at least
annually as to whether their carrying value has become impaired, pursuant to
guidance established in Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. Management considers assets to be impaired if the
carrying value exceeds the future projected cash flows form related operations
(undiscounted and without interest charges). If impairment is deemed to
exist, the assets will be written down to fair value or projected discounted
cash flows from related operations. Management also reevaluates the periods
of amortization to determine whether subsequent events and circumstances
warrant revised estimates of useful lives. As of February 28, 1997, the
Company expects these assets to be fully recoverable.
[G] Minority Interest - On March 21, 1996, the Company acquired 61.3% on the
issued and outstanding common stock of Vista. In May 1996, Vista issued
1,450,000 shares of its common stock to acquire interests in three
developmental stage companies involved in providing PRK and other LVC
facilities and services to the health care industry.
In June 1996, Vista sold 100,000 common shares for cash proceeds of $212,500.
In May 1996 Vista issued 1,450,000 of its shares to acquire 1,500,000 Series B
Convertible Preferred shares of 3 regional affiliates. In July 1996, Vista
issued 520,000 shares to acquire 520,000 Series A preferred shares of five
regional affiliates. Pharma Patch exercised its options to acquire 250,000
Vista shares for $625,000 cash in July 1996. In October and December of 1996
1,450,000 of Vista's shares were returned to the Vista for cancellation from
the 3 regional affiliates. In December 1996, 98,000 of Vista shares where
issued in exchange for a $122,500 note. The shares issued by Vista, adjusted
for the shares acquired by ACE, reduced the Company's ownership in Vista from
61.3% to 54.14% at February 28, 1997.
On March 21, 1996, the minority interest associated with the Company's
investment in Vista was $2,135,895. During the year Vista had losses of
$6,999,981. ACE's minority interest portion of this loss was 45.86% at
February 28, 1997, or $3,210,191. In accordance with US GAAP, the Company
charged $2,135,895 against minority interest on the balance sheet, bringing
ACE's minority interest in Vista to a zero balance and charged the remaining
$1,074,296 to ACE's statement of operations.
F-17<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[2] Significant Accounting Policies [Continued]
[G] Minority Interest [Continued] - The remaining $211,410 of minority
interest on ACE's balance sheet relates to Vista's minority shareholders
proportionate share of the equity in Vista Italy and Vista Southwest. On
February 28, 1997 Vista owned 75% of the capital stock of Vista Italy and 94%
of the capital stock of Vista Southwest.
[H] Foreign Currency Translation - Assets and liabilities stated in functional
currencies other than the U.S. dollar are translated at the year-end exchange
rate and revenues and expenses at the average rate of exchange for the year.
Foreign exchange gains and losses from transactions in currencies other than
the applicable functional currency are reflected in income during the year.
Gains or losses arising on the translation of financial statements give rise
to a cumulative translation adjustment, which is included as a component of
shareholders' deficiency.
As a result of the Company's translation and consolidation of Vista's
financial statements at February 28, 1997, a balance of $159,431 relating to
foreign currency translation exists. This amount arises from Vista's European
subsidiaries.
[I] Offering Costs - Costs associated with public and private offerings by the
Company of its stock have been charged against the proceeds of the offering.
Any costs associated with an abandoned financing are charged against income in
the year the financing is abandoned.
[J] Revenue Recognition - Revenues for the period March 21, 1996 to February
28, 1997, the period the Company consolidated Vista's results, are recognized
when photorefractive keratectomy related facility and service fees are
performed. Product development fees in the prior years are included in
discontinued operations and represent charges to third parties for research
and development work performed by the Company and is recorded in the period
the fees are earned.
[K] Stock Compensation - The Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock Based Compensation in October 1995. SFAS No. 123 uses a
fair value based method of accounting for stock options and similar equity
instruments as contrasted to the intrinsic valued based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees. The Company adopted SFAS No. 123 on March 1,
1996 for financial note disclosure purposes and will continue to apply APB
Opinion No. 25 for financial reporting purposes.
[L] Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
[M] Operations in Foreign Countries - The Company is subject to numerous
factors relating to conducting business in foreign countries (including,
without limitation, economic, political and currency risks), any of which
could have a significant impact on the Company's operations.
[N] Advertising Costs - Advertising costs are expensed as incurred. The
Company incurred advertising expense of approximately $415,000 for the year
ended February 28, 1997.
F-18
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[2] Significant Accounting Policies [Continued]
[O] New Authoritative Pronouncements - The FASB has issued SFAS No. 128,
Earnings Per Share and FASB No. 129, Disclosure of Information About Capital
Structure. Both are effective for financial statements issued for periods
ending after December 15, 1997. SFAS No. 128 simplifies the computation of
earning per share by replacing the presentation of primary earnings per share
with a presentation of basic earnings per share. The statement requires dual
presentation of basic and diluted earnings per share by entities with complex
capital structures. Basic earnings per share include no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of shares outstanding for the period. Diluted earnings per
share reflect the potential dilution of securities that could share in the
earnings of an entity similar to fully diluted earnings per share.
While the Company has not analyzed SFAS No. 128 sufficiently to determine its
long-term impact on per share reported amounts, SFAS No. 128 should not have a
significant effect on historically reported per share loss amounts.
SFAS No. 129 does not change any previous disclosure requirements but, rather,
consolidates existing disclosure requirements for ease of retrieval.
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No.
130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. SFAS No. 130
is not expected to have a material impact on the Company.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information." SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December
15, 1997, and comparative information for earlier years is to be restated.
SFAS No. 131 need not be applied to interim financial statements in the
initial year of its application. SFAS No. 131 is not expected to have a
material impact on the Company.
[3] Investment Securities
Investment securities at February 28, 1997, consisted of equity shares
acquired by the Company in the TCPI asset purchase agreement (see note 1(d)).
On November 15, 1995, the Company acquired 786,214 common shares of TCPI with
a fair value of $11,919,000 or $15.16 per share. As of February 28, 1997, the
TCPI stock was trading at $9.125 per share. In the Company's transaction with
Vista on March 21, 1996, Vista received 200,000 shares of the Company's TCPI
stock as part of the consideration for the purchase of Vista stock at the
company's cost basis of $15.16. In April 1996, the Company sold 210,000 TCPI
shares for net proceeds of $2,928,697 and recorded a loss of $255,100. In
January and February 1997, the Company sold 116,214 TCPI shares in open market
transactions for net proceeds of $1,052,931 and recorded a loss of $963,776.
The actual cost was used in determining the loss on sale of marketable
securities. As of February 28, 1997, the Company held 260,000 shares of TCPI
stock with a fair market value of $2,372,500 and a recorded unrealized loss of
$ 1,569,000 as a separate component of shareholders' equity.
F-19
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[4] Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are calculated using the straight-line method over the estimated useful lives
of the assets, ranging from three to ten years. Fixed assets consisted of the
following at February 28, 1997.
<TABLE>
<CAPTION>
February 28, 1997
<S> <C>
Excimer lasers and other technical equipment $ 2,861,604
Office Furniture and equipment 388,031
--------------
Total 3,249,635
Less: Accumulated Depreciation (1,154,823)
--------------
Net book value $ 2,094,812
==============
</TABLE>
The following is a summary of property held under capital leases at February
28, 1997:
<TABLE>
<S> <C>
Medical Equipment $ 3,228,308
Total Property Held Under Capital Leases 3,228,308
Less: Accumulated Amortization 952,990
--------------
Net Capitalized Lease Obligations $ 2,275,318
==============
</TABLE>
Depreciation and amortization expense for property and equipment and property
held under capital leases was $471,480 for the year ended February 28, 1997.
[5] Long Term Notes Receivable
Notes receivable consist of the following on February 28, 1997:
<TABLE>
<S> <C>
9% Promissory note receivable from VLC-Pacific for the repurchase
of VLC-Pacific's 500,000 shares owned by Vista, due on the earlier
of December 31, 1998 or ten days after successful completion of a
initial public offering by VLC-Pacific - Forward $ 100,000
9% Promissory note receivable from VLC-Pacific for, repayment
of advances made by Vista to VLC Pacific due on the earlier of
December 31, 1998 or ten days after successful completion of a
initial public offering by VLC-Pacific 160,838
0% Convertible loan to Millennium Hair Restoration Centers, Inc.
due of the earlier of December 13, 1997 or the Date which
Millenium completes of financing of $4 million or more 150,000
----------
Total $ 410,838
==========
</TABLE>
F-20
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[6] Notes Payable
In 1995, the Company issued a $5,000,000 senior secured convertible promissory
note (note 1(e)). The promissory note bore interest at the rate of 10% per
annum, payable semiannually. The principal amount of the note was originally
due and payable in full on June 30, 1996.
As collateral for the promissory note, the Company pledged substantially all
of the assets acquired from Pharmetrix being held in the Company's subsidiary,
PP Holdings Inc. The note was satisfied by TCPI (see note 1(e)).
Notes payable consist of the following at February 28, 1997:
<TABLE>
<CAPTION>
Vista Issued Debt:
<S> <C>
12% convertible promissory notes due to related parties;
maturing June 15, 1998, collateralized by the pledge
of 51% of Vista-Sweden's capital stock (note 6(a)(i)) $ 277,777
12% secured promissory note maturing June 30, 1997,
collateralized by general security interest in all of
Vista's assets (note 6 (a)(ii)) 300,000
Accrued liability to LVCI under a default judgment
(Note 6(a)(iii)) 175,000
VLC-Southwest note payable to related party 25,000
------------
Total 777,777
Less: Current Portion (500,000)
------------
Total $ 277,777
============
</TABLE>
i. The principal amount and accrued interest on the 12% convertible
notes due in 1998 are convertible, at the option of the holder, into
shares of Vista's common stock at a conversion price of $5.00 per
share. These notes are collateralized by 51% of the issued and
outstanding shares of Vista-Sweden common stock. Vista-Sweden is
also committed under a royalty agreement with each noteholder
expiring on May 31, 1998. Under the royalty agreements, Vista-Sweden
will pay royalties to each noteholder for each incremental PRK
procedure performed by Vista-Sweden during the three years ended May
31, 1996, 1997 and 1998. Vista has not accrued any royalties for
1997 or 1996.
ii. The 12% secured promissory note is collateralized by a security
interest in all of the assets of Vista. The 12% promissory note was
to mature on June 30, 1997. The holder of the note has verbally
agreed to extend the term. Definitive agreements revising the note
are expected to be executed by April 30, 1998 [See Subsequent Event
Note 17A].
F-21
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[6] Notes Payable [Continued]
iii. In 1991 and 1993, Vista-Italy and another company in the laser vision
correction service industry entered into agreements to license
trademarks and develop territorial marketing strategies. The
companies exchanged shares of their respective common stock as
consideration under the agreements. In 1993, the other party filed
suit for termination of these agreements and a default judgment was
entered in their favor. In connection with this judgment,
Vista-Italy canceled the shares of the common stock Vista-Italy had
issued in the exchange, wrote-off the value of the other company's
shares which had been issued to Vista-Italy and recorded an accrued
liability for $175,000 equal to the principal amount of the default
judgment. The plaintiff has instituted legal proceedings in Italy
seeking to collect the cash portion of its default judgment plus
interest and costs.
There were no restrictions or covenants on the note agreements.
[7] Long-Term Debt
Long-term debt consists of the following as of February 28, 1997:
<TABLE>
<S> <C>
Vista Issued Debt
Note payable with interest accrued quarterly at 18%
per annum; payments of approximately $43,191 due
quarterly; maturing June 30, 2000; collateralized
by laser equipment $ 465,114
Note payable with interest accrued monthly at 10% per annum;
payments of approximately $22,003 due quarterly; maturing
January 10, 1999; collateralized by laser equipment 233,014
Note payable with interest accrued monthly at 10% per annum;
payments of $9,898 due quarterly; maturing June 30, 1999;
collateralized by laser equipment 245,765
Note payable with interest accrued monthly at 10% per annum;
payments of $7,442 due monthly; maturing January 1999;
collateralized by laser equipment 193,145
------------
Total 1,137,038
Less: Current Portion (370,373)
------------
Total $ 766,665
============
</TABLE>
There are no restrictions or covenants on the note agreements.
F-22
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[7] Long-Term Debt [Continued]
Future maturities of long-term debt are as follows for the years ended
February 28:
<TABLE>
<S> <C>
1998 $ 370,373
1999 416,430
2000 299,911
2001 50,324
------------
Total $ 1,137,038
============
</TABLE>
[8] Fair Value of Financial Instruments
The carrying value of notes payable included in current liabilities
approximates fair value because of their short maturities. The carrying
amount of long term notes receivable, notes payable and notes payable related
party included in non-current liabilities approximates their fair value
because they bear interest at a rate that approximates the Company's cost of
capital.
[9] Leases, Commitments and Contingencies
Vista leases equipment, vehicles and office space under non-cancelable
operating leases and leases certain equipment under capital leases.
As of February 28, 1997, future minimum lease payments under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
Operating
Vehicles and Laser Capital
Equipment Centers Leases Total
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 $ 91,794 $ 208,125 $ 720,512 $ 1,020,431
1999 46,548 166,521 720,512 933,581
2000 25,881 168,601 491,009 685,491
2001 -- 170,743 352,650 523,393
2002 -- 172,950 87,863 260,813
----------- ---------- ----------- -----------
Total Minimum
Lease Payments $ 164,223 $ 886,940 $ 2,372,546 $ 3,423,709
=========== ========== =========== ===========
Amount representing
interest (22%) (1,038,267)
Present value of net
minimum Lease payments 1,334,279
Less Current Portion (274,510)
-----------
Total $ 1,059,769
===========
</TABLE>
Rent expense relating to operating leases totaled approximately $254,000 for
the year ended February 28, 1997.
F-23
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[9] Leases, Commitments and Contingencies [Continued]
Facilities and Equipment Lease Guarantees for VLC- Northeast
Vista has executed guarantees of certain equipment lease and premises lease
obligations of VLC-Northeast, subject to the agreement of VLC-Northeast to use
its best efforts to obtain a release of such guarantees in the event of a
change in control of VLC-Northeast or should Vista successfully complete a
private placement offering of at least $2 million, failing which VLC-Northeast
will agree to indemnify the Company for any liabilities incurred as a result
of the guarantees. The equipment lease guarantee executed on October 25,
1996 is for a VISX Star laser system with an initial value of $809,000. The
equipment is to be used exclusively by VLC-Northeast in Toronto, Ontario, and
VLC-Northeast is primarily obligated to make all equipment lease payments.
Vista does not own a beneficial interest in the equipment or in proceeds from
the use of the equipment. The premises lease executed on March 21, 1996 is
for a rental of approximately $9,058 per month expiring on May 14, 2006.
Insurance and Indemnification
Use of laser systems by health care professionals using laser equipment and
other laser vision correction services may give rise to claims against the
Company or its affiliates by persons alleging injury. The Company's
subsidiaries generally do not currently have malpractice liability insurance
due to limited capital resources.
The Company believes that claims alleging defects in laser systems will be
covered by manufacturers' warranties and the manufacturer's product liability
insurance, and that the Company and its affiliates could take advantage of
such insurance by adding such suppliers to potentially adverse lawsuits.
There can be no assurance that laser suppliers will carry product liability
insurance or that any such insurance will be adequate to protect the Company.
Generally speaking, the policy of the Company's operating subsidiaries and
regional joint ventures is to require that ophthalmologists who perform laser
procedures by use of laser vision correction equipment maintain their own
professional liability insurance.
Lease commitments relating to abandoned equipment
On November 15, 1996, Vista entered into an equipment lease for a VISX 20/20B
excimer laser system with an initial value of $267,500, which represents the
total lease payments of $317,145 less interest of $76,395. The equipment was
leased for the benefit of London Place Eye Center, Inc. ("LPEC"), an affiliate
of Dr. Donald G. Johnson, former Chairman of the Board and a former director
of Vista. LPEC has guaranteed the obligations of the Vista under this
equipment lease. The equipment is to be used exclusively by LPEC in British
Columbia, and LPEC has agreed to make all equipment lease payments. Vista
will not own a beneficial interest in the equipment or in proceeds from use of
the equipment unless LPEC defaults in its obligations to make equipment lease
payments. The Company reflects the lease obligation of $251,533 and a
long-term receivable from the related party of $248,021 at February 28, 1997
On October 19, 1996, Vista and LPEC executed a lease guarantee for an
equipment lease entered into by VLC-Northwest for a VISX Star laser system
with an initial value of $525,000, which represents the minimum future lease
payments of $720,000 less interest of $247,500. The equipment was leased for
the benefit of LPEC. The equipment is to be used exclusively by LPEC in
British Columbia, and LPEC has agreed to make all equipment lease payments.
Vista and VLC-Northwest will not own a beneficial interest in the equipment or
in proceeds from use of the equipment unless LPEC defaults in its obligations
to make equipment lease payments. Vista reflects the lease obligation of
$514,366 and a long-term receivable from the related party of $485,041 at
February 28, 1997.
F-24
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[9] Leases, Commitments and Contingencies [Continued]
Lease Commitments Relating to Abandoned Equipment [Continued]
On March 29, 1996, Vista signed a lease guarantee for an equipment lease by
LPEC of a VISX Star laser system with an initial value of $450,000. Vista
does not own a beneficial interest in the equipment or in proceeds from use of
the equipment.
Vista entered into these equipment lease arrangements as an accommodation to
LPEC during the course of continuing negotiations for the purchase of LPEC
Vista subject to obtaining additional financing required to make such an
acquisition. Negotiations to acquire LPEC were terminated in late 1996 and
Vista remains contingently liable as to the lease obligations and guarantee.
Litigation with Former Officers as to Severance Obligations
In June 1997, Vista was named as the defendant in a civil action filed in
California state court by two former executive officers. The complaint
alleges that Vista breached written employment agreements with each of the two
executives, both of whom were terminated as employees of Vista on March 6,
1997, and seeks damages of $231,073 plus interest and costs for Vista's former
President, damages of $241,902 plus interest and costs for the Vista's former
Executive Vice President, and restoration of stock options previously issued
to the executives under the terms of their employment agreements.
Vista's written employment agreement with its former President provided he
would be entitled to severance benefits if his employment was involuntarily
terminated, other than for cause, death or disability, equal to (i) a lump-sum
payment equal to his annual base salary of $175,000, (ii) continuation of
insurance benefits for life, health, dental and long-term disability for a
period of 12 months after employment termination, and (iii) continued vesting
of his outstanding stock options for a period of 12 months after employment
termination. Vista's written employment agreement with its former Executive
Vice President provided he would be entitled to severance benefits if his
employment was involuntarily or constructively terminated, other than for
cause, death or disability, equal to (i) a lump-sum payment equal to his
annual base salary of $175,000, and (ii) continuation of insurance benefits
for life, health, dental and long-term disability for a period of 12 months
after employment termination.
Vista intends to vigorously contest claims of the plaintiffs for damages based
upon Vista's claim that their employment was terminated for cause. However,
these proceedings are at a preliminary stage and no discovery has taken place.
Special counsel engaged to represent Vista accordingly has advised it cannot
render an opinion as to whether the likelihood of an adverse determination
would be remote, reasonably possible or probable, until discovery proceedings
have been conducted. Vista has accrued a liability for these legal
proceedings. An adverse determination in these proceedings would have a
material adverse effect on the current financial condition of Vista.
Legal Judgement
In 1991 and 1993, Vista-Italy and another company in the laser vision
correction service industry entered into agreements to license trademarks and
develop territorial marketing strategies. The companies exchanged shares of
their respective common stock as consideration under the agreements. In 1993,
the other party filed suit for termination of these agreements and a default
judgment was entered in their favor. In connection with this judgment,
Vista-Italy canceled the shares of the common stock Vista-Italy had issued in
the exchange, wrote-off the value of the other company's shares which had been
issued to Vista-Italy and recorded an accrued liability for $175,000 equal to
the principal amount of the default judgment. The plaintiff has instituted
legal proceedings in Italy seeking to collect the cash portion of its default
judgment plus interest and costs.
F-25
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[9] Leases, Commitments and Contingencies [Continued]
Other Litigation
Vista and the Company, from time to time, may be a defendant in various legal
proceedings other than that noted above. In particular, a case was dismissed
without prejudice which alleged damages for economic interference and which
sought injunctive relief preventing Vista from being affiliated with a certain
doctor. However, such dismissal leaves open the possibility that the claims
can be re-filed in the future. In the opinion of management, the final
outcome of any such current proceedings will not have a material effect on the
financial position, results of operations, or cash flows of Vista and the
Company. Management's opinion of the above proceedings, however, may change
in the near term due to the uncertainty of the legal process.
[10] Capital Stock
Stockholders' equity has been retroactively restated to reflect the
reorganization with ACE for the periods presented. These transactions resulted
in the elimination of the 16,541,570 ordinary shares of Pharma Patch and
created 1,654,157 shares of common stock (one share of ACE common stock for
every 10 Ordinary shares of Pharma Patch) in ACE with a par value of $16,542.
As a result of the difference between Pharma Patch's ordinary shares issued at
par value ($2,343,914) and ACE's common stock issued at par value ($16,542)
the premium in excess of par value increased by $2,327,372 (Pharma Patch's
par value per ordinary share was Irish Pounds .01 and ACE's par value per
common share is US$ .01). All per share amounts in this report have been
restated to reflect this reorganization. However, retained earnings was not
restated as no assignment is required as a result of the restructuring.
The authorized and issued Common Shares of ACE for the 1997 and 1996 fiscal
years are as follows:
Authorized -The Company has authorized 50,000,000 Common Shares, par value
$.01 representing an aggregate value of $500,000.
<TABLE>
<CAPTION>
Premium in
Number Excess of
of Shares Par Value Par Value Total
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at February 29, 1996 1,141,063 11,411 17,649,925 17,661,336
Payment of professional fees (i) 63,874 639 322,597 323,236
Shares issued to acquire 900,000
Shares of Vista's outstanding
common stock (ii) 450,000 4,500 2,245,500 2,250,000
Private placement (iii) 60,000 600 299,400 300,000
Share issuance costs (iv) -- -- (126,705) (126,705)
Return of shares (60,780) (608) 608 --
--------- --------- ------------ ------------
Balance February 28, 1997 1,654,157 $ 16,542 $ 20,391,325 $ 20,407,867
========= ========= ============ ============
</TABLE>
F-26
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[10] Capital Stock [Continued]
(i) During fiscal 1997, the Company issued 63,874 shares in lieu of
cash payments of $323,236 to various professionals for services
rendered
(ii) On March 21, 1996, the Company issued 450,000 shares to three
investors as consideration for 900,000 shares of Vista
(iii) During fiscal 1997, the Company completed a private placement and
issued 60,000 shares for cash consideration of $300,000.
(iv) The Company paid $126,706 in commissions relating to its total
private placement. Of the $126,706, the Company issued $103,600
in stock as consideration and the balance of $23,106 was paid in
cash.
(v) The reorganization of the Company resulted in the shareholders of
Pharma Patch receiving one common share in Ace for every ten
ordinary shares held in Pharma Patch immediately prior to the
transaction. ACE common shares have a par value of $ .01 each.
All stock options of Pharma Patch were canceled as a result of the
reorganization. There are currently no stock options issued for
ACE.
(vi) On December 18, 1996, ACE offered to the holders of Pharma Patch's
outstanding Class A, Class B, Class C and/or Class D Warrants the
opportunity to exchange up to 32,023 shares of common stock of ACE
at a rate of one ACE share for each 100 Class A, B, C and D
Warrants. The exchange offer expired on May 30, 1997 and as a
result 15,230 shares of ACE were issued to holders of Pharma Patch
warrants.
[11] Earnings (Loss) Per Share
The net earnings (loss) per share calculations are based on the weighted
average number of shares outstanding during the year.
EPS calculations for fiscal 1997 has been restated to reflect the
reorganization between Pharma Patch and ACE.
[12] Income Taxes
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. ACE had research and development expenses not
claimed for income tax purposes of approximately $2,870,000, available to
reduce taxable income of ACE in future years. Due to the significant
uncertainty relating to the Company's ability to utilize these expenses to
offset taxable income, valuation allowances are recognized to offset all of
the deferred tax assets relating to these expenses. These unclaimed research
and development expenses may be carried forward indefinitely for income tax
purposes.
F-27
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[12] Income Taxes [Continued]
Vista has net operating losses carryforwards totaling approximately
$8,200,000, which expire between the years 2007 and 2012. As of February 28,
1997, ACE may not have available the Vista NOL's to offset against future ACE
taxable income, however, Vista's NOL are available against future Vista
income. Vista's use of these carryforwards may be limited by Section 382 of
the Internal Revenue Code.
ACE is not required to file a US consolidated income tax return. Accordingly,
the net operating loss carryforwards of Pharma Patch may not be available to
reduced future taxable income as a result of the Company's reorganization in
January of 1997 [See Note 1C].
[13] Related Parties
[A] Stockholder Agreement - In 1993, the Company entered into an agreement,
which expires on December 31, 2011, with a stockholder whereby the Company has
granted the licensee certain production and distribution rights to a
technology that the Company still owns after the TCPI transaction, but which
is not expected to be pursued for commercialization. No fee revenue was
recognized in fiscal 1997 and 1996.
[B] Vista's Agreements with Refractive Services-800, Inc. - From July 1995
through June 1996, a foreign corporate investor named Refractive Services-800,
Inc. provided at least $100,000 in initial seed capital to each of five
Regional Joint Ventures (for an aggregate investment of $520,000) to finance
initial organizational expenses and costs of negotiating agreements with
vision care professionals and seeking additional financing. In exchange for
that investment, and in view of the high risks associated with a start-up
enterprise, Refractive Services-800, Inc. received shares of a 10% Series A
convertible preferred issue of the Regional Joint Venture with a liquidation
preference equal to five times its cash investment in four Regional Joint
Ventures and six times its cash investment in one other Regional Joint
Venture.
Vista has been advised that a former chief executive officer of the Company,
Mr. Jac. J. Lam, renders financial advisory services to Refractive Services-
800, Inc. Certain other clients of Mr. Lam and an entity owned by Mr. Lam,
Quintillion B.V., have previously invested in debt and equity securities of
Vista and ACE.
Vista negotiated an agreement effective July 18, 1996 to acquire the Series A
preferred shares owned by Refractive Services-800, Inc. in all five of these
Regional Joint Ventures in exchange for 520,000 shares of Vista common stock.
In addition, Vista agreed to purchase all of the capital stock in Refractive
Services 800 Corp., a Nevada corporation, for $50,000 from Refractive
Services-800, Inc. Refractive Services-800, Inc. organized Refractive
Services 800 Corp. to acquire rights to, and offer the use of, certain 800 and
900 telephone numbers for telemarketing purposes at the election of Regional
Joint Ventures.
In assigning value to the Company's common stock issued to Refractive
Services-800, Inc., Vista gave consideration to an independent appraisal
obtained on the value of the consideration received from the Regional Joint
Ventures in exchange for Vista's common stock, the estimated market value of
Vista's common stock based upon recent private placements, the quoted price of
Vista's common stock in the over-the-counter market, and the voting and other
restrictions on the issued stock.
[C] Agreement to Purchase Assets and Assume Lease Obligations - On February
1, 1996, Vista entered into an asset purchase and lease assumption agreement
with a related party for an excimer laser system. The purchase price for the
asset was $75,000 in cash, a $96,591 promissory note with annual interest at
8% originally due May 31, 1996, and the assumption of outstanding obligations
under the existing lease on the laser, including future lease payments not to
exceed $328,409. Subsequent to February 1, 1996, Vista replaced this laser
with newer technology resulting in a charge to the statement of operations in
the amount of $446,636 for the impairment of an idle asset. As of March 31,
1997, $80,000 of the note payable for $96,591 had been paid. The balance of
the note has been forgiven.
F-28<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[13] Related Parties [Continued]
[D] Agreements with Executive Officers - On January 31, 1996, Vista hired a
new chief executive officer who was granted five-year options to purchase
300,000 shares of common stock under Vista's 1994 Stock Option Plan
exercisable at $2.50 per share. On October 22, 1996, Vista also granted this
officer a five-year option to purchase 600,000 shares of common stock under
Vista's 1994 Stock Option Plan exercisable at $2.625 per share in anticipation
of a proposed financing. The services of this employee were terminated for
cause in March 1997 and, therefore, these options were canceled.
Effective November 1, 1996, Vista hired a new chief operating officer who was
granted a five-year option to purchase 500,000 shares of common stock under
Vista's 1994 Stock Option Plan exercisable at $2.75 per share and purchased
for the sum of $100 a total of 100,000 Class G nontransferable common stock
purchase Warrants exercisable until December 31, 2001, unless earlier called
for redemption, at an exercise price of $2.625 per share. The services of
this employee were terminated for cause by the Company in March 1997 and,
therefore, these options were canceled.
The exercise price of options and warrants were equal to or above the fair
market value of the common stock at the date of grant.
[E] Long-term Receivable - Related Party - Vista and a wholly-owned subsidiary
are parties to two lease agreements for two excimer vision correction lasers.
Vista is not using the lasers, nor does Vista receive any benefit from the
procedures performed on these lasers. The lasers are in the possession of a
company formerly affiliated with Vista as a Regional Joint Venture company.
As Vista is party to the leases, the lease obligations are reflected on the
Company's financial statements as current and as long-term debt. The lease
payments are guaranteed and made by the formerly affiliated Regional Joint
Venture company directly to the lessor. The Company reflects the lease
obligations of $765,899 and a Long-Term Receivable from the related party of
$733,062 at March 31, 1997.
[14] The 1996 Stock Option Plan
On February 2, 1996, the Company's Board of Directors proposed the 1996 Stock
Option Plan [Option Plan] that was approved by the stockholders of the Company
in February 1996. The purpose of the Option Plan is to permit the Board or a
Committee of the Board the flexibility of granting options of the Company's
common stock in lieu of cash to compensate officers, directors, employees and
other individuals acting as professionals, consultants and/or advisers to the
Company for services rendered to the Company and its subsidiaries. A total of
350,000 shares of common stock are available for payment of compensation under
the Option Plan. No awards under the Option Plan have been made.
[15] Foreign Segment Operations
The Company's operations are in a single industry, providing PRK treatments
and laser surgical procedures to patients through the establishment and
operation of eye clinics.
The Company's headquarters is located in Bermuda, and all material operating
assets of the Company and the Company's subsidiary's are located in the United
States, Italy and Sweden.
Revenue by geographic areas is as follows:
<TABLE>
<S> <C>
United States $ 287,039
Foreign (Western Europe) 3,198,628
------------
$ 3,485,667
============
</TABLE>
F-29
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[15] Foreign Segment Operations [Continued]
Net income (loss) by geographic areas is as follows:
<TABLE>
<S> <C>
United States $ (12,660,480)
Foreign (Western Europe) 114,361
-------------
Totals $ (12,546,119)
=============
</TABLE>
Identifiable assets by geographic areas are as follows:
<TABLE>
<S> <C>
United States $ 5,410,019
Foreign (Western Europe) 2,708,875
-------------
Total $ 8,118,894
=============
</TABLE>
[16] Fourth Quarter Adjustments
During the fourth quarter of fiscal 1997, the Company recorded the following
year-end adjustments which it believes are material to the results of that
quarter:
<TABLE>
<S> <C>
Accrual for closing of Vista's California facilities $ 200,000
Accrual for severance litigation costs relating to Vista 250,000
-----------
Total $ 450,000
===========
</TABLE>
[17] Subsequent Event
[A] Promissory Note - Vista has been negotiating with the holder of a 12%
promissory note for $300,000 who has verbally agreed to extend the maturity
date of the 12% promissory note. Definitive agreements for the 12% promissory
note extension are being prepared and management anticipates that they will be
executed by April 30, 1998.
[B] First American AMO - In May 1997, Ace entered into an agreement to form a
new corporation, First American AMO ["AMO"], which is located in Palm Harbor,
Florida. Ace agreed to fund AMO up to $450,000 prior to separate outside
funding of AMO. Ace owns 83% of the issued and outstanding common stock of
AMO upon signing of this agreement. AMO is an automotive maintenance
organization that improves the efficiencies of fixing a car.
[C] Sale of Marketable Securities - Between March 1, 1997 and July 3, 1997,
the Company sold 35,000 shares of TCPI common stock with net proceeds to the
Company of approximately $360,000.
[18] Subsequent Events [Unaudited]
[A] Shares fraudulently Issued - On December 12, 1997, management of the
Company discovered that its former U.S. counsel, fraudulently caused 960,000
newly issued and freely-tradeable shares of the Company's common stock to be
issued without the prior authorization or knowledge of the Company's board of
directors and management to his affiliate or to his brokerage account in
Canada, during the period from March 25, 1997 through July 31, 1997. The
Company's legal counsel believes that it is probable the Company will incur a
loss contingency for the 960,000 shares of its common stock fraudulently
issued without consideration at the sole instructions of the former counsel.
The Company is seeking a judgement for compensatory damages in the amount of
approximately $750,000 in legal fees and costs paid by the Company to the
former counsel during the period from 1993 to 1997 while he fraudulently
represented himself to be a licensed attorney, damages for the 960,000
fraudulently issued shares of the Company's common stock, and other
compensatory, punitive and exemplary damages.
F-30
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[18] Subsequent Events [Unaudited] [Continued]
[A] Shares fraudulently Issued [Continued] - The Company has assigned a value
of $400,000 for the 960,000 shares fraudulently issued and will charge
operations with the value calculated using the market value on the day the
shares were issued. It's the Company's intention to pursue legal action where
it will seek the return and cancellation of these 960,000 shares or other
restitution equivalent to the estimated fair value of the 960,000 shares.
Based upon extensive investigation of documents and other information provided
to counsel with respect to these proceedings, it is counsel's opinion that the
Company has meritorious causes against the former counsel and it is also their
opinion that it is probable the Company ultimately will be successful in
obtaining final judgments in the Company's favor against the former counsel
for an amount in excess of $1,250,000. The ability of the Company to realize
on any such judgements, if successfully obtained, will be dependent upon the
Company's ability to locate and levy upon assets of the former counsel. At
hearings held in December 1997 and January 1998, orders of preliminary
injunction were issued by a U.S. Federal district court and a court in British
Columbia restraining the transfer of assets from accounts with any financial
institutions maintained by the former counsel and certain corporate entities
controlled by the former counsel. Pursuant to those orders, approximately
$220,000 of cash and securities in accounts maintained by Mr. Quinn have been
frozen. The former counsel has filed responsive pleadings in the litigation
proceeding denying liability.
In addition, the Company is investigating potential claims against other third
parties than may have aided and abetted the former counsel with respect to the
one or more of the causes of action asserted by the Company in the litigation
proceedings. In addition to the former counsel and two entities believed to
be under his control, the Company's transfer agent has been named and served
as a defendant in the litigation proceedings. A motion to dismiss the
proceedings against the transfer agent was denied by the federal district
court in this case, and the transfer agent has filed an answer denying
liability. Based upon the information obtained, it is counsel's opinion it is
probable the Company has a meritorious cause of action against the transfer
agent.
[B] Asset Purchase Agreement - In July 1997, Vista Southwest entered into an
asset purchase and lease assumption agreement whereby Vista Southwest agreed
to purchase certain equipment for a total purchase price of $411,860,
consisting of $50,000 in cash payments, $361,860 in a promissory note with
annual interest of 8%. The principal and interest on the note is due the
earlier of June 30, 1999 or 30 days following the close of an offering of
securities of Vista Southwest or Vista Technologies, Inc. with net proceeds of
not less than $2,000,000. The estimated fair value of the acquired equipment
is $120,000. Therefore, goodwill of approximately $292,000 was recorded on
this transaction.
Also in July 1997, ICON Vision Centers, Inc., a wholly owned subsidiary of the
Company, entered into an asset purchase agreement to purchase certain fixed
assets and inventory for a total purchase price of $128,000, consisting of
$25,600 in cash and a $102,400 noninterest bearing promissory note The note
has monthly payments of $3,200 and will be paid in full by April 30, 2000.
The estimated fair value of the inventory and fixed assets is approximately
$50,000. Therefore, goodwill of approximately $78,000 was recorded on this
transaction.
[C] Sale of TCPI Marketable Securities - Between July 4, 1997 and December 31,
1997, the Company sold an additional 140,050 shares of TCPI common stock with
net proceeds to the Company of approximately $1,316,000. Proceeds were
utilized for operations and to purchase additional investments through
December 31, 1997. The sale of TCPI stock subsequent to March 1, 1997
resulted in a net loss of approximately $1,000,000 for the Company. As of
February 28, 1998, the Company had 43,850 shares of TCPI.
[D] Additional Debt Financing - Subsequent to year end, ACE opened a margin
account with its broker and borrowed funds against its holdings of TCPI
shares. At February 28, 1998, there was no balance owing on the margin
account.
F-31<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
[19] Other Matters - Predecessor Auditor
The February 29, 1996 financial statements were previously audited with an
auditor's report dated May 9, 1996. On March 20, 1998, the predecessor
auditor informed the Company that they would not re-release the auditor's
report.
. . . . . . . . . . . . . . . .
F-32
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AT FEBRUARY 29, 1996 AND FOR THE YEAR ENDED FEBRUARY 29, 1996
[NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS]
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements:
Consolidated Statement of Operations ..................... F-34
Consolidated Statement of Shareholders' Equity ........... F-35
Consolidated Statement of Cash Flows ..................... F-36
</TABLE>
F-33
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 29, 1996
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
[NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS]
<TABLE>
<CAPTION>
<S> <C>
Revenues ................................................... $ --
------------
Operating Expenses:
Administrative ........................................... 1,798,524
Foreign Exchange ......................................... 2,285
------------
Total Operating Expenses ................................. 1,800,809
------------
Loss from Continuing Operations .......................... (1,800,809)
------------
Other Income and [Expenses]:
Other Income ............................................. 76,019
Other Expenses ........................................... (3,893)
------------
Total Other Income and [Expenses] ........................ 72,126
------------
Loss Before Discontinued Operations ...................... (1,728,683)
------------
Discontinued Operations:
Loss from Discontinued Operations ........................ (2,593,468)
Gain of Sale of Business Segment ......................... 16,412,827
------------
Gain on Discontinued Operations .......................... 13,819,359
------------
[Loss] Income Before Equity Investee
and Minority Interest Income [Loss] .................... 12,090,676
Equity Investee Income [Loss] .............................. --
------------
[Loss] Income Before Minority Interest
Income [Loss] .......................................... 12,090,676
Minority Interest Loss ..................................... --
------------
Net [Loss] Income ........................................ $ 12,090,676
============
Per Share Common Stock:
Loss from Continuing Operations .......................... $ (2.15)
Discontinued Operations .................................. $ 17.20
Net Earnings [Loss] ...................................... $ 15.05
Weighted Average Number of Ordinary Shares Outstanding ... 803,327
</TABLE>
See Notes to Consolidated Financial Statements included elsewhere herein.
F-34
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED
FEBRUARY 29, 1996
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
[NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS]
<TABLE>
<CAPTION>
Capital Stock Foreign Unrealized
-------------------- Premium in Currency Gain Total
Number of Excess of Translation [Loss] on Accumulated Shareholders'
Shares Amount Par Value Adjustment Investments Deficit Equity
---------- -------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
February 28, 1995 574,025 $ 5,741 $ 13,626,342 $ -- $ -- $(18,340,304) $ (4,708,221)
Issuance of Stock:
Payment of
Professional Fees 69,037 690 601,214 -- -- -- 601,904
Payment of
Accrued Salaries 80,404 804 498,519 -- -- -- 499,323
Private Placement 324,940 3,249 2,433,549 -- -- -- 2,436,798
Shares Issuance
Costs -- -- (250,022) -- -- -- (250,022)
Officers and
Directors 92,657 927 740,323 -- -- -- 741,250
Foreign Currency
Translation
Adjustment -- -- -- (6,518) -- -- (6,518)
Net Earnings -- -- -- -- -- 12,090,676 12,090,676
Unrealized Gain
on Investments -- -- -- -- 3,176,108 -- 3,176,108
---------- -------- ------------ ----------- ----------- ------------ -------------
Balance -
February 29, 1996 1,141,603 11,411 17,649,925 (6,518) 3,176,108 (6,249,628) 14,581,298
========== ======== ============ =========== =========== ============ =============
</TABLE>
See Notes to Consolidated Financial Statements included elsewhere herein.
F-35
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED FEBRUARY 29, 1996
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
[NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS]
<TABLE>
<CAPTION>
<S> <C>
Operating Activities:
Net Income ............................................... $ 12,090,676
------------
Adjustments to Reconcile Net Income to Net
Cash [Used for] Operating Activities:
Depreciation and Amortization .......................... 253,958
Noncash Expenses ....................................... 1,842,478
Write-Down of Fixed Assets ............................. 9,900
Gain on Sale of Business ............................... (16,412,827)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable - Trade ............................ 18,910
Prepaid Expenses ....................................... 47,298
Increase [Decrease] in:
Accounts Payable - Trade ............................... (5,275)
Accrued Expenses ....................................... 296,854
Other Liabilities ...................................... 3,485
------------
Total Adjustments ........................................ (13,945,219)
------------
Net Cash - Operating Activities - Forward ................ (1,854,543)
------------
Investing Activities:
Purchase of Fixed Assets ................................. $ (50,658)
Cash Acquired in Investment in Vista ..................... (251,500)
------------
Net Cash - Investing Activities - Forward ................ $ (302,158)
------------
</TABLE>
See Notes to Consolidated Financial Statements included elsewhere herein.
F-36
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
- -----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED FEBRUARY 29, 1996
[EXPRESSED IN U.S. DOLLARS]
- -----------------------------------------------------------------------------
[NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS]
<TABLE>
<CAPTION>
<S> <C>
Net Cash - Operating Activities - Forwarded .............. $ (1,854,543)
------------
Net Cash - Investing Activities - Forwarded .............. (302,158)
------------
Financing Activities:
Shares Issued for Cash ................................... 2,186,778
------------
Net Cash - Financing Activities .......................... 2,186,778
------------
Effective of Exchange Rate Change in Cash
and Cash Equivalents ..................................... --
------------
Net Increase in Cash and Cash Equivalents ................ 30,077
Cash and Cash Equivalents - Beginning of Year .............. 638,745
------------
Cash and Cash Equivalents - End of Year .................. $ 668,822
============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest ............................................... $ 250,000
Income Taxes ........................................... $ --
</TABLE>
See Notes to Consolidated Financial Statements included elsewhere herein.
F-37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: March 26, 1998
ATLANTIC CENTRAL ENTERPRISES LIMITED
(Registrant)
By: /s/ Patrick J. Rooney
---------------------------------
Patrick J. Rooney,
President and Chief Executive Officer
(principal executive officer; principal financial officer;
principal accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- ----------------------- ------------ ----------------
<S> <C> <C>
/s/ Patrick J. Rooney March 26, 1998
- ------------------------ Director; President
Patrick J. Rooney and Chief Executive
Officer
/s/ Jeffrey D. Dickson March 26, 1998
- ------------------------ Director
Jeffrey D. Dickson
- ------------------------ Director
Patrick J. O'Sullivan
</TABLE>
PHARMA PATCH PLC
- and -
ATLANTIC CENTRAL
ENTERPRISES LIMITED
---------------------------------------------
BUSINESS TRANSFER AGREEMENT
---------------------------------------------
<PAGE>
THIS AGREEMENT is made this 17th day of January, 1997
BETWEEN:-
1. PHARMA PATCH PLC whose registered office is at 15/16 Fitzwilliam Place
Dublin 2, Ireland (the "Transferor");
AND
2. ATLANTIC CENTRAL ENTERPRISES LIMITED whose registered office is at Cedar
House, 41 Cedar Avenue, Hamilton HM 12, Bermuda (the "Transferee").
WHEREAS:-
(A) The Transferor is a public limited company incorporated in Ireland.
(B) The Transferee is a company incorporated in Bermuda and is a
wholly-owned subsidiary of the Transferor.
<PAGE>
2
(C) Pursuant to a plan of reorganisation of the Transferor, (i) the
Transferor proposes to transfer to the Transferee all of the
Transferor's assets, and the Transferee proposes to assume all of the
Transferor's liabilities in exchange for shares of the Transferor; (ii)
the Transferor will commence voluntary liquidation or winding-up; and
(iii) the Transferor will distribute its shares in the Transferee to its
shareholders.
NOW THIS AGREEMENT WITNESSES as follows:-
1. DEFINITION AND INTERPRETATION
In this Agreement (which expression shall include the Recitals of and
the Schedules to this Agreement) the headings are for convenience only
and shall not affect the interpretation hereof and except where
inconsistent with the subject matter or context:-
(A) the following words and expressions shall have the following meanings
respectively:-
"Assets" means all the assets hereby agreed to be transferred
as more particularly described in Schedule I;
<PAGE>
3
"Books Debts" means all books and other debts owing to the
Transferor (and whether or not yet due and payable) at
the Transfer Date including:
(i) all loans and advances due from an Vista
Technologies, Inc. and
(ii) sundry debtors;
"Business" means the investment holding business of the
Transferor;
"Chattels" means the books, ledgers, day books, cash books,
account books, records, reports and marketing
literature, confidential information and other
personal chattels of the Transferor (whether in
written form, on microfilm, magnetic tape or any other
form of mechanical or electronic data retrieval
system) on and used by the Transferor exclusively for
or in connection with the Business as at the Transfer
Date;
<PAGE>
4
"Claims" means all rights and claims of the Transferor
whatsoever subsisting on the Transfer Date in favour
of the Transferor in relation to the Business or any
of the Assets;
"Completion" means performance by the parties of the several
obligations contained in the Agreement;
"Goodwill" means the goodwill of the Transferor in connection
with the Business together with the benefit of all
records, customer lists and other documents whatsoever
used in connection with the Business and owned by the
Transferor;
"Liabilities" means any liability or indebtedness of the Transferor,
whether actual or contingent, which has arisen or been
incurred or may arise or be incurred in connection
with the Business as at the Transfer Date:
"Management
Contracts" means the management agreements entered into by the
Transferor and described in Schedule [ ];
<PAGE>
5
"Parties" means the Transferor and the Transferee;
"Securities" means the securities beneficially owned by the
Transferor at the Transfer Date, including those
presently owned by the Transferor and listed in
Schedule II;
"Tax Liability" means any liability or indebtedness of the Transferor,
whether actual or contingent, which has arisen or been
incurred on account of duties or taxation assessed,
imposed or levied on the Transferor by any relevant
regulatory or governmental authority, department or
agency in respect of the Business; and
"Transfer Date" means 20th January, 1997;
(B) references to Recitals, Clauses, sub-clauses and Schedules are
references to recitals, clauses and sub-clauses of and schedules to this
Agreement; and
<PAGE>
6
(C) references to a statutory provision shall include references to such
provision and to any regulations made in pursuance thereof as from time
to time modified, codified or re-enacted whether before or after the
date of this Agreement so far as such modification, codification or
re-enactment applies or is capable of applying to any transactions
entered into prior to Completion and (so far as liability thereunder may
exist or can arise) shall include also any past statutory provisions or
regulations (as from time to time modified, codified or re-enacted)
which such provision has directly or indirectly replaced.
2. TRANSFER OF THE ASSETS
(A) The Transferor shall transfer and the Transferee shall acquire with
effect from the close of business on the Transfer Date the Assets,
including, but without prejudice to the generality of the foregoing, the
following:-
(1) the Book Debts;
(2) the Chattels;
(3) the Claims;
(4) the Goodwill; and
(5) the Securities.
<PAGE>
7
and the Transferor will assume all of the Transferor's liabilities in
exchange for 1,747,961 shares of the Transferor's. common shares
constituting all of the issued and outstanding shares of the Transferee.
(B) The Transferee shall accept without enquiry, requisition or objection
such title as the Transferor may have in the Assets.
(C) The Transferor undertakes to transfer the Business as a going concern as
at the Transfer Date and the Transferee undertakes that as from the
Transfer Date it will carry on the Business as a going concern.
3. COMPLETION
(A) Completion of the transfer purchase of the Business shall take place on
20th January, 1997 or on such later date on which the shareholders of
the Transferor shall have approved the Plan of Reorganisation.
(B) On Completion the Transferor shall:
(a) deliver or, transfer, or procure the delivery or transfer, to the
Transferee of possession or control of the Assets capable of
<PAGE>
8
delivery or transfer including (without prejudice to the
generality of the foregoing):-
(i) all Chattels; and
(ii) such lists of clients, agents and other information
documents or things relating to the Business as the
Transferee may reasonably require; and
(b) deliver to the Transferee instruments of transfer in respect of
all of the Securities referred to in Schedule II duly executed by
or on behalf of the Transferor or otherwise its nominee(s) (as the
registered holder(s) and transferor(s) of the securities) in
favour of the Transferor or its nominee(s).
(D) On Completion or as soon as practicable thereafter, the parties hereto
shall execute and do, or procure to be done or executed, and concur in,
all such assurances, assignments, deeds, documents, acts and things as
shall be required for vesting in the Transferee the Assets and giving
the Transferee the full benefit of this Agreement, and prior thereto the
Transferor shall hold the Assets in question in trust for the Transferee
absolutely.
<PAGE>
9
(E) In the case of any Asset in respect of which any licence, consent or
release is required to be obtained to transfer possession, possession
will be given to the Transferee as soon after Completion as the
requisite licence, consent or release is obtained. Until such time, the
Transferor will give the Transferee such access to or the use of the
relevant Asset, if any, as may be permissible in the absence of the
licenee, consent or release.
(F) Following the date hereof and pending Completion, the Transferor shall
not acquire any assets, or incur any liabilities, in respect of the
Business without the prior consent of the Transferee, save as may be
necessary in connection with the liquidation of the Transferor.
(G) The provisions of this Agreement shall remain in full force and effect
notwithstanding Completion.
4. LIABILITIES AND UNCOMPLETED CONTRACTS
(A) The Transferee shall after the Transfer Date have the benefit of
carrying out and completing for its own account all contracts and
arrangements entered into by the Transferor in connection with the
Business on or prior to the Transfer Date.
<PAGE>
10
(B) The Transferee shall after the Transfer Date meet the obligations and
liabilities of the Transferor under all contracts and arrangements
entered into by the Transferor in connection with the Business on or
prior to the Transfer Date including the Liabilities, with the intent of
discharging the same in the ordinary course of business to the extent
that the same have not been performed prior thereto. The Transferee
shall itself bear the cost of meeting such obligations.
(C) Insofar as any of the properties, rights, assets or the benefit of any
contracts to be transferred hereunder cannot effectively be transferred
to the Transferee, except by an agreement of novation with third
parties, then conditionally upon Completion:-
(i) the parties shall co-operate to use their best endeavours to
procure the same to be novated as aforesaid; and
(ii) unless and until any such novation the Transferor shall do all
acts and things in relation thereto as the Transferee may
reasonably require.
(D) To the extent that any payment is made to the Transferor in respect of
contracts after the Transfer Date and the Transferor shall receive the
same as agent of the Transferee and shall account to the Transferee for
the same on or after Completion.
<PAGE>
11
(E) The Transferee shall be responsible for and shall indemnify the
Transferor against any claim duly made on or after the Transfer Date in
respect of any service supplied by the Transferor prior to the close of
business on the Transfer Date in the ordinary course of the Business.
5. OBLIGATIONS OF TRANSFEROR
Except as otherwise expressly provided in this Agreement in respect of
the Liabilities, the Transferor shall be responsible for and shall duly
and punctually pay and discharge all debts, taxation and other
liabilities in connection with the Business existing at the close of
business on the Transfer Date or arising, accruing or assessed in
respect of any period (or part thereof) or in consequence of any
transaction carried out prior thereto.
6. NOTICES
Any notice or document requiring to be served on any of the parties
hereto in relation to the provisions of this Agreement may be served on
a party at its registered office. Any such notice shall be delivered by
hand or telex or sent by first class post and if sent by post shall
conclusively be deemed to have been received forty-eight hours from the
time of posting.
<PAGE>
12
7. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of Bermuda and each of the parties hereto hereby submit to the
non-exclusive jurisdiction of the Bermuda courts.
8. GENERAL
(A) This Agreement may be executed in one or more counterparts each signed
by one or more of the parties hereto and such counterparts shall
constitute one agreement.
(B) This Agreement shall be binding upon each of the parties hereto and
their assigns, successors in title or legal personal representatives as
the case may be.
(C) The costs and expenses of entering into this Agreement and giving effect
to the transactions contemplated thereby shall be home by the parties
thereto in such proportions as may be respectively agreed between them.
(D) No variation of this Agreement shall be valid unless it is signed in
writing by or on behalf of the parties thereto.
<PAGE>
13
AS WITNESS whereof this Agreement was entered into the day and year
first above written.
Signed by:
(For and on behalf of PHARMA PATCH PLC) /s/ Paul E. Heney
in the presence of: /s/ Murray D. Watson
Signed by: )
For and on behalf of ) /s/ Paul E. Heney
ATLANTIC CENTRAL ) /s/ Murray D. Watson
ENTERPRISES LIMITED in the )
presence of: )
BYE-LAWS
OF
ATLANTIC CENTRAL ENTERPRISES LIMITED
I HEREBY CERTIFY that the within-written Bye-Laws are a true copy of the Bye-
Laws of Atlantic Central Enterprises Limited approved at a Special General
Meeting of the Members of the above Company on the 20th day of November, 1996.
/s/ Judith Collis
Director
Appleby-Spurling & Kempe-
Cedar House-
41 Cedar Avenue-
Hamilton HM 12-
Bermuda
<PAGE>
ATLANTIC CENTRAL ENTERPRISES LIMITED
INDEX
<TABLE>
<CAPTION>
Bye-Law Subject Page
- ------- ------- -----
<S> <C> <C>
1 Interpretation 1
2 Registered Office 2
3-4 Share Capital and Share Rights 2-3
5-6 Modification of Rights 3
7-9 Shares 4
10-12 Certificates 4-5
13-15 Lien 5-6
16-21 Calls on Shares 6-7
22-28 Forfeiture of Shares 7-8
29 Register of Members, Directors and Officers 9
30-33 Transfer of Shares 9-10
34-37 Transmission of Shares 10-12
38-40 Increase of Capital 12
41-42 Alteration of Capital 12-13
43-44 Reduction of Capital 13
45 General Meetings 13
46-47 Notice of General Meetings 14
48-53 Proceedings at General Meetings 14-16
54-65 Voting 16-18
66-72 Proxies and Corporate Representatives 18-20
73-77 Appointment and Removal of Directors 20-22
78 Resignation and Disqualification of Directors 22
<PAGE>
Bye-Law Subject Page
- ------- ------- -----
79-81 Alternate Directors 22-23
82 Directors' Fees and Additional Remuneration and Expenses 23-24
83-84 Directors' Interests 24-27
85-90 Powers and Duties of the Board 27-29
91-93 Delegation of the Board's Powers 29
94-101 Proceedings of the Board 30-32
102 Officers 32
103 Minutes 32
104-105 Secretary 33
106 The Seal 33
107-113 Dividends and other Payments 34-35
114 Reserves 35-36
115-116 Capitalization and Profits 36-37
117 Record Dates 37
118-120 Accounting Records 37-38
121 Audit 38
122-124 Service of Notices and Other Documents 38-39
125 Winding Up 39
126-128 Indemnity 39-40
129 Alteration of Bye-Laws 40
</TABLE>
<PAGE>
BYE-LAWS
of
ATLANTIC CENTRAL ENTERPRISES LIMITED
INTERPRETATION
1. In these Bye-Laws unless the context otherwise requires:-
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"Company" means the company incorporated in Bermuda under the name of
Bamburgh Limited on the 2nd day of February, 1996 and which changed its
name to Atlantic Central Enterprises Limited on the 22nd day of April,
1996;
"the Companies Acts" means every Bermuda statute from time to time in
force concerning companies insofar as the same applies to the Company;
"equity share capital" means the issued share capital excluding any part
of that capital which, neither as respects dividends nor as respects
capital, carries any right to participate beyond a specified amount in a
distribution;
"Member" means a member of the Company;
"paid up" means paid up or credited as paid up;
"Principal Register" means the Register of Members of the Company
maintained in Bermuda;
"the Register" means the Principal Register or any Branch Register
established pursuant to Bye-Law 29;
"Seal" means the common seal of the Company;
"Secretary" includes a temporary or assistant Secretary and any person
appointed by the Board to perform any of the duties of the Secretary;
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<PAGE>
"shares" means the Common Shares as defined in Bye-law 3;
"these Bye-Laws" means these Bye-Laws in their present form or as from
time to time amended;
for the purposes of these Bye-Laws a corporation shall be deemed to be
present in person if its representative duly authorised pursuant to the
Companies Acts is present;
words importing the singular number only include the plural number and
vice versa;
words importing the masculine gender only include the feminine and
neuter genders respectively;
words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate;
reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a
legible and non-transitory form;
any words or expressions defined in the Companies Acts in force at the
date when these Bye-Laws or any part thereof are adopted shall bear the
same meaning in these Bye-Laws or such part (as the case may be).
REGISTERED OFFICE
2. The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint.
SHARE CAPITAL AND SHARE RIGHTS
3. (a) The authorised share capital of the Company at the date of
adoption of these Bye-laws is US$500,000 divided into 50 million
Common Shares of par value US$0.01 each; and
(b) Subject to any special rights conferred on the holders of any
share or class of shares, any share in the Company may be issued
with or have attached thereto such preferred, deferred, qualified
or other special rights or such restrictions, whether in regard to
dividend, voting, return of capital or otherwise, as the Company
may in general meeting determine or, if there has not been any
such
2
<PAGE>
determination or so far as the same shall not make specific
provision, as the Board may determine.
4. Any preference shares may be issued on terms:
(a) that they are to be redeemed on the happening of a specified event
or on a given date and/or,
(b) that they are liable to be redeemed at the option of the Company;
and/or,
(c) that they are liable to be redeemed at the option of the holder.
MODIFICATION OF RIGHTS
5. Subject to the Companies Acts, all or any of the special rights attached
to any class of shares for the time being issued may from time to time
(whether or not the Company is being wound up) be altered or abrogated
with the consent in writing of the holders of not less than seventy five
percent of the issued shares of that class or with the sanction of a
resolution passed at a separate general meeting of the holders of such
shares voting in person or by proxy. To any such separate general
meeting, all the provisions of these Bye-Laws as to general meetings of
the Company shall mutatis mutandis apply, but so that the necessary
quorum shall be two or more persons holding or representing by proxy
one-third of the issued shares of the relevant class, that every holder
of shares of the relevant class shall be entitled on a poll to one vote
for every such share held by him and that any holder of shares of the
relevant class present in person or by proxy may demand a poll. If at
any adjourned meeting of such holders such quorum as aforesaid is not
present any two holders of shares of the relevant class who are present
in person or by proxy shall be a quorum.
6. The special rights conferred upon the holders of any shares or class of
shares shall not, unless otherwise expressly provided in the rights
attaching to or the terms of issue of such shares, be deemed to be
altered by the creation or issue of further shares ranking pari passu
therewith.
3
<PAGE>
SHARES
7. Unless otherwise determined by a resolution of the Company in general
meeting, any shares unissued at the date of adoption of these Bye-Laws
and any shares hereafter created and forming part of the equity share
capital of the Company and any other securities convertible into such
equity share capital shall be under the control of the Directors who may
allot grant options over or otherwise dispose of the same to such
persons (including the Directors themselves) on such terms and at such
times as they think proper provided that no share shall be issued at a
discount to its par value.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
9. Except as ordered by a court of competent jurisdiction or as required by
law, no person shall be recognised by the Company as holding any share
upon trust and the Company shall not be bound by or required in any way
to recognise (even when having notice thereof) any equitable,
contingent, future or partial interest in any share or any interest in
any fractional part of a share or (except only as otherwise provided in
these Bye-Laws or by law) any other right in respect of any share except
an absolute right to the entirety thereof in the registered holder.
CERTIFICATES
10. The preparation, issue and delivery of certificates shall be governed by
the Companies Acts. In the case of a share held jointly by several
persons, delivery of a certificate to one of several joint holders shall
be sufficient delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence and indemnity and
to payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board
may think fit and, in case of defacement, on delivery of the old
certificate to the Company.
4
<PAGE>
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other
like documents) shall, except to the extent that the terms and
conditions for the time being relating thereto otherwise provide, be
issued under the Seal. The Board may by resolution determine, either
generally or in any particular case, that any signatures on any such
certificates need not be autographic but may be affixed to such
certificates by some mechanical means or may be printed thereon or that
such certificates need not be signed by any persons.
LIEN
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or
not, called or payable, at a date fixed by or in accordance with the
terms of issue of such share in respect of such share, and the Company
shall also have a first and paramount lien on every share (other than a
fully paid share) standing registered in the name of a Member, whether
singly or jointly with any other person, for all the debts and
liabilities of such Member or his estate to the Company, whether the
same shall have been incurred before or after notice to the Company of
any interest of any person other than such Member, and whether the time
for the payment or discharge of the same shall have actually arrived or
not. and notwithstanding that the same are joint debts or liabilities of
such Member or his estate and any other person, whether a Member or not.
The Company's lien on a share shall extend to all dividends payable
thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to
be wholly or in part exempt from the provisions of this Bye-Law.
14. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless
some sum in respect of which the lien exists is presently payable nor
until the 'expiration of fourteen days after a notice in writing,
stating and demanding payment of the sum presently payable and giving
notice
5
<PAGE>
of the intention to sell in default of such payment, has been served on
the holder for the time being of the share.
15. The net proceeds of sale by the Company of any shares on which it has a
lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for
debts or liabilities not presently payable as existed upon the share
prior to the sale) be paid to the holder of the share immediately before
such sale. For giving effect to any such sale the Board may authorise
some person to transfer the share sold to the purchaser thereof. The
purchaser shall be registered as the holder of the share and he shall
not be bound to see to the application of the purchase money, nor shall
his title to the share be affected by any irregularity or invalidity in
the proceedings relating to the sale.
CALLS ON SHARES
16. The Board may from time to time make calls upon the Members in respect
of any moneys unpaid on their shares (whether on account of the par
value of the shares or by way of premium) and not by the terms of issue
thereof made payable at a date fixed by or in accordance with such terms
of issue, and each Member shall (subject to the Company serving upon him
at least fourteen days notice specifying the time or times and place of
payment) pay to the Company at the time or times and place so specified
the amount called on his shares. A call may be revoked or postponed as
the Board may determine.
17. A call may be made payable by installments and shall be deemed to have
been made at the time when the resolution of the Board authorizing the
call was passed.
18. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is
due shall pay interest on the sum from the day appointed for the payment
thereof to the time of actual payment at such rate as the
6
<PAGE>
Board may determine, but the Board shall be at liberty to waive payment
of such interest wholly or in part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of
issue, whether on account of the nominal amount of the share or by way
of premium, shall for all the purposes of these Bye-Laws be deemed to be
a call duly made, notified and payable on the date on which, by the
terms of issue, the same becomes payable and, in case of non-payment,
all the relevant provisions of these Bye-Laws as to payment of interest,
forfeiture or otherwise shall apply as if such sum had become payable by
virtue of a call duly made and notified.
21. The Board may on the issue of shares differentiate between the allottees
or holders as to the amount of calls to be paid and the times of
payment.
FORFEITURE OF SHARES
22. If a Member fails to pay any call or installment of a call on the day
appointed for payment thereof, the Board may at any time thereafter
during such time as any part of such call or installment remains unpaid
serve a notice on him requiring payment of so much of the call or
installment as is unpaid, together with any interest which may have
accrued.
23. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the
payment required by the notice is to be made and shall state that, in
the event of non-payment on or before the day and at the place
appointed, the shares in respect of which such call is made or
installment is payable will be liable to be forfeited. The Board may
accept the surrender of any share liable to be forfeited hereunder and,
in such case, references in these Bye-Laws to forfeiture shall include
surrender.
24. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at
any time thereafter, before payment of all calls or installments and
interest due in respect thereof has been made, be forfeited by
7
<PAGE>
a resolution of the Board to that effect. Such forfeiture shall include
all dividends declared in respect of the forfeited shares and not
actually paid before the forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the
share; but no forfeiture shall be in any manner invalidated by any
omission or neglect to give such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company and
may be sold, reoffered or otherwise disposed of either to the person who
was, before forfeiture, the holder thereof or entitled thereto or to any
other person upon such terms and in such manner as the Board shall think
fit, and at any time before a sale, re-allotment or disposition the
forfeiture may be cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be a
Member in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the
date of forfeiture were presently payable by him to the Company in
respect of the shares with interest thereon at such rate as the Board
may determine from the date of forfeiture until payment, and the Company
may enforce payment without being under any obligation to make any
allowance for the value of the shares forfeited.
28. An affidavit in writing that the deponent is a Director or the Secretary
of the Company and that a share has been duly forfeited on the date
stated in the affidavit shall be conclusive evidence of the facts
therein stated as against all persons claiming to be entitled to the
share. The Company may receive the consideration (if any) given for the
share on the sale, re-allotment or disposition thereof and the Board may
authorise some person to transfer the share to the person to whom the
same is sold, re-allotted or disposed of, and he shall thereupon be
registered as the holder of the share and shall not be bound to see to
the application of the purchase money (if any) nor shall his title to
the share be affected by any irregularity or invalidity in the
proceedings relating to the forfeiture, sale, re-allotment or disposal
of the share.
8
<PAGE>
REGISTERS OF MEMBERS, DIRECTORS AND OFFICERS
29. (a) The Secretary shall establish and maintain the Register of Members
at the Registered Office in the manner prescribed by the Companies
Acts. Unless the Board other-wise determines, the Register of
Members shall be open to inspection in the manner prescribed by
the Companies Acts between 10.00 a.m. and 12.00 noon on every
working day. Subject to the provisions of the Companies Acts, the
Board may establish Branch Registers of Members in countries in
which the shares of the Company are dealt on a stock exchange and
shares of the Company shall be registered on both the Register and
any such Branch Register. Unless the Board so determines, no
Member or intending Member shall be entitled to have entered in
the Register any indication of any trust or any equitable,
contingent, future or partial interest in any share or any
interest in any fractional part of a share and if any such entry
exists or is permitted by the Board it shall not be deemed to
abrogate any of the provisions of Bye-Law 9.
(b) The Secretary shall establish and maintain a register of the
Directors and Officers of the Company as required by the Companies
Acts. The Register of Directors and Officers shall be open to
inspection in the manner prescribed by the Companies Acts between
10.00 a.m. and 12.00 noon on every working day.
TRANSFER OF SHARES
30. Subject to the Companies Acts and to such of the restrictions contained
in these Bye-Laws as may be applicable, any Member may transfer all or
any of his shares by an instrument of transfer in the usual common form
or in any other form which the Board may approve.
31. The instrument of transfer of a share shall be signed by or on behalf of
the transferor and where any share is not fully-paid the transferee, and
the transferor shall be deemed to remain the holder of the share until
the name of the transferee is entered in the Register in respect
thereof. All instruments of transfer when registered may be retained by
the
9
<PAGE>
Company. The Board may, in its absolute discretion and without assigning
any reason therefor, decline to register any transfer of any share which
is not a fully-paid share. The Board may also decline to register any
transfer unless:-
(a) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it
relates, and such other evidence as the Board may reasonably
require to show the right of the transferor to make the transfer,
(b) the instrument of transfer is in respect of only one class of
share,
(c) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under
this Bye-Law and Bye-Laws 30 and 32.
32. If the Board declines to register a transfer it shall, within three
months after the date on which the instrument of transfer was lodged,
send to the transferee notice of such refusal.
33. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage,
power of attorney, distringas or stop notice, order of court or other
instrument relating to or affecting the title to any share, or otherwise
making an entry in the Register relating to any share.
TRANSMISSION OF SHARES
34. In the case of the death of a Member, the survivor or survivors, where
the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as
having any title to his shares; but nothing herein contained shall
release the estate of a deceased holder (whether the sole or joint) from
any liability in respect of any share held by him solely or jointly with
other persons. For the purpose of this Bye-Law, estate representative
means the person to whom probate or letters of administration has or
have been granted in Bermuda or, failing any such person,
10
<PAGE>
such other person as the Board may in its absolute discretion determine
to be the person recognised by the Company for the purpose of this
Bye-Law.
35. Any person becoming entitled to a share in consequence of the death of a
Member or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from
time to time be required by the Board as to his entitlement, either be
registered himself as the holder of the share or elect to have some
person nominated by him registered as the transferee thereof. If the
person so becoming entitled elects to be registered himself, he shall
deliver or send to the Company a notice in writing signed by him stating
that he so elects. If he shall elect to have his nominee registered, he
shall signify his election by signing an instrument of transfer of such
share in favour of his nominee. All the limitations, restrictions and
provisions of these Bye-Laws relating to the right to transfer and the
registration of transfer of shares shall be applicable to any such
notice or instrument of transfer as aforesaid as if the death of the
Member or other event giving rise to the transmission had not occurred
and the notice or instrument of transfer was an instrument of transfer
signed by such Member.
36. A person becoming entitled to a share in consequence of the death of a
Member or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the
Board as to his entitlement) be entitled to receive and may give a
discharge for any dividends or other moneys payable in respect of the
share, but he shall not be entitled in respect of the share to receive
notices of or to attend or vote at general meetings of the Company or,
save as aforesaid, to exercise in respect of the share any of the rights
or privileges of a Member until he shall have become registered as the
holder thereof. The Board may at any time give notice requiring such
person to elect either to be registered himself or to transfer the share
and if the notice is not complied with within sixty days the Board may
thereafter withhold payment of all dividends and other moneys payable in
respect of the shares until the requirements of the notice have been
complied with.
11
<PAGE>
37. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under
Bye-Laws 34, 35 and 36.
INCREASE OF CAPITAL
38. The Company may from time to time increase its capital by such sum to be
divided into shares of such par value as the Company in general meeting
shall prescribe.
39. The Company may, by the resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance
either at par or at a premium or (subject to the provisions of the
Companies Acts) at a discount to all the holders for the time being of
shares of any class or classes in proportion to the number of such
shares held by them respectively or make any other provision as to the
issue of the new shares.
40. The new shares shall be subject to all the provisions of these Bye-Laws
with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
41. The Company may from time to time in general meeting;-
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special
rights, privileges or conditions;
(b) consolidate and divide all or any of its share capital into shares
of larger par value than its existing shares;
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum, so, however, that in the
sub-division the proportion between the amount paid and the
amount, if any, unpaid on each reduced share shall be the same as
it was in the case of the share from which the reduced share is
derived;
(d) make provision for the issue and allotment of shares which do not
carry any voting rights; and
(e) cancel shares which, at the date of the passing of the resolution
in that behalf, have not been taken or agreed to be taken by any
person, and diminish the amount of its share capital by the amount
of the shares so canceled.
12
<PAGE>
Where any difficulty arises in regard to any division, consolidation, or
sub-division under this Bye-Law, the Board may settle the same as it
thinks expedient and, in particular, may arrange for the sale of the
shares representing fractions and the distribution of the net proceeds
of sale in 'due proportion amongst the Members who would have been
entitled to the fractions, and for this purpose the Board may authorise
some person to transfer the shares representing fractions to the
purchaser thereof, who shall not be bound to see to the application of
the purchase money nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings relating to the sale.
42. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by resolution in
general meeting from time to time convert any preference shares into
redeemable preference shares.
REDUCTION OF CAPITAL
43. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to
time in general meeting authorise the reduction of its issued share
capital or any capital redemption reserve fund or any share premium or
contributed surplus account in any manner.
44. In relation to any such reduction, the Company may in general meeting
determine the terms upon which such reduction is to be effected
including in the case of a reduction of part only of a class of shares,
those shares to be affected.
GENERAL MEETINGS
45. The Board shall convene and the Company shall hold general meetings as
Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The
Board may, whenever it thinks fit, and shall, when required by the
Companies Acts, convene general meetings other than Annual General
Meetings which shall be called Special General Meetings.
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<PAGE>
NOTICE OF GENERAL MEETINGS
46. An Annual General Meeting shall be called by not less than five (5)
days' notice in writing and a Special General Meeting shall be called by
not less than fourteen (14) days' notice in writing. The notice shall be
exclusive of the day on which it is served or deemed to be served and of
the day for which it is given, and shall specify the place, day and time
of the meeting, and, in the case of a Special General Meeting, the
general nature of the business to be considered. Notice of every general
meeting shall be given in any manner permitted by Bye-Laws 122 and 123
to all Members other than such as, under the provisions of these
Bye-Laws or the terms of issue of the shares they hold, are not entitled
to receive such notice from the Company.
Notwithstanding that a meeting of the Company is called by shorter
notice than that specified in this Bye-Law, it shall be deemed to have
been duly called if it is so agreed:-
(a) in the case of a meeting called as an Annual General Meeting, by
all the Members entitled to attend and vote thereat;
(b) in the case of any other meeting, by a majority in number of the
Members having the right to attend and vote at the meeting, being
a majority together holding not less than 95 percent in nominal
value of the shares giving that right.
47. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental
omission to send such instrument of proxy to, or the non-receipt of
notice of a meeting or such instrument of proxy by, any person entitled
to receive such notice shall not invalidate the proceedings at that
meeting.
PROCEEDINGS AT GENERAL MEETINGS
48. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a
quorum shall not preclude the appointment, choice or election of a
chairman which shall not be treated as part of the business of the
meeting. Save as otherwise provided by these Bye-Laws, at least two
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<PAGE>
Members present in person and entitled to vote holding or representing
at least 5% of the issued share capital of the Company, shall be a
quorum for all purposes.
49. If within five minutes (or such longer time as the Chairman of the
meeting may determine to wait) after the time appointed for the meeting,
a quorum is not present, the meeting, if convened on the requisition of
Members, shall be dissolved. In any other case, it shall stand adjourned
to such other day and such other time and place as the Chairman of the
meeting may determine and at such adjourned meeting two Members present
in person (whatever the number of shares held by them) shall be a
quorum. The Company shall give not less than five (5) days' notice of
any meeting adjourned through want of a quorum and such notice shall
state that two Members present in person (whatever the number of shares
held by them) shall be a quorum.
50. Each Director shall be entitled to attend and speak at any general
meeting of the Company.
51. The Chairman (if any) of the Board or, in his absence, the President
shall preside as Chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither of the Chairman nor
the President is present within five minutes after the time appointed
for holding the meeting, or if neither of them is willing to act as
Chairman, the Directors present shall choose one of their number to act
or if one Director only is present he shall preside as Chairman if
willing to act. If no Director is present or, if each of the Directors
present declines to take the chair, the persons present and entitled to
vote on a poll shall elect one of their number to be Chairman.
52. The Chairman may, with the approval by resolution of any meeting at
which a quorum is present (and shall if so directed by the meeting),
adjourn the meeting from time to time and from place to place but no
business shall be transacted at any .adjourned meeting except business
which might lawfully have been transacted at the meeting from which the
adjournment took place. When a meeting is adjourned for three months or
more, notice of the adjourned meeting shall be given as in the case of
an original meeting.
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53. Save as expressly provided by these Bye-Laws, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted
at an adjourned meeting.
VOTING
54. Save where a greater majority is required by the Companies Acts or these
Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
55. Subject and without prejudice to any special fights, privileges or
restrictions as to voting for the time being attached to any special
class of shares for the time being forming part of the capital of the
Company, at any general meeting a resolution put to the vote of the
meeting shall be decided on a show of hands and every Member who (being
an individual) is present in person or (being a corporation) is present
by a representative duly authorised in accordance with the Companies
Acts shall have one vote, unless (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for
a poll) a poll is demanded by:-
(a) the Chairman of the meeting; or
(b) at least three Members present in person or represented by proxy;
or
(c) any Member or Members present in person or represented by proxy
and holding between them not less than one tenth of the total
voting rights of all the Members having the right to vote at such
meeting; or
(d) a Member or Members present in person or represented by proxy
holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not
less than one tenth of the total sum paid up on all such shares
conferring such right.
In the case of a poll every Member present in person, by representative
or by proxy shall have one vote for every share of any class of which he
is the holder. Unless a poll is so demanded and the demand is not
withdrawn, a declaration by the Chairman that a resolution has, on a
show of hands, been carried or carried unanimously or by a particular
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majority or not carried by a particular majority or lost shall be final
and conclusive, and an entry to that effect in the Minute Book of the
Company shall be conclusive evidence of the fact without proof of the
number of votes recorded for or against such resolution.
56. If a poll is duly demanded, the result of the poll shall be deemed to be
the resolution of the meeting at which the poll is demanded.
57. A poll demanded on the election of a Chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other
question shall be taken in such manner and either forthwith or at such
time (being not later than three months after the date of the demand)
and place as the Chairman shall direct. It shall not be necessary
(unless the Chairman otherwise directs) for notice to be given of a
poll.
58. The demand for a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which the
poll has been demanded and it may be withdrawn at any time before the
close of the meeting or the taking of the poll, whichever is the
earlier.
59. On a poll, votes may be cast either personally or by proxy.
60. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
61. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the Chairman of such meeting shall not be
entitled to a second or casting vote.
62. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in
the Register in respect of the joint holding.
63. A Member who is a patient for any purpose of any statute or applicable
law relating to mental health or in respect of whom an order has been
made by any Court having jurisdiction for the protection or management
of the affairs of persons incapable of managing their own affairs may
vote, whether on a show of hands or on a poll, by his
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receiver, committee, curator bonis or other person in the nature of a
receiver, committee or curator bonis appointed by such Court and such
receiver, committee, curator bonis or other person may vote on a poll by
proxy, and may otherwise act and be treated as such Member for the
purpose of general meetings.
64. No Member shall, unless the Board otherwise determines, be entitled to
vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
65. If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not to have been counted
or which might have been rejected or (iii) any votes are not counted
which ought to have been counted, the objection or error shall not
vitiate the decision of the meeting or adjourned meeting on any
resolution unless the same is raised or pointed out at the meeting or,
as the case may be, the adjourned meeting at which the vote objected to
is given or tendered or at which the error occurs. Any objection or
error shall be referred to the Chairman of the meeting and shall only
vitiate the decision of the meeting on any resolution if the Chairman
decides that the same may have affected the decision of the meeting. The
decision of the Chairman on such matters shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
66. The instrument appointing a proxy shall be in writing under the hand of
the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of
an officer, attorney or other person authorised to sign the same.
67. A corporation may appoint a representative as permitted by the Companies
Acts and such representative need not be a Member.
68. Any Member may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be
valid for all general meetings and adjournments thereof
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until notice of revocation is received at the Registered Office. Where a
standing proxy or authorisation exists, its operation shall be deemed to
have been suspended at any general meeting or adjournment thereof at
which the Member is present or in respect to which the Member has
specially appointed a proxy or representative. The Board may from time
to time require such evidence as it shall deem necessary as to the due
execution and continuing validity of any such standing proxy or
authorisation and the operation of any such standing proxy or
authorisation shall be deemed to be suspended until such time as the
Board determines that it has received the requested evidence or other
evidence satisfactory to it.
69. Subject to Bye-Law 68, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time
to time require, shall be delivered at the Registered Office (or at such
place as may be specified in the notice convening the meeting or in any
notice of any adjournment or, in either case, in any document sent
therewith) 48 hours prior to the holding of the meeting or adjourned
meeting at which the person named in the instrument proposes to vote or,
in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, 24 hours before the time appointed for the taking of
the poll and in default the instrument of proxy shall not be treated as
valid.
70. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out
with the notice of any meeting forms of instruments of proxy for use at
that meeting. The instrument of proxy shall be deemed to confer
authority to demand or join in demanding a poll and to vote on any
amendment of a resolution put to the meeting for which it is given as
the proxy thinks fit. The instrument of proxy shall unless the contrary
is stated therein be valid as well for any adjournment of the meeting as
for the meeting To which it relates.
71. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the
principal, or revocation of the
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instrument of proxy or of the authority under which it was executed,
provided that no intimation in writing of such death, insanity or
revocation shall have been received by the Company at the Registered
Office (or such other place as may be specified for the delivery of
instruments of proxy in the notice convening the meeting or other
documents sent therewith) one hour at least before the commencement of
the meeting or adjourned meeting, or the taking of the poll, at which
the instrument of proxy is used.
72. Subject to the Companies Acts, the Board may at its discretion waive any
of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it
thinks fit as to the right of any person to attend and vote on behalf of
any Member at general meetings.
APPOINTMENT AND REMOVAL OF DIRECTORS
73. The number of Directors shall be seven or such number not less than two
as the Company in general meeting may from time to time determine and,
subject to the Companies Acts and these Bye-Laws, shall serve until
re-elected or their successors are appointed at the next Annual General
Meeting.
74. No person shall be required to hold any shares in the capital of the
Company in order to be eligible for election or to serve as a Director.
75. The Company shall at the Annual General Meeting and may in general
meeting determine the minimum and the maximum number of Directors and
may in general meeting determine that one or more vacancies in the Board
shall be deemed casual vacancies for the purposes of these Bye-Laws.
Without prejudice to the power of the Company in general meeting in
pursuance of any of the provisions of these Bye-Laws to appoint any
person to be a Director, the Board, so long as a quorum of Directors.
remains in office, shall have power at any time and from time to time to
appoint any Member being an individual to be a Director so as to fill a
casual vacancy.
76. (a) At the Annual General Meeting of the Company in every year all of
the Directors for the time being shall retire from office.
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(b) A retiring Director shall be eligible for re-election.
(c) The Company at the meeting at which a Director retires in manner
aforesaid may fill the vacated office by electing a person
thereto, and in default the retiring Director shall if offering
himself for re-election be deemed to have been re-elected except
in any of the following cases:-
(i) if at such meeting it is expressly resolved not to fill up
such vacated office or a resolution for the re-election of
such Director is put to the meeting and lost; or
(ii) if such Director has given notice in writing to the Company
that he is unwilling to be re-elected.
(d) A resolution for the appointment of 2 or more persons as Directors
by a single resolution shall not be moved at any general meeting
unless a resolution that it shall be so moved has first been
agreed to by the meeting without any vote being given against it;
and any resolution moved in contravention of this provision shall
be void.
(e) No person other than a Director retiring at the meeting shall,
unless recommended by the Board, be eligible for election to the
office of Director at any general meeting unless not less than 7
nor more than 21 days before the date appointed for the meeting
there shall have been left at the Registered Office notice in
writing signed by a Member duly qualified to attend and vote at
the meeting for which such notice is given of his intention to
propose such person for election, and also notice in writing
signed by that person of his willingness to be elected.
(f) The Board shall have power at any time and from time to time to
appoint any person to be a Director to fill a casual vacancy. or
to fill any vacancy on the Board left to be filled by the
Directors.
(g) Any Director appointed to fill a casual vacancy or as an addition
to the existing Directors shall hold office only until the
conclusion of the next following Annual General Meeting and shall
then be eligible for re-election.
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77. The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served
upon the Director concerned not less than 14 days before the meeting and
he shall be entitled to be heard at that meeting. Any vacancy created by
the removal of a Director at a Special General Meeting may be filled at
the Meeting by the election of another Director in his place or, in the
absence of any such election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
78. The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he is removed by resolution of the Board;
(b) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(c) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board
resolves that his office is vacated;
(d) if he becomes bankrupt or compounds with his creditors;
(e) if he is prohibited by law from being a Director;
(f) if he ceases to be a Director by virtue of the Companies Acts or
is removed from office pursuant to these Bye-Laws;
(g) if he absents himself from the meetings of the Board during a
continuous period of 6 months without special leave of absence
from the Board, and his alternate Director (if any) shall not
during such period have attended in his stead, and the Board
passes a resolution that he has by reason of such absence vacated
his office.
ALTERNATE DIRECTORS
79. The Company may in general meeting elect a person or persons qualified
to be Directors to act as Directors in the alternative to any of the
Directors of the Company or may authorise the Board to appoint such
Alternate Directors. Any Alternate Director may be
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removed by the Company in general meeting and, if appointed by the
Board, may be removed by the Board and, subject thereto, the office of
Alternate Director shall continue until the next annual election of
Directors or, if earlier, the date on which the relevant Director ceases
to be a Director. An Alternate Director may also be a Director in his
own right and may act as alternate to more than one Director.
80. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at
any such meeting at which any Director to whom he is alternate is not
personally present, and generally to perform all the functions of any
Director to whom he is alternate in his absence.
81. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all
respects to the provisions of these Bye-Laws relating to Directors and
shall alone be responsible to the Company for his acts and defaults and
shall not be deemed to be the agent of or for any Director for whom he
is alternate. An Alternate Director may be paid expenses and shall be
entitled to be indemnified by the Company to the same extent mutatis
mutandis as if he were a Director. Every person acting as an Alternate
Director shall have one vote for each Director for whom he acts as
alternate (in addition to his own vote if he is also a Director). The
signature of an Alternate Director to any resolution in writing of the
Board or a committee of the Board shall, unless the terms of his
appointment provides to the contrary, be as effective as the signature
of the Director or Directors to whom he is alternate.
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
82. The amount, if any, of Directors' fees shall from time to time be
determined by the Company in general meeting and in the absence of a
determination to the contrary in general meeting, such fees shall be
deemed to accrue from day to day. Each Director may be paid his
reasonable traveling, hotel and incidental expenses in attending and
returning from meetings of the Board or committees constituted pursuant
to these Bye-Laws or
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general meetings and shall be paid all expenses properly and reasonably
incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request,
goes or resides abroad for any purposes of the Company or who performs
services which in the opinion of the Board go beyond the ordinary duties
of a Director may be paid such extra remuneration (whether by way of
salary, commission, participation in profits or otherwise) as the Board
may determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other Bye-Law.
DIRECTORS' INTERESTS
83. (a) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may
determine, and may be paid such extra remuneration therefor
(whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or
pursuant to any other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his
firm shall be entitled to remuneration for professional services
as if he were not a Director.
(c) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested
in, any transaction or arrangement with the Company or in which
the Company is otherwise interested; and be a Director or other
officer of, or employed by, or a party to any transaction or
arrangement with, or otherwise interested in, any body corporate
promoted by the Company or in which the Company is interested. The
Board may also cause the voting power conferred by the shares in
any other company held or owned by the Company to be exercised in
such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the
Directors or any of
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them to be directors or officers of such other company, or voting
or providing for the payment of remuneration to the directors or
officers of such other company.
(d) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by
writing to the Directors as required by the Companies Acts, a
Director shall not by reason of his office be accountable to the
Company for any benefit which he derives from any office or
employment to which these Bye-Laws allow him to be appointed or
from any transaction or arrangement in which these Bye-Laws allow
him to be interested, and no such transaction or arrangement shall
be liable to be avoided on the ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or
officer declaring that he is a director or officer or has an
interest in a person and is to be regarded as interested in any
transaction or arrangement made with that person, shall be a
sufficient declaration of interest in relation to any transaction
or arrangement so made.
84. (a) Save as provided in the following paragraphs of this Bye-Law, a
Director shall not vote in respect of any contract or arrangement
or any other proposal whatsoever in which he has any material
interest which would include a decision on the exercise of voting
rights in relation to the waiver of an equivalent provision by a
subsidiary (otherwise than by virtue of his interests in shares or
debentures or other securities of or otherwise in or through the
Company) or by virtue of holding any office of, or interest in
shares or debentures or other securities or interests of any other
entity or company with which the Company proposes to contract. A
Director shall not be counted in the quorum of a meeting in
relation to any resolution on which he is debarred from voting.
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(b) A Director shall (in the absence of some other material interest
than is indicated below) be entitled to vote (and be counted in
the quorum) in respect of any resolution concerning any of the
following matters, namely:-
(i) the giving of any security or indemnity to him in respect of
money lent or obligations incurred by him at the request of
or for the benefit of the Company or any of its
subsidiaries;
(ii) the giving of any security or indemnity to a third party in
respect of a debt or obligation of the Company or any of its
subsidiaries for which he himself has assumed responsibility
in whole or in part under a guarantee or indemnity or by the
giving of security;
(iii) any proposal concerning an offer of shares or debentures or
other securities of or by the Company or any of its
subsidiaries for subscription or purchase in which offer he
is or is to be interested as a participant in the
underwriting or sub-underwriting thereof;
(iv) any proposal concerning any other company in which he is
interested directly or indirectly and whether as an officer
or shareholder or otherwise howsoever, and that he is not
the holder of or beneficially interested in 1 per cent. or
more of any class of the equity share capital of such
company (or of any third company through which his interest
is derived) or of the voting rights available to Members of
the relevant company (any such interest being deemed for the
purpose of this Bye-Law to be a material interest in all the
circumstances).
(v) any proposal concerning the adoption, modification or
operation of a superannuating fund or retirement, death or'
disability benefits scheme under which he may benefit which
relates both to Directors and employees of the Company or of
any of its subsidiaries and does not
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accord to any Director as such any privilege or advantage
not generally accorded to the employees to whom such scheme
or fund relates.
(c) Where proposals are under consideration concerning the appointment
(including fixing or Varying the terms of appointment) of 2 or
more Directors to offices or employment's with the Company or any
company in which the Company is interested, such proposals may be
divided and considered in relation to each Director separately. In
such case each of the Directors concerned (if not debarred from
voting under Bye-Law 84(b)(iv) shall be entitled to vote (and be
counted in the quorum) in respect of each resolution except that
concerning his own appointment.
(d) If any question shall arise at any meeting as to the materiality
of a Director's interest or as to the entitlement of any Director
to vote and such question is not resolved by his voluntarily
agreeing to abstain from voting, such question shall be referred
to the Chairman of the meeting and his ruling in relation to any
other Director shall be final and conclusive, except in a case
where the nature or extent of the interest of the Director
concerned has not been fairly disclosed.
(e) Subject to the provisions of the Companies Acts the Company may by
resolution suspend or relax the provisions of this Bye-Law to any
extent or ratify any transaction not duly authorised by reason of
a contravention of this Bye-Law.
POWERS AND DUTIES OF THE BOARD
85. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company in general meeting, the Board
shall manage the business of the Company and may pay all expenses
incurred in promoting and incorporating the Company and may exercise all
the powers of the Company. No alteration of these Bye-Laws and no such
direction shall invalidate any prior act of the Board which would have
been valid if that alteration had not been made or that direction had
not been given. The powers given by this Bye-Law shall not be limited by
any special power given to the
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Board by these Bye-Laws and a meeting of the Board at which a quorum is
present shall be competent to exercise all the powers, authorities and
discretions for the time being vested in or exercisable by the Board.
86. The Board may exercise all the powers of the Company to borrow money and
to mortgage or charge all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company and to
issue debentures and other securities, whether outright or as collateral
security for any debt, liability or obligation of the Company or of any
other persons.
87. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts
for money paid to the Company shall be signed, drawn, accepted, endorsed
or otherwise executed, as the case may be, in such manner as the Board
shall from time to time by resolution determine.
88. The Board on behalf of the Company may provide benefits, whether by the
payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has
been a subsidiary or affiliate of the Company or a predecessor in the
business of the Company or of any such subsidiary or affiliate, and to
any member of his family or any person who is or was dependent on him,
and may contribute to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or other benefit, or for the
insurance of any such person.
89. The Board may from time to time appoint one or more of its body to be a
managing director, joint managing director or an assistant managing
director or to hold any other employment or executive office with the
Company for such period and upon such terms as the Board may determine
and may revoke or terminate any such appointments. Any such revocation
or termination as aforesaid shall be without prejudice To any claim for
damages that such Director may have against the Company or the Company
may have against such Director for any breach of any contract of service
between him and the
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Company which may be involved in such revocation or termination. Any
person so appointed shall receive such remuneration (if any) (whether by
way of salary, commission, participation in profits or otherwise) as the
Board may determine, and either in addition to or in lieu of his
remuneration as a Director.
DELEGATION OF THE BOARD'S POWERS
90. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or
indirectly by the Board, to be the attorney or attorneys of the Company
for such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Board under these
Bye-Laws) and for such period and subject to such conditions as it may
think fit, and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such
attorney and of such attorney as the Board may think fit, and may also
authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
91. The Board may entrust to and confer upon any Director or officer or
attorney appointed under Bye-Law 90 any of the powers exercisable by it
upon such terms and conditions with such restrictions as it thinks fit,
and either collaterally with, or to the exclusion of, its own powers,
and may from time to time revoke or vary all or any of such powers but
no person dealing in good faith and without notice of such revocation or
variation shall be affected thereby.
92. The Board may delegate any of its powers, authorities and discretions to
committees, consisting of such person or persons (whether a member or
members of its body or not) as it thinks fit. Any committee so formed
shall, in the exercise of the powers, authorities and discretions so
delegated, conform to any regulations which may be imposed upon it by
the Board.
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PROCEEDINGS OF THE BOARD
93. The Board may meet for the dispatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting
shall be determined by a majority of votes.-in the case of an equality
of votes the motion shall be deemed to have been lost. A Director may,
and the Secretary on the requisition of a Director shall, at any time
summon a board meeting.
94. Notice of a board meeting shall be deemed to be duly given to a Director
if it is given to him personally or by word of mouth or sent to him by
post, cable, telex, telecopier, facsimile or other mode of representing
or reproducing words in a legible and nontransitory form at his last
known address or any other address given by him to the Company for this
purpose. A Director may waive notice of any meeting either
prospectively or retrospectively.
95. (a) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other
number, shall be two individuals. Any Director who ceases to be a
Director at a board meeting may continue to be present and to act
as a Director and be counted in the quorum until the termination
of the Board meeting if no other Director objects and if otherwise
a quorum of Directors would not be present.
(b) A meeting of the Board or a committee appointed by the Board may
be held by means of such telephone, electronic or other
communication facilities as permit all persons participating in
the meeting to communicate with each other simultaneously and
instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
(c) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract,
transaction or arrangement with the Company and has complied with
the provisions of the Companies Acts and these Bye-Laws with
regard to disclosure of his interest shall be entitled to vote
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in respect of any contract, transaction or arrangement in which he is so
interested and if he shall do so his vote shall be counted, and he shall
be taken into account in ascertaining whether a quorum is present.
96. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no
quorum of Directors remains, the continuing Directors or a sole
continuing Director may act only for the purpose of calling a general
meeting.
97. The Board may elect a Chairman of the Board from amongst its members.
If no Chairman of the Board is elected or he is absent, the President
shall be Chairman. If at any meeting neither the Chairman of the Board
nor the President is present within five minutes after the time
appointed for holding the same, the Directors present may choose one of
their number to be Chairman of the meeting.
98. The meetings and proceedings of any committee consisting of two or more
members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the
same are applicable and are not superseded by any regulations imposed by
the Board.
99. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the
members of a committee for the time being shall be as valid and
effectual as a resolution passed at a meeting of the Board or, as the
case may be, of such committee duly called and constituted. Such
resolution may be contained in one document or in several documents in
the like form each signed by one or more of the Directors or members of
the committee concerned.
100. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by
the Board or any committee, shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any member
of the Board or such committee or person acting as aforesaid or that
they or any of them were disqualified or had vacated their office, be as
valid as if
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every such person had been duly appointed and was qualified and had
continued to be a Director, member of such committee or person so
authorised.
OFFICERS
101. The officers of the Company shall include a President and a
Vice-President who shall be Directors and shall be elected by the Board
as soon as possible after the statutory meeting and each annual general
meeting. In addition, the Board may appoint any person whether or not he
is a Director to hold such other office (including any additional Vice-
Presidencies) as the Board may from time to time determine. Any person
elected or appointed pursuant to this Bye-Law shall hold office for such
period and upon such terms as the Board may determine and the Board may
revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for
damages that such officer may have against the Company or the Company
may have against such officer for any breach of any contract of service
between him and the 'Company which may be involved in such revocation or
termination. Save as provided in the Companies Acts or these Bye-Laws,
the powers and duties of the officers of the Company shall be such (if
any) as are determined from time to time by the Board.
MINUTES
102. The Directors shall cause minutes to be made and books kept for the
purpose of recording:-
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present at
each meeting of Directors and of any committee;
(c) of all proceedings at meetings of the Company, of the holders of
any class of shares in the Company, and of committees;
(d) of all proceedings of managers (if any).
32
<PAGE>
SECRETARY
103. The Secretary shall be appointed by the Board at such remuneration (if
any) and upon such terms as it may think fit and any Secretary so
appointed may be removed by the Board.
The duties of the Secretary shall be those prescribed by the Companies
Acts together with such other duties as shall from time to time be
prescribed by the Board.
104. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary
shall not be satisfied by its being done by or to the same person acting
both as Director and as, or in the place of, the Secretary.
THE SEAL
105. (a) The Seal shall consist of a circular metal device with the name of
the Company around the outer margin thereof and the country and
year of incorporation across the centre thereof. Should the Seal
not have been received at the registered office in such form at
the date of adoption of this Bye-Law then, pending such receipt,
any document requiring to be sealed with the Seal shall be sealed
by affixing a red wafer seal to the document with the name of the
Company, and the country and year of incorporation type written
across the centre thereof.
(b) The Board shall provide for the custody of the Seal, which Seal
shall only be used by authority of the Board or of a committee
authorised by the Board in that behalf. Subject to these Bye-Laws,
any instrument to which the Seal is affixed shall be signed by a
Director and by the Secretary or by a Director and any other
person approved and appointed for such purpose by the Board or
such Committee; provided that the Secretary or a Director may
affix the Seal over his signature only to authenticate copies of
these Bye-Laws, the minutes of any meeting or any other documents
requiring authentication.
33
<PAGE>
DIVIDENDS AND OTHER PAYMENTS
106. The Board may from time to time declare cash dividends to be paid to the
Members according to their rights and interests in the profits including
such interim dividends as appear to the Board] to be justified by the
position of the Company. The Board may also pay any fixed cash dividend
which is payable on any shares of the Company half yearly or on such
other dates, whenever the position of the Company, in the opinion of the
Board, justifies such payment. For the purpose of this Bye-Law,
contributed surplus shall be deemed not to be a profit of the Company
and shall not be taken account of in calculating the amount of the
profits available for distribution to the Members and shall not be
available for distribution other than in the manner provided for in
Bye-Law 110.
107. Except insofar as the rights attaching to, or the terms of issue of, any
share otherwise provide:-
(a) all dividends may be declared and paid according to the amounts
paid up on the shares in respect of which the dividend is paid,
and an amount paid up on a share in advance of calls may be
treated for the purpose of this Bye-Law as paid-up on the share;
(b) dividends may be apportioned and paid pro rata according to the
amounts paid-up on the shares during any portion or portions of
the period in respect of which the dividend is paid.
108. The Board may deduct from any dividend or other moneys payable to a
Member by the Company on or in respect of any shares all sums of money
(if any) presently payable by him to the Company on account of calls or
otherwise in respect of shares of the Company.
109. No dividend or other moneys payable by the Company on or in respect of
any share shall bear interest against the Company.
110. Any dividend, interest or other sum payable in cash to the holder of
shares may be paid by cheque or warrant sent through the post addressed
to the holder at his address in the Register or, in the case of joint
holders, addressed to the holder whose name stands first
34
<PAGE>
in the Register in respect of the shares at his registered address as
appearing in the register or addressed to such person at such address as
the holder or joint holders may in writing direct. Every such cheque or
warrant shall, unless the holder or joint holders otherwise direct, be
made payable to the order of the holder or, in the case of joint
holders, to the order of the holder whose name stands first in the
Register in respect of such shares, and shall be sent at his or their
risk and payment of the cheque or warrant by the bank on which it is
drawn shall constitute a good discharge to the Company. Any one of two
or more joint holders may give effectual receipts for any dividends or
other moneys payable or property distributable in respect of the shares
held by such joint holders.
111. Any dividend unclaimed for a period of six years from the date of
declaration of such dividend shall be forfeited and shall revert to the
Company and the payment by the Board of any unclaimed dividend, interest
or other sum payable on or in respect of the share into a separate
account shall not constitute the Company a trustee in respect thereof.
112. With the sanction of the Company in general meeting, the Board may (a)
declare a distribution to any Member out of contributed surplus and (b)
may direct payment or satisfaction of such distribution or any dividend
wholly or in part by the distribution of specific assets, and in
particular of paid-up shares or debentures of any other company, and
where any difficulty arises in regard to such distribution or dividend
the Board may settle it as it thinks expedient, and in particular, may
authorise any person to sell and transfer any fractions or may ignore
fractions altogether, and may fix the value for distribution or dividend
purposes of any such specific assets and may determine that cash
payments shall be made to any Members upon the footing of the values so
fixed in order to secure equality of distribution and may vest any such
specific assets in trustees as may seem expedient to the Board.
RESERVES
113. The Board may, before recommending or declaring any dividend, set aside
out of the profits of the Company such sums as it thinks proper as
reserves which shall, at the
35
<PAGE>
discretion of the Board, be applicable for any purpose to which the
profits of the Company may be properly applied and pending such
application may, also at such discretion, either be employed in the
business of the Company or be invested in such investments as the Board
may from time to time think fit. The Board may also without placing the
same to reserve carry forward any profits which it may think it prudent
not to distribute.
CAPITALIZATION OF PROFITS
114. The Company may, upon the recommendation of the Board, at any time and
from time to time resolve in general meeting to the effect that it is
desirable to capitalize all or any part of any amount for the time being
standing to the credit of any reserve or fund which is available for
distribution or to the credit of any share premium account or any
capital redemption reserve fund and accordingly that such amount be set
free for distribution amongst the Members or any class of Members who
would be entitled thereto if distributed by way of dividend and in the
same proportions, on the footing that the same be not paid in cash but
be applied either in or towards paying up amounts for the time being
unpaid on any shares in the Company held by such Members respectively or
in payment up in full of unissued shares, debentures or other
obligations of the Company, to be allotted and distributed credited as
fully paid amongst such Members, or partly in one way and partly in the
other, and the Board shall give effect to such resolution, provided that
for the purpose of this Bye-Law, a share premium account and a capital
redemption reserve fund may be applied only in paying up of unissued
shares to be issued to such Members credited as fully paid.
115. Where any difficulty arises in regard to any distribution under the last
preceding Bye-Law the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any
fractions or may resolve that the distribution should be as nearly as
may be practicable in the correct proportion but not exactly so or may
ignore fractions altogether, and may determine that cash payments should
be made to any
36
<PAGE>
Members in order to adjust the rights of all parties, as may seem
expedient to the Board. The Board may appoint any person to sign on
behalf of the persons entitled to participate in the distribution any
contract necessary. or desirable for giving effect thereto and such
appointment shall be effective and binding upon the Members.
RECORD DATES
116. Notwithstanding any other provisions of these Bye-Laws the Company in
general meeting or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of
identifying the persons entitled to receive notices of general meetings.
Any such record date may be on or at any time before or after any date
on which such dividend, distribution, allotment or issue is declared,
paid or made or such notice is despatched.
ACCOUNTING RECORDS
117. The Board shall cause to be kept accounting records sufficient to give a
true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
118. The records of account shall be kept at the Registered Office or at such
other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of
account are kept at some place outside Bermuda, there shall be kept at
an office of the Company in Bermuda such records as will enable the
directors to ascertain with reasonable accuracy the financial position
of the Company at the end of each three month period. No Member (other
than an officer of the Company) shall have any right to inspect any
accounting record or book or document of the Company except as conferred
by law or authorised by the Board or the Company in general meeting.
119. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is
to be laid before the Company
37
<PAGE>
in general meeting, together with a copy of the auditor's report, shall
be sent to each person entitled thereto in accordance with the
requirements of the Companies Acts.
AUDIT
120. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties
regulated in accordance with the Companies Acts, any other applicable
law and such requirements not inconsistent with the Companies Acts as
the Board may from time to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
121. Any notice or other document (including a share certificate) may be
served on or delivered to any Member by the Company either personally or
by sending it through the post (by airmail where applicable) in a
pre-paid letter addressed to such Member at his address as appearing in
the Register or by delivering it to or leaving it at such registered
address. In the case of joint holders of a share, service or delivery of
any notice or other document on or to one of the joint holders shall for
all purposes be deemed as sufficient service on or delivery to all the
joint holders. Any notice or other document if sent by post shall be
deemed to have been served or delivered seven days after it was put in
the post, and in proving such service or delivery, it shall be
sufficient to prove that the notice or document was properly addressed,
stamped and put in the post.
122. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Member if it is sent to him by cable, telex, telecopier
or other mode of representing or reproducing words in a legible and
non-transitory form at his address as appearing in the Register or any
other address given by him to the Company for this purpose. Any such
notice shall be deemed to have been served twenty-four hours after its
dispatch.
123. Any notice or other document delivered, sent or given to a Member in any
manner permitted by these Bye-Laws shall, notwithstanding that such
Member is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has notice of the death or bankruptcy or
other event, be deemed to have been duly served or
38
<PAGE>
delivered in respect of any share registered in the name of such Member
as sole or joint holder unless his name shall, at the time of the
service or delivery of the notice or document, have been removed from
the Register as the holder of the share, and such service or delivery'
shall for all purposes be deemed as sufficient service or delivery of
such notice or document on all persons interested (whether jointly with
or as claiming through or under him) in the share.
WINDING UP
124. If the Company shall be wound up, the liquidator may, with the sanction
of a resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Members in specie or kind the whole
or any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may for such purposes set such
values as he deems fair upon any property to be divided as aforesaid and
may determine how such division shall be carried out as between the
Members or different classes of Members. The liquidator may, with the
like sanction, vest the whole or any part of such assets in trustees
upon such trust for the benefit of the contributories as the liquidator,
with the like sanction, shall think fit, but so that no Member shall be
compelled to accept any shares or other assets upon which there is any
liability.
INDEMNITY
125. Subject to the proviso below, every Director, officer of the Company and
member of a committee constituted under Bye-Law 93 shall be indemnified
out of the funds of the Company against all civil liabilities loss
damage or expense (including but not limited to liabilities under
contract, tort and statute or any applicable foreign law or regulation
and all reasonable legal and other costs and expenses property payable)
incurred or suffered by him as such Director, officer or committee
member and the indemnity contained in this Bye-Law shall extend to any
person acting as a Director, officer or committee member in the
reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election PROVIDED
ALWAYS that the indemnity
39
<PAGE>
contained in this Bye-Law shall not extend to any matter which would
render it void pursuant to the Companies Acts.
126. Every Director, officer and member of a committee duly constituted under
Bye-Law 93 of the Company shall be indemnified out of the funds of the
Company against all liabilities incurred by him as such Director,
officer or committee member in defending any proceedings, whether civil
or criminal, in which judgment is given in his favour, or in which he is
acquitted, or in connection with any application under the Companies
Acts in which relief from liability is granted to him by the court.
127. To the extent that any Director, officer or member of a committee duly
constituted under Bye-Law 93 is entitled to claim an indemnity pursuant
to these Bye-Laws in respect of amounts paid or discharged by him, the
relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
ALTERATION OF BYE-LAWS
128. These Bye-Laws may be amended from time to time in the manner provided
for in the Companies Acts.
40
INDEMNIFICATION AGREEMENT
This Agreement dated February 1, 1994 by and between MERCURY
ACQUISITIONS INC., a Nevada corporation to be renamed VISTA TECHNOLOGIES INC.
(the "Company") and MURRAY D. WATSON (the "Indemnified Party").
WHEREAS, the Indemnified Party has and/or will act as a
director, officer, employee, financial advisor and/or agent of the Company;
and
WHEREAS, in consideration of such services, and pursuant to authority of
its Board of Directors, the Company has agreed to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company hereby agrees to indemnify and hold harmless the
Indemnified Party against any and all losses, claims, damages, judgments,
liabilities or costs, including related attorneys' fees and other costs of
investigation, preparation, defense and providing evidence, whether or not in
connection with litigation in which the Indemnified Party is a party, as and
when such losses, claims, damages, judgments, liabilities or costs are
incurred, which are directly or indirectly caused by, relating to, based upon
or arising out of any act or omission on the part of the Indemnified Party in
his or her capacity as a director, officer, employee, financial advisor or
agent of the Company or in connection with any transactions undertaken as a
result of such relationship, including any actions taken or decisions made as
a director, officer, employee, financial advisor or agent with respect
thereto. Furthermore, the Company waives its right to bring any claim against
the Indemnified Party in connection with any matter caused by, relating to,
based upon or arising out of any act or omission on the part of the
Indemnified Party in his or her capacity as a director, officer, employee,
financial advisor or agent of the Company or in connection with any
transactions undertaken as a result of such relationship, other than any
actions based on the gross negligence or willful misconduct of the Indemnified
Party.
2. The Indemnified Party shall promptly notify the Company in writing
of any action or proceeding (including any governmental investigation) brought
or asserted against the Indemnified Party in respect of which indemnity is
sought from the Company hereunder, and (subject to clause (c) below) the
Company shall promptly assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with the defense thereof. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof if (a) the Indemnified Party
shall pay the fees and expenses of such separate counsel or (b) the Company
shall have failed promptly to assume the defense of such action or proceeding
through counsel reasonably satisfactory to the Indemnified Party or (c) the
named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnified Party and the Company and the
Indemnified Party shall have been advised in writing by counsel that there
maybe one or more legal defenses available to the Indemnified Party which are
different from or additional to those available to the Company, in which case
the Indemnified Party may elect in writing to employ separate counsel at the
expense of the Company (after which the Company shall not
<PAGE>
have the right to defense of such action or proceeding on behalf of such
Indemnified Party), it being understood, however, that the Company shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time, which firm shall be
designated by agreement of all indemnified parties and, if no agreement is
reached by the indemnified parties within 15 days of the filing of the
relevant complaint, by the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without its written
consent (which shall not be unreasonably withheld), but if any such action or
proceeding is settled with its written consent, the Company agrees to
indemnify and hold harmless the Indemnified Party from and against any loss,
claim, damage, or liability (to the extent stated above) by reason of such
settlement or judgment.
3. In order to provide for just and equitable contribution, if a
claim for indemnification hereunder is found unenforceable in a final judgment
by a court of competent jurisdiction (not subject to further appeal), even
though the express provisions hereof provide for indemnification in such
case, then the Company shall contribute to the losses, claims, damages,
judgments, liability or costs to which the Indemnified Parties may be subject
in accordance with the relative benefits received by, and the relative fault
of, the Company in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, judgments, liabilities, or costs.
4. These indemnification provisions shall (i) remain operative and in
full force and effect regardless of any termination of the relationship
between the Company and the Indemnified Party; (ii) inure to the benefit of
any successors, assigns, heirs or personal representative of the Indemnified
Party; and (iii) be in addition to any other rights that the Indemnified Party
may have.
IN WITNESS WHEREAS, this Agreement has been executed by the parties
hereto on the date first written above.
"Company" MERCURY ACQUISITIONS, INC.,
a Nevada corporation to be renamed VISTA TECHNOLOGIES INC.
By: /s/ G. Lennart Perlhagen
----------------------------------------
G. Lennart Perlhagen
Title: President and Chief Executive Officer
"Indemnified Party" /s/ Murray D. Watson
-----------------------------------------
MURRAY D. WATSON
2
Rev-2 PHARMA PATCH PLC
(an Irish public limited company)
REGULATION S OFFSHORE TRANSACTION SUBSCRIPTION AGREEMENT
2,150,000 American Depositary Shares, each representing one Ordinary Share,
IR Pound .01 par value
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Any interest in the PHARMA PATCH PLC securities subscribed to hereunder may be
resold within the jurisdiction of the United States or to U.S. Persons [as
defined in Rule 902(o) of Regulation S under the United States Securities Act
of 1933 ("Securities Act")] by or for the account of the undersigned Foreign
Investor only (i) pursuant to a registration statement under the Securities
Act, or (ii) pursuant to an applicable exemption from such registration.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Pharma Patch PLC
15-16 FitzWilliam Place
Dublin 2, Ireland
FAX Number 011-353-1-661-9671
1. SUBSCRIPTION TO AMERICAN DEPOSITARY SHARES. The undersigned, an
individual not residing in nor a resident of the United States, or
alternatively a company organized under the laws of the jurisdiction of its
organization or incorporation set forth on the signature page hereof (herein
called the "Foreign Investor"), hereby subscribes for the purchase of the
number of American Depositary Shares ("ADS") indicated on the signature page
hereof, each ADS representing one Ordinary Share, IR Pound .01 par value, in
PHARMA PATCH PLC, an Irish public limited company (herein called "PHARMA
PATCH") for the account of the Foreign Investor upon the terms and conditions
set forth in this Subscription Agreement. The subscription price for each
ADS shall be (i) $0.50 per ADS in United States funds, payable in cash upon
acceptance hereof, and (ii) the delivery in proper form, endorsed for
transfer, of one (1) Class C Warrant previously issued by PHARMA PATCH which
shall be surrendered for cancellation.
2. DESCRIPTION OF OFFERING.
2.1. REGULATION S OFFERING. PHARMA PATCH is offering up to a maximum
of 2,150,000 American Depositary Shares representing up to a maximum of
2,150,000 Ordinary Shares of PHARMA PATCH on a "best efforts" basis to a
limited number of qualified investors in a private placement offering of
securities exempt from the registration requirements of the United States
Securities Act of 1933, as amended (the "Securities Act"). The offering of
such ADS securities to investors who are not U.S. persons as defined in Rule
902(o) of Regulation S ("Regulation S") promulgated under the Securities Act
is herein called the "Offering". All of the ADS securities are being offered
at a price of $0.50 per ADS share in U.S. funds and the surrender for
cancellation of one (1) PHARMA PATCH Class C Warrant for each ADS sold in the
Offering. The Foreign Investor acknowledges receipt and has read and
understands information concerning the existing financial condition and a
proposed future plan of operation and proposed reorganization of PHARMA PATCH.
There are no minimum amount of subscriptions required in order for
Regulation S Subscription Agreement -1-
<PAGE>
PHARMA PATCH to accept any subscriptions to the Offering. The Offering will
terminate on February 15, 1996 unless extended at the option of PHARMA PATCH
for an additional period of not more than 30 days. PHARMA PATCH reserves the
right to terminate the Offering at any time, whether or not the maximum ADS
securities have been sold, and further reserves the right to increase the
amount of ADS securities offered if at least 2,150,000 ADS securities are
subscribed for in this Offering on or prior to February 15, 1996.
2.2. CLASS C WARRANTS TO BE SURRENDERED FOR CANCELLATION. Each Class
C Warrant to be transferred and surrendered for cancellation by PHARMA PATCH
pursuant to this Offering represents the right to purchase for $10.00 a unit
of PHARMA PATCH securities consisting of one ADS, one-half of a Class A
Warrant and one-quarter of a Class B Warrant in PHARMA PATCH. Upon the
acceptance of his or its subscription to this Offering, the undersigned
Foreign Investor acknowledges that he or it is surrendering all rights
represented by such Class C Warrants and the other securities underlying the
Class C Warrants. In order to perform his or its obligations under this
Agreement with respect to the transfer and surrender of Class C Warrants, the
Foreign Investor represents and warrants to PHARMA PATCH as follows:
(a) The Foreign Investor is the owner of record and beneficially of a
sufficient number of Class C Warrants, free and clear of any liens,
encumbrances or other adverse claims, necessary to subscribe for the
number of ADS securities indicated on the signature page of this
Agreement, and the Foreign Investor has not sold, assigned, endorsed,
transferred, deposited under any agreement, hypothecated, pawned,
pledged for any bank or brokerage loan, or otherwise transferred any
interest in such Class C Warrants to any third party;
(b) Upon the tender of this subscription Agreement, the Foreign Investor
shall promptly
(i) cause certificates representing the Class C Warrants transferred
and surrendered in connection with this Offering to be delivered
to, and deposited with, PHARMA PATCH at its offices at 15-16
FitzWilliam Place, Dublin 2, Ireland;
(ii) deliver to PHARMA PATCH at said office in Toronto, Ontario a stock
power in the form attached hereto, duly endorsed for transfer of
said Class C Warrants to PHARMA PATCH with signature guaranteed by
a medallion signature guaranty;
(iii) if the Foreign Investor is a corporation, partnership or another
entity (other than an individual), deliver to PHARMA PATCH at said
office in Toronto, Ontario a certificate in the form attached
hereto confirming the authority of the officer, managing director
or other agent executing the aforesaid stock power on behalf of
the Foreign Investor.
The Foreign Investor agrees that it will, at any time and from time to time
after this subscription is accepted by PHARMA PATCH, do, execute, acknowledge
and deliver, or will cause to be done, executed, acknowledged and delivered,
all such further acts, assignments, transfers, powers and assurances as may be
required to enable PHARMA PATCH to cancel the Class C Warrants delivered in
payment of the applicable portion of the subscription price to ADS in this
Offering and hereby appoints PHARMA PATCH as the duly authorized agent and
attorney-in-fact of the Foreign Investor to cause such Class C Warrants to be
cancelled.
Regulation S Subscription Agreement -2-
<PAGE>
3. OTHER REPRESENTATIONS AND WARRANTIES OF THE FOREIGN INVESTOR. In
connection with this Agreement and the transactions contemplated herein, the
Foreign Investor represents and warrants to PHARMA PATCH as follows:
3.1. The Foreign Investor has been duly formed and is validly existing
as a corporation or other legal entity in good standing under the laws of its
jurisdiction of incorporation set forth on the signature page to this
Agreement. The Foreign Investor is not organized under the laws of the United
States, is not a "U.S. Person" as that term is defined in Rule 902(o) of
Regulation S, and is not an "affiliate" of PHARMA PATCH as that term is used
in regulations promulgated under the Securities Act or associated with any
individual or entity which may be deemed an "affiliate" of PHARMA PATCH as of
the date hereof. Neither the Foreign Investor, nor any person affiliated with
it, is or has been for the past three months, an officer, director,
controlling shareholder or otherwise in a position to control, select or
influence the management and policies of PHARMA PATCH.
3.2. The Foreign Investor was not formed for the purpose of investing
in Regulation S securities or formed for the purpose of investing in this
Agreement and the ADS securities of PHARMA PATCH. The Foreign Investor is not
registered as an issuer under the Securities Act and is not required to be
registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940, as amended. The Foreign Investor is entering
into this Agreement and is participating in the Offering for its own account,
and not on behalf of any U.S. Person as defined in Rule 902(o) of Regulation
S.
3.3. No offer to enter into this Agreement has been made by PHARMA
PATCH to the Foreign Investor in the United States other than as permitted in
the case of an account managed by a professional fiduciary resident in the
United States within the meaning of Section 902(o)(2) of Regulation S. At the
times of the offer and execution of this Agreement and, to the best knowledge
of the Foreign Investor, at the time the Offering originated, the Foreign
Investor was located and resident outside the United States other than as
permitted in the case of an account managed by a professional fiduciary
resident in the United States within the meaning of Section 902(o)(2) of
Regulation S.
3.4. Neither the Foreign Investor, nor any of its affiliates nor any
person acting on its behalf or any behalf of any such affiliate, has engaged,
or will engage, in any activity undertaken for the purpose of, or that could
reasonable be expected to have the effect of, conditioning the markets in the
United States for the ADS securities or for any securities that are
convertible into or exercisable for ADS securities of PHARMA PATCH, including
but not limited to effecting any sale of PHARMA PATCH securities to or through
the Foreign Investor or any of its affiliates prior to the expiration of any
restricted period contained in Regulation S (any such activity being defined
herein as a "Directed Selling Effort"). To the best knowledge of the
undersigned, this Agreement and the transactions contemplated herein are not
part of a plan or scheme to evade the registration provisions of the
Securities Act and the ADS securities are being purchased for investment
purposes by the Foreign Investor. The Foreign Investor, and to the best
knowledge of the Foreign Investor, each distributor, if any, participating in
this Offering of PHARMA PATCH ADS securities, has agreed that all offers and
sales of any securities included in the Offering prior to the date hereof and
through the expiration of the any restricted period set forth in Rule 903 of
Regulation S (and as the same may be amended from time to time hereafter)
shall not be made to U.S. Persons or for the account or benefit of U.S.
Persons, and shall otherwise be made in compliance with the provisions of
Regulation S and any other applicable provisions of the Securities Act. The
Foreign Investor and its representatives have not conducted any Directed
Selling Effort as that term is used and defined in Rule 902 of Regulation S
and will not engage in any such Directed Selling Effort within the United
States through the expiration of any restricted period set forth in Rule 903
of Regulation S.
Regulation S Subscription Agreement -3-
<PAGE>
3.5. The Foreign Investor acknowledges and agrees that following the
expiration of any restricted period provided by Rule 903 of Regulation S, any
interest in this Agreement or in the ADS securities subscribed to hereunder
may be resold within the jurisdiction of the United States or to U.S. Persons
[as defined in Rule 902(o) of Regulation S] by or for the account of the
parties hereto only: (i) pursuant to a registration statement under the
Securities Act, or (ii) pursuant to an exemption from such registration for
sales by a person other than an issuer, underwriter or dealer as those terms
are used in Section 4(1) and related provisions of the Securities Act and
regulations thereunder, or pursuant to another exemption from registration,
and following the expiration of any restricted period required by Regulation
S. The Foreign Investor acknowledges that this Agreement and the PHARMA PATCH
ADS securities have not been registered under the Securities Act or qualified
under state securities laws of the United States, and that the transferability
hereof and thereof within the jurisdiction of the United States is restricted
by the Securities Act as well as such state laws. The Foreign Investor
acknowledges that this Agreement and the ADS securities are being sold in
reliance upon the transaction exemption afforded by Regulation S in connection
with an offshore offer and sale of securities of PHARMA PATCH not within or
subject to the jurisdiction of the United States markets. The Foreign
Investor acknowledges it has received a copy of Regulation S, is familiar with
and understands the terms thereof, and has had the opportunity to consult with
its legal counsel concerning this Agreement and Regulation S.
The Foreign Investor acknowledges that if any transfer of the ADS securities
is to be made in reliance upon an exemption under the Securities Act, the
issuer of the securities being so transferred or its successor-in-interest may
require an opinion of counsel satisfactory to the issuer that such transfer
may be made pursuant to an applicable exemption under the Securities Act. The
Foreign Investor acknowledges that, so long as appropriate, a legend similar
to the following may appear on the certificates representing the PHARMA PATCH
ADS securities subscribed for hereunder: "These securities have not been
registered under the Securities Act of 1933 and may be reoffered and sold only
if registered or if an exemption from such registration is available in the
opinion of counsel satisfactory to the issuer."
3.6. The Foreign Investor has not received any general solicitation or
advertising regarding the Offering or this Agreement. The Foreign Investor
has sufficient knowledge and experience in financial and business matters so
that it is able to evaluate the merits and risks of the Offering and this
Agreement. The Foreign Investor has had substantial experience in previous
private and public purchases of speculative and restricted securities,
understands that an investment in the ADS securities of PHARMA PATCH is
speculative, and can afford to sustain a complete loss of its investment.
3.7. The Foreign Investor has carefully read and reviewed this
Agreement and any other written information received by the Foreign Investor
or its representatives and agent relating to this Offering. The Foreign
Investor has had an opportunity to ask questions of, and to receive answers
from, one or more of the executive officers of PHARMA PATCH as the Foreign
Investor deems necessary in order for the Foreign Investor to make an informed
decision with respect to this Agreement and the Offering. The undersigned
Foreign Investor has received complete and satisfactory answers to all such
inquiries. The undersigned has not received oral or written representations
or assurances from PHARMA PATCH or any representatives of PHARMA PATCH, other
than as set forth in this Agreement.
3.8. This Agreement has been duly authorized, executed and delivered by
the Foreign Investor and is a valid and binding agreement enforceable in
accordance with its terms, subject only to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
to or affecting creditors' rights generally and to general principles of
equity. The Foreign Investor has full power and authority necessary to enter
into this Agreement and to perform its obligations hereunder.
Regulation S Subscription Agreement -4-
<PAGE>
3.9. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated herein, do not and will not conflict with or
result in a breach by the Foreign Investor of any of the terms or provisions
of, or constitute a default under, its charter documents, its memorandum or
articles of association or incorporation, its by-laws, any action of its
directors or shareholders, or any indenture, mortgage, deed of trust or other
agreement or instrument to which the undersigned is a party or by which it or
any of its properties or assets are bound, or any existing applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
regulatory body, administrative agency or other governmental body having
jurisdiction over the undersigned or any of its properties or assets.
4. REPRESENTATIONS AND WARRANTIES OF PHARMA PATCH.
By its acceptance of any subscription from the Foreign Investor
hereunder, PHARMA PATCH represents and warrant to the Foreign Investor as
follows:
4.1. PHARMA PATCH is duly organized and validly existing in good
standing as a public limited company under the laws of the Republic of Ireland
with corporate power to enter into this Agreement and to conduct its business
as presently conducted.
4.2. PHARMA PATCH is a "Reporting Issuer" as defined in Rule 902(l) of
Regulation S and will cause all the materials required to be filed by it
pursuant to Section 13(a) of the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act") to be filed with the Securities and Exchange
Commission for a period of at least three (3) months following the completion
of the Offering. PHARMA PATCH is not an investment company registered or
required to register as such under the United States Investment Company Act of
1940.
4.3. PHARMA PATCH's ADS securities is a class of securities registered
under Section 12(g) of the Exchange Act, and PHARMA PATCH has filed all
materials, reports and documents required to be filed pursuant to Section
13(a) of the Exchange Act for a period of at least twelve months preceding the
date of this Offering (or for such shorter period as it may have been required
to filed such materials). PHARMA PATCH has made available to the Foreign
Investor copies of PHARMA PATCH's filings with the Securities and Exchange
Commission for the last twelve months prior to the date of this Offering
including, without limitation, its last proxy statement to shareholders for
its annual general meeting of shareholders and audited financial statements
for its last fiscal year and unaudited interim financial statements for
quarterly periods subsequent thereto.
4.4. PHARMA PATCH has not offered any securities covered by this
Offering to any persons in the United States nor to any U.S. Person nor to any
identifiable group or groups of U.S. citizens in the United States or abroad.
4.5. The PHARMA PATCH ADS securities and the underlying Ordinary
shares of PHARMA PATCH, when issued and delivered upon payment of the
subscription price, will each be duly and validly authorized and issued, fully
paid and nonassessable securities of PHARMA PATCH and will not subject the
holders thereof to personal liability by reason of being such holders.
4.6. This Agreement, upon its acceptance by PHARMA PATCH, has been
duly authorized, executed and delivered by PHARMA PATCH and is a valid and
binding agreement enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application to or affecting creditors' rights
generally and to general principles of equity. PHARMA PATCH has full power
and authority necessary to enter into this Agreement and to perform its
obligations hereunder.
Regulation S Subscription Agreement -5-
<PAGE>
4.7. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated herein, do not and will not
conflict with or result in a breach by PHARMA PATCH of any of the terms or
provisions of, or constitute a default under, its articles of incorporation or
association, its by-laws, any action of its directors or shareholders, or any
indenture, mortgage, deed of trust or other agreement or instrument to which
it is a party or by which it or any of its properties or assets are bound, or
any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, regulatory body, administrative agency or
other governmental body having jurisdiction over the undersigned or any of its
properties or assets.
5. OTHER TERMS AND AGREEMENTS.
5.1. Each of the parties understand that no governmental agency of any
jurisdiction has passed upon or made any recommendation or endorsement of the
ADS securities, the transactions contemplated by this Agreement, or an
investment in the ADS securities.
5.2. Each of the undersigned agrees to pay its own expenses incident to
the performance of its obligations hereunder.
5.3. Each of the undersigned agree this Agreement shall be governed by
and construed in accordance with the laws of the Republic of Ireland, and
without regard to principles of conflicts of law.
5.4. This Agreement may be executed in one or more counterparts and it
is not necessary that the signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. The headings of the sections of this Agreement have been
inserted for convenience of reference only, and shall not be deemed to be a
part of this Agreement.
5.5. Time shall be of the essence of this Agreement.
[SIGNATURE PAGE FOLLOWS]
Regulation S Subscription Agreement -6-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the respective dates set forth below.
FOREIGN INVESTOR:
- ----------------------------------------------------------------------------
[Full Legal Name]
By:
--------------------------------------
[Authorised Signature]
Name of Signing Officer:
--------------------------------------------------
Title of Signing Officer:
--------------------------------------------------
Principal Address of Foreign Investor:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Jurisdiction in which Foreign Investor is Incorporated or Organized:
- ----------------------------------------------------------------------------
Number of PHARMA PATCH American Depositary Shares subscribed for ( ADS)
-------
at $0.50 per ADS equals $ .
------------------
The following is a true and correct schedule of the PHARMA PATCH Class C
Warrants to be surrendered for cancellation upon your acceptance of this
subscription, all of which currently are registered solely in the name of the
undersigned Foreign Investor:
CLASS C WARRANTS TO BE SURRENDERED:
Certificate Number Number of Class C Warrants
------------------ --------------------------
ATTACH LIST IF MORE ROOM IS REQUIRED
Date: , 1996
--------------
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This Agreement is accepted as of 1996
-----------------
for PHARMA PATCH PLC in the City of Dublin, Ireland:
By:
-----------------------------------------------------------------------
[Authorised Signature]
Name and Title of Signing Officer:
-----------------------------------------
Date: , 1996 Rev-2
--------------------------
Regulation S Subscription Agreement -7-
Rev-D1 PHARMA PATCH PLC
(an Irish public limited company)
REGULATION D PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
250,000 American Depositary Shares, each representing one Ordinary Share,
IR Pound .01 par value
Pharma Patch PLC
15-16 FitzWilliam Place
Dublin 2, Ireland
FAX Number 011-353-1-661-9671
1. SUBSCRIPTION TO AMERICAN DEPOSITARY SHARES. The undersigned
(herein called the "Investor"), hereby subscribes for the purchase of the
number of American Depositary Shares ("ADS") indicated on the signature page
hereof, each ADS representing one Ordinary Share, IR Pound .01 par value, in
PHARMA PATCH PLC, an Irish public limited company (herein called "PHARMA
PATCH") for the account of the Investor upon the terms and conditions set
forth in this Subscription Agreement.
The subscription price for each ADS shall be (i) $0.50 per ADS in United
States funds, payable in cash upon acceptance hereof, and (ii) the delivery in
proper form, endorsed for transfer, of one (1) Class C Warrant previously
issued by PHARMA PATCH which shall be surrendered for cancellation.
2. DESCRIPTION OF OFFERING.
2.1. THE OFFERING. PHARMA PATCH is offering up to a maximum of
250,000 American Depositary Shares representing up to a maximum of 250,000
Ordinary Shares of PHARMA PATCH on a "best efforts" basis to a limited number
of qualified United States investors in a private placement offering of
securities exempt from the registration requirements of the United States
Securities Act of 1933, as amended (the "Securities Act"). The offering of
such ADS securities to investors who are residents or citizens of the United
States will be made pursuant to Regulation D promulgated under the Securities
Act and is herein called the "Offering". All of the ADS securities are being
offered at a price of $0.50 per ADS share in U.S. funds and the surrender for
cancellation of one (1) PHARMA PATCH Class C Warrant for each ADS sold in the
Offering. The Foreign Investor acknowledges receipt and has read and
understands information concerning the existing financial condition and a
proposed future plan of operation and proposed reorganization of PHARMA PATCH.
There are no minimum amount of subscriptions required in order for PHARMA
PATCH to accept any subscriptions to the Offering. The Offering will
terminate on February 29, 1996 unless extended at the option of PHARMA PATCH
for an additional period of not more than 15 days. PHARMA PATCH reserves the
right to terminate the Offering at any time, whether or not the maximum ADS
securities have been sold.
2.2. CLASS A WARRANTS TO BE SURRENDERED FOR CANCELLATION. Each Class
C Warrant to be transferred and surrendered for cancellation by PHARMA PATCH
pursuant to this Offering represents the right to purchase, for $10.00, a unit
of PHARMA PATCH securities consisting of one ADS, one-half of a Class A
Warrant and one-quarter of a Class B Warrant in PHARMA PATCH. Upon the
acceptance of his, her or its subscription to this Offering, the undersigned
Investor acknowledges that he, she or it is surrendering all rights
represented by such Class C Warrants and the other securities underlying the
Class
Regulation D Subscription Agreement -1-
<PAGE>
C Warrants. In order to perform his, her or its obligations under this
Agreement with respect to the transfer and surrender of Class C Warrants, the
Investor represents and warrants to PHARMA PATCH as follows:
(a) The Investor is the owner of record and beneficially of a sufficient
number of Class C Warrants, free and clear of any liens, encumbrances or
other adverse claims, necessary to subscribe for the number of ADS
securities indicated on the signature page of this Agreement, and the
Investor has not sold, assigned, endorsed, transferred, deposited under
any agreement, hypothecated, pawned, pledged for any bank or brokerage
loan, or otherwise transferred any interest in such Class C Warrants to
any third party;
(b) Upon the tender of this subscription Agreement, the Investor shall
promptly
(i) cause certificates representing the Class C Warrants transferred
and surrendered in connection with this Offering to be delivered
to, and deposited with, PHARMA PATCH at its offices at 15-16
FitzWilliam Place, Dublin 2, Ireland;
(ii) deliver to PHARMA PATCH at said office in Dublin, Ireland a stock
power in the form attached hereto, duly endorsed for transfer of
said Class C Warrants to PHARMA PATCH with signature guaranteed by
a medallion signature guaranty;
(iii) if the Investor is a corporation, partnership or another entity
(other than an individual), deliver to PHARMA PATCH at said office
in Dublin, Ireland a certificate in the form attached hereto
confirming the authority of the officer, general partner or other
agent executing the aforesaid stock power on behalf of the
Investor.
The Investor agrees that it will, at any time and from time to time after this
subscription is accepted by PHARMA PATCH, do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, assignments, transfers, powers and assurances as may be
required to enable PHARMA PATCH to cancel the Class C Warrants delivered in
payment of the applicable portion of the subscription price to ADS in this
Offering and hereby appoints PHARMA PATCH as the duly authorized agent and
attorney-in-fact of the Investor to cause such Class C Warrants to be
cancelled.
2.3. SECURITIES ACT RESTRICTIONS. The Investor acknowledges that the
ADS securities included in the Offering have not been registered under the
Securities Act or qualified under applicable state securities laws and that
the transferability thereof is restricted by the registration provisions of
the Securities Act as well as such state laws. Based upon the representations
and agreements being made by the Investor herein, the ADS securities are being
offered and sold pursuant to an exemption from such registration provided by
Sections 4(2) and/or Regulation D promulgated under Section 3(b) of the
Securities Act and applicable state securities law qualification exemptions.
2.4. NO BROKERS OR FINDERS FEES. The parties represent and warrant to
each other that each of them, to the best of their knowledge, have not
retained any broker, finder or agent or incurred any liability or obligation
for any brokerage, finders or other origination fees or commissions with
respect to this Agreement or the transactions contemplated hereby.
Regulation D Subscription Agreement -2-
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
By its acceptance of the subscription from the Investor hereunder,
PHARMA PATCH represents and warrants to the Investor as follows:
3.1. PHARMA PATCH is duly organized and validly existing in good
standing as a public limited company under the laws of the Republic of Ireland
with corporate power to enter into this Agreement and to conduct its business
as presently conducted.
3.2. PHARMA PATCH is a reporting foreign issuer under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and will cause all the
materials required to be filed by it pursuant to Section 13(a) of the Exchange
Act to be filed with the Securities and Exchange Commission so long as PHARMA
PATCH remains a reporting foreign issuer under the Exchange Act. PHARMA PATCH
has filed all materials, reports and documents required to be filed pursuant
to Section 13(a) of the Exchange Act for a period of at least twelve months
preceding the date of this Offering (or for such shorter period as it may have
been required to filed such materials). PHARMA PATCH has made available to
the Investor copies of PHARMA PATCH's filings with the Securities and Exchange
Commission for the last twelve months prior to the date of this Offering
including, without limitation, its last proxy statement to shareholders for
its annual general meeting of shareholders and audited financial statements
for its last fiscal year and unaudited interim financial statements for
periods subsequent thereto.
3.3. The ADS securities purchased hereunder, when issued and delivered
upon receipt of the subscription price, will be duly and validly authorized
and issued, fully paid and nonassessable securities of PHARMA PATCH and will
not subject the holders thereof to personal liability by reason of being such
holders.
3.4. This Agreement, upon its acceptance by PHARMA PATCH, has been
duly authorized, executed and delivered by PHARMA PATCH and is a valid and
binding agreement enforceable in accordance with its terms. PHARMA PATCH has
full power and authority necessary to enter into this Agreement and to perform
its obligations hereunder.
3.5. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated herein, do not and will not
conflict with or result in a breach by PHARMA PATCH of any of the terms or
provisions of, or constitute a default under, its charter documents, its by-
laws, any action of its directors or stockholders, or any indenture, mortgage,
deed of trust or other agreement or instrument to which it is a party or by
which it or any of its properties or assets are bound, or any existing
applicable law, rule or regulation or any applicable decree, judgment or order
of any court, regulatory body, administrative agency or other governmental
body having jurisdiction over the undersigned or any of its properties or
assets.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In connection
with this Agreement and the transactions contemplated herein, the Investor
represents and warrants to PHARMA PATCH as follows:
4.1. The Investor has relied only on the information contained in this
Agreement and only such other information (if any) that has been provided in
writing by duly authorized representatives of PHARMA PATCH to the Investor.
The Investor has carefully read and reviewed this Agreement and any other
documentation provided in connection with this Offering, and has asked such
questions of management of
Regulation D Subscription Agreement -3-
<PAGE>
PHARMA PATCH and received from them such information as he or she deems
necessary in order for the Investor to make an informed decision with respect
to an investment in the ADS securities of PHARMA PATCH's Common Stock. Except
as provided in this Agreement, the Investor warrants that no other
representations, statements or inducements were made to the Investor to
purchase the ADS securities. The Investor acknowledges that any projections
included in information furnished to the Investor are confidential and are
based upon certain assumptions as to future sales, expenses, operations,
available capital and other assets of PHARMA PATCH and its affiliates, and
there can be no guarantee or assurance that PHARMA PATCH's future operations
will attain the levels included in any such projections.
4.2. The Investor has sufficient knowledge and experience of financial
and business matters so that he or she is able to evaluate the relative merits
and risks of purchasing the ADS securities. The Investor has not received any
general solicitation or advertising regarding this Offering. The Investor is
aware that an investment in the ADS securities is a speculative investment, is
not liquid, and involves a high degree of risk of loss. The Investor further
understands and agrees that the securities may be sold only if they are
subsequently registered under the Securities Act and qualified under any
applicable state securities laws or, in the opinion of counsel satisfactory to
PHARMA PATCH, an exemption from such registration and qualification is
available. The Investor understands that the transfer of the ADS securities
will be prohibited absent full compliance with the Securities Act and all
applicable state securities laws. The Investor agrees that the certificates
representing the ADS securities will bear legends indicating that subsequent
transfer of these securities is restricted by reason of the fact that they
have not been registered or qualified under federal securities laws.
4.3. The Investor's commitment in direct participation in investments
in restricted securities is reasonable in relation to his or her net worth.
The investment of the Investor in the ADS securities will in no event exceed
10% of the net worth of the Investor. The Investor has the means to provide
for his or her personal needs, possesses the ability to bear the economic risk
hereunder indefinitely, and can afford a complete loss of his or her
investment.
4.4 The Investor is acquiring the ADS securities for his or her own
account only, for long-term investment and not with a view toward resale or
distribution thereof. The Investor realizes that the ADS securities must not
be purchased unless the Investor has liquid assets sufficient to assure that
this investment will cause no undue financial difficulties and the Investor
can provide for current financial needs and possible personal contingencies
from other funds.
4.5. All information which the Investor has provided to PHARMA PATCH or
its representatives concerning the Investor's financial position and knowledge
of investment matters is correct and complete as of the date set forth herein.
If the Investor is an "accredited investor" within the meaning of Regulation D
under the Securities Act, the undersigned has reviewed carefully the
definition of Investor set forth in Exhibit B attached hereto and is an
"accredited investor" within that definition. The Investor understands that
PHARMA PATCH cannot determine whether it will be in a position to accept this
subscription before reviewing suitability information supplied by the
Investor.
4.6. The Investor acknowledges that PHARMA PATCH has offered to make
available, prior to this subscription, to each prospective investor, the
opportunity to ask questions of, and receive written answers from, authorized
representatives of PHARMA PATCH concerning the terms and conditions of this
Offering, the existing and proposed operations of PHARMA PATCH, and any other
Regulation D Subscription Agreement -4-
<PAGE>
relevant matters, and to obtain any additional written information, to the
extent that PHARMA PATCH possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of any
information provided in connection with the Offering.
4.7. This Agreement has been duly authorized, executed and delivered by
the Investor and is a valid and binding agreement enforceable in accordance
with its terms. The Investor has full power and authority necessary to enter
into this Agreement and to perform his or her obligations hereunder.
5. OTHER PROVISIONS.
5.1. Each of the parties understand that no governmental agency of any
jurisdiction has passed upon or made any recommendation or endorsement of the
ADS securities, the transactions contemplated by this Agreement, or an
investment in the ADS securities.
5.2 This Subscription Agreement may be executed in one or more
counterparts and transmitted by facsimile telephonic transmission, each of
which shall be deemed to constitute an original and shall become effective
when one or more counterparts have been signed by each of the parties hereto
and delivered or transmitted by facsimile telephonic transmission to the other
party.
5.3 Each of the undersigned agrees to pay its own expenses incident to
the performance of its obligations hereunder.
5.4 Each of the undersigned agree this Agreement shall be governed by
and construed in accordance with the laws of the Republic of Ireland, and
without regard to principles of conflicts of law.
5.5 The headings of the sections of this Agreement have been inserted
for convenience of reference only, and shall not be deemed to be a part of
this Agreement.
5.6 Time shall be of the essence of this Agreement.
(SIGNATURE PAGE FOLLOWS)
Regulation D Subscription Agreement -5-
<PAGE>
SIGNATURE PAGE
The undersigned hereby agrees to purchase ____________ American
Depositary Shares in PHARMA PATCH at $0.50 per ADS for a total cash
subscription price of $ _____________________.
The following is a true and correct schedule of the PHARMA PATCH Class C
Warrants to be surrendered for cancellation upon your acceptance of this
subscription, all of which currently are registered in the name of the
undersigned Investor:
CLASS C WARRANTS TO BE SURRENDERED:
Certificate Number Number of Class C Warrants
__________________ __________________________
__________________ __________________________
ATTACH LIST IF MORE ROOM IS REQUIRED
Date: ___________________________, 1996
- ------------------------------------------------------------------------------
[Signature(s)]
- ------------------------------------------------------------------------------
[Please print name as it should appear on your certificates]
ADDRESS:
TELEPHONE NUMBER:______________________
_____________________________________
FAX NUMBER: ___________________________
_____________________________________
SOCIAL SECURITY OR
_____________________________________ IRS IDENTIFICATION NUMBER: ___________
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This Agreement is accepted as of _________________________ 1996
for PHARMA PATCH PLC in the City of Dublin, Ireland:
By: _____________________________________________________________
[Authorised Signature]
Name and Title of Signing Officer: ______________________________
Date: ____________________________________ , 1996
Regulation D Subscription Agreement -6-
<PAGE>
EXHIBIT A -- SUITABILITY INFORMATION
(ALL INVESTORS MUST COMPLETE)
1. I represent to PHARMA PATCH that my net worth is in excess of the
following amount (in calculating "net worth," the value of a principal
residence must be valued at cost or at a written appraised value used by an
institutional lender to make a loan secured by the property, in either case
net of current encumbrances on the property.):
[ ] $ 250,000, of which _________ represents the value of my residence.
[ ] $ 500,000, of which _________ represents the value of my residence.
[ ] $ 750,000, of which _________ represents the value of my residence.
[ ] $1,000,000, of which _________ represents the value of my residence.
2. I represent to PHARMA PATCH that my annual income in each of the last
two (2) years has been in excess of the following amount and that I have no
reason to believe that such annual income would be reduced in future years:
[ ] $ 75,000, of which _________ represents salary and wages.
[ ] $ 100,000, of which _________ represents salary and wages.
[ ] $ 150,000, of which _________ represents salary and wages.
[ ] $ 200,000, of which _________ represents salary and wages.
[ ] $ 300,000, of which _________ represents salary and wages.
3. Name and address of Employer, and Position of the Investor with
Employer:
_________________________________________
_________________________________________
_________________________________________
4. I currently own the following securities for investment purposes:
_________________________________________
_________________________________________
_________________________________________
5. Education -- I have received the following degrees from the educational
institutions listed below:
_________________________________________
_________________________________________
I certify that the above information is true and correct, and I agree to
furnish any additional information requested by PHARMA PATCH concerning my
ability to qualify as an investor in the Offering.
_________________________________
Signature
Regulation D Subscription Agreement -7-
<PAGE>
EXHIBIT B -- FOR ACCREDITED INVESTORS ONLY
THE UNDERSIGNED SUBSCRIBER IS AN ACCREDITED INVESTOR BY REASON OF
SUBPARAGRAPH ______________ SET FORTH BELOW.
If the Investor is an "accredited investor" within the meaning of Rule
501(a) of Regulation D promulgated under the Securities Act, I understand that
"accredited investor" is defined as follows:
(A) Certain banks, savings and loan institutions, broker-dealers, investment
companies and other entities including an employee benefit plan within
the meaning of Title I of the Employee Retirement Income Security Act of
1974 with total assets in excess of $5,000,000;
(B) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(C) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
Shares, with total assets in excess of $5,000,000;
(D) Any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(E) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
(F) Any natural person who had an individual income in excess of $200,000
or, with that person's spouse a joint income in excess of $300,000, in
each of the two most recent years and who reasonably expects an income
in excess of $200,000 (or joint income with that person's spouse in
excess of $300,000) in the current year;
(G) Any trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Section
230.506(b)(2)(ii) of Regulation D, i.e. a person having such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment; or
(H) Any entity in which all of the equity owners are accredited investors
under any of the paragraphs above.
______________________________
Signature
[DO NOT SIGN UNLESS YOU HAVE COMPLETED A PARAGRAPH NUMBER
CONFIRMING YOU ARE AN "ACCREDITED INVESTOR" AS DEFINED ABOVE]
Regulation D Subscription Agreement -8-
Date: June 1, 1995
VISTA TECHNOLOGIES INC.
12% Convertible Promissory Note
Secured by Majority of the Capital Stock of Vista Vision Scandinavia AB
Due June 15, 1998
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE
UNITED STATES TRUST INDENTURE ACT OF 1939, AS AMENDED (THE "ACTS") IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION S OF THE SECURITIES ACT
OF 1933. ACCORDINGLY, NO TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN MAY BE
MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACTS
UNLESS THE ISSUER HAS RECEIVED A SATISFACTORY OPINION OF COUNSEL THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACTS.
VISTA TECHNOLOGIES INC., a Nevada corporation (herein called the
"Company"), for value received, hereby promises to pay to G. LENNART PERLHAGEN
(the "Payee"), or order, at the offices of Vista Vision Scandinavia AB, c/o
Clemens Wallens Ostlund Advokater AB, Vasterlanggatan 27, 111 29 Stockholm,
Sweden, on the 15th June, 1998 (the "Maturity Date") the principal sum of ONE
HUNDRED SEVENTY-SEVEN THOUSAND SEVEN HUNDRED SEVENTY-SEVEN DOLLARS
($177,777.00) in United States funds, together with interest on the unpaid
principal amount of this Note from the date hereof. Interest on this Note
shall be payable at the rate of twelve percent (12%) per annum, interest
payable semi-annually in arrears on December 31, 1995 and on each June 30 and
December 31 thereafter until this Note is paid in full; interest shall also
be payable on the date of any payment of principal on this Note, whether at
the Maturity Date or at an earlier date fixed for optional redemption upon
notice by the Company.
1. NOTES. This Note is one of a duly authorized issue of 12%
Convertible Notes (herein called the "Notes") made by the Company in an
aggregate principal amount of $277,777, United States funds, issued by the
Company in a private placement offering of securities in 1995. All of the
Notes are issuable and assignable substantially in the form of this Note only
to investors who are not United States persons as defined in Rule 902(o) of
Regulation S promulgated under the United States Securities Act of 1933.
2. COLLATERAL SECURITY; ROYALTY AGREEMENT; LIMITED RECOURSE.
2.1. COLLATERAL SECURITY. The obligations of the Company under this
Note are secured by the pledge of a majority, i.e. 51%, of the issued and
outstanding share capital in VISTA VISION SCANDINAVIA AB, a company organized
under the laws of Sweden (herein called "VVScandinavia") as collateral
security for the Notes (the "Collateral"), which shares of Collateral are
owned by CONVISTA VISION BV, a wholly-owned subsidiary of the Company
organized under the laws of The Netherlands. Upon issuance and delivery of
the Notes, the Company shall promptly cause ConVista Vision BV to (i) furnish
evidence of its corporate authority to pledge the Collateral as security for
the repayment of the Notes in the event any Event of Default hereunder shall
occur and remain uncured, and (ii) to deposit share certificates representing
the Collateral duly endorsed for transfer with an escrow agent for the benefit
of the holders of record of the Notes. Until notice to the contrary is
provided in writing to holders of record of the
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Notes, the escrow holder shall be Clemens Wallens Ostlund Advokater AB,
Vasterlanggatan 27, 111 29 Stockholm, Sweden.
2.2 INTERCOMPANY CONDITIONAL SHAREHOLDER CONTRIBUTION AND ROYALTY
AGREEMENT. The record holder of this Note, by his or her acceptance hereof,
acknowledges that the original proceeds of the Notes, when issued and sold,
are to be advanced by the Company or its subsidiaries as a conditional
shareholder contribution to VVScandinavia for the purpose of providing for the
payment of obligations to Semera A.B. incurred in connection with the purchase
of assets of the Klara Clinic in June 1994. In consideration of the original
proceeds of the Notes being advanced as a conditional shareholder contribution
by the Company to VVScandinavia, the Company shall promptly cause
VVScandinavia to execute and deliver to the Company for the benefit of the
holders of record of the Notes a Royalty Agreement as provided by the original
subscription agreements for the notes ("Royalty Agreement").
3. OPTIONAL REDEMPTION. The Company, at its option and upon not
less than thirty (30) nor more than sixty (60) days prior written notice to
the holder of record of this Note (which notice may be waived in writing by
the registered holder), may at any time after June 15, 1996 call for
prepayment redemption and prepay all or any portion of the principal of this
Note at the time outstanding (except to the extent this Note has been
converted into the Company's common stock in accordance with Section 4 of this
Note), in each case at the following redemption price: if called for
redemption and prepaid prior to the Maturity Date, at one hundred and ten
percent (110%) of the principal amount so being prepaid plus all unpaid
interest accrued on the principal amount so prepaid to the date fixed for
prepayment. By its acceptance of this Note, the holder of this Note
covenants and agrees that upon any partial prepayment of this Note, and upon
the request of the Company, this Note shall be made available to the Company
for notation hereon of the payment of the portion of the principal so prepaid,
in which case the Company shall make such notation and return this Note to or
on the order of the holder of this Note.
4. CONVERSION RIGHTS.
4.1. CERTAIN DEFINITIONS. The following terms used in this Note shall
be defined as follows:
"Company Common Stock" shall mean the common stock of the Company as
such common stock was constituted on May 31, 1995, and as the same shall be
constituted thereafter including appropriate and equitable adjustment for any
capital reorganization or reclassification thereof.
"Conversion Price" shall mean, subject to possible adjustment in
accordance with the provisions of Section 4.2 of this Note, the amount of ONE
DOLLAR ($1.00) per share of Company Common Stock.
4.2. CERTAIN ADJUSTMENTS AND NOTICES RELATING TO THE CONVERSION PRICE
AND COMPANY COMMON STOCK. The Conversion Price and number of shares of
Company Common Stock issuable upon conversion of this Note shall be subject to
adjustment from time to time hereafter as follows:
(A) In case the Company at any time after May 31, 1995 shall
issue a stock dividend on its outstanding shares of Company Common Stock or
shall subdivide or combine the outstanding shares of Company Common Stock into
a greater or lesser number of shares, the Conversion Price and number of
shares issuable upon conversion of the this Note shall be proportionately and
equitably adjusted as if the holder of record of this Note had converted this
Note into Company Common Stock immediately prior to such event. Any such
adjustment shall become effective at the close of business on the date that
such stock dividend, subdivision or combination relating to the Company Common
Stock shall become effective. For the purposes of such adjustment, the
Conversion Price in effect immediately prior to such stock dividend,
subdivision or combination shall forthwith be changed to a Conversion Price
determined by:
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(i) dividing the total number of shares of Company Common Stock outstanding
immediately prior to the stock dividend, subdivision or combination, by
an amount equal to the total number of shares of Company Common Stock
outstanding immediately after such stock dividend, subdivision or
combination; and
(ii) multiplying the result of clause (i) above by the actual Conversion
Price in effect immediately prior to such stock dividend, subdivision or
combination.
and the total of shares of Company Common Stock thereafter issuable and
deliverable on conversion of the this Note shall be the number of shares
obtained by applying the Conversion Price as so adjusted.
(B) In case of any capital reorganization or any
reclassification of the shares of Company Common Stock (other than as a result
of a stock dividend, subdivision or combination, as aforesaid), or in case of
any consolidation with or merger of Company into or with another corporation,
or the sale, lease or other disposition of the properties of Company as an
entirety or substantially as an entirety, then as a part of such
reorganization, reclassification, consolidation, merger, sale, lease or other
disposition, as the case may be, lawful provision shall be made so that the
holder of this Note shall have the right thereafter to receive upon conversion
thereof the kind and amount of shares of stock or other securities or property
which such holder would have been entitled to receive if, immediately prior to
such reorganization, reclassification, consolidation, merger, sale, lease or
other disposition, such holder had held the number of shares of Company Common
Stock which were then issuable upon the conversion of this Note. In any such
case, appropriate adjustment shall be made in the application of the
provisions set forth herein with respect to the rights and interests
thereafter of the holders of record of this Note, to the end that the
provisions set forth herein (including provisions with respect to adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of this Note.
(C) Whenever the Conversion Price is adjusted, as herein pro-
vided, the Company shall forthwith transmit to the registered holder of this
Note a statement signed by the Secretary or the Treasurer of Company, stating
the adjusted Conversion Price determined as herein provided. Such statement
shall specify in detail the facts requiring such adjustment.
4.3. RIGHTS OF CONVERSION.
(a) At any time up through the second business day prior to a
date fixed for redemption of this Note, whether at its Maturity Date or by
optional redemption in accordance with Section 3 above (unless Company shall
default in payment due upon the redemption thereof), at the election of the
holder of this Note and subject to the terms and conditions set forth herein,
any and all of the principal and accrued and unpaid interest of this Note may
be converted into fully paid and nonassessable shares of Company Common Stock
at the Conversion Price then in effect (after taking into account any
adjustment thereof as hereinabove set forth).
(b) The value of this Note, for the purpose of determining the
number of shares of Company Common Stock to be issued in accordance with any
such conversion, shall be deemed to be principal amount tendered for
conversion and any accrued and unpaid interest thereon to the date this Note
is so tendered to Company for conversion hereunder; provided, however, that
the Company at its option may elect to pay such accrued and unpaid interest in
cash to the holder of this Note within two (2) business days after this Note
is tendered for conversion in lieu of converting such interest obligation into
shares of Company Common Stock.
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(c) In order to exercise this conversion privilege, the holder
of this Note shall execute and deliver to the Company at its principal office
in the State of Pennsylvania a duly executed notice of the holder's election
to convert all or any portion of this Note into Company Common Stock. Such
notice shall specify the principal amount of this Note to be so converted and
shall also state the name or names (with addresses) in which the certificates
for shares of Company Common Stock issuable on such conversion shall be
issued.
(d) No certificates for fractional shares of Company Common
Stock shall be issued upon any such conversion of this Note, and in lieu
thereof Company shall pay the holder the cash equivalent of such fractional
share based upon the value of principal and/or accrued interest of this Note
representing such fractional share.
(e) So long as this Note shall remain outstanding, the Company
covenants and agrees to reserve unissued, out of the authorized but unissued
shares of Company Common Stock, that number of shares sufficient to provide
for conversion of all the principal of this Note then outstanding for Company
Common Stock as provided for herein.
5. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. The holder of this
Note, by his or her acceptance hereof, represents and warrants that this Note
has been acquired by said holder for its own account for investment, and
acknowledges that any proposed sale, assignment or transfer of this Note or
any shares issuable upon conversion of this Note is prohibited unless such
sale, assignment or transfer will not require the prior registration of this
Note under the United States Securities Act of 1933, as amended, or the
qualification of this Note under the United States Trust Indenture Act of
1939, as amended.
6. DEFAULT. If one or more of the following events (herein called
"Events of Default") shall happen, that is to say:
(a) If default be made in the punctual payment of the principal of this Note
as the same shall become due and payable at the Maturity Date in
accordance with its terms, and such default shall continue for three (3)
business days after the Company has received written notice of default
from the holder of this Note; or
(b) If default be made in the punctual payment of the interest on of this
Note as the same shall become due and payable in accordance with its
terms, and such default shall continue for thirty (30) business days
after the Company has received written notice of default from the holder
of this Note; or
(c) If default (not covered by clauses (a) or (b) above) be made in the due
observance or performance of any covenant, condition or agreement
contained in any provision of this Note, and such default shall continue
for forty-five (45) days after written notice thereof shall have been
given to the Company by the holder of this Note; or
(d) If (i) any court of competent jurisdiction shall enter a decree or order
not vacated or stayed within 30 days from the date of entry thereof (A)
appointing a trustee or receiver of the Company or of any substantial
part of the property of the Company, or (B) approving a petition for, or
effecting, an arrangement in bankruptcy of, or a reorganization pursuant
to any bankruptcy act of, the Company, or any other judicial
modification or alteration of the rights of the holders of this Note or
of other creditors of the Company, or (ii) the Company shall itself file
any such petition or take or consent to any other action seeking any
such judicial order or shall make an assignment for the
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benefit of its creditors or shall admit in writing its inability to pay
its debts generally as they become due.
6.1. RIGHT OF ACCELERATION. All of the unpaid principal and interest
of this Note shall become immediately due and payable upon demand made by the
holder of this Note if any one or more Events of Default shall occur and be
continuing at the time of such demand.
6.2. COSTS OF COLLECTION. The Company covenants that, if default be
made in any payment of the principal of or interest on this Note, the Company
will pay the holder of this Note such further amount as shall be sufficient to
cover the costs and expenses of collection, including without limitation
reasonable attorneys' fees of such holder and all other costs incurred for
court filings, witnesses, preparation, prosecution and enforcement of
collection.
7. REGISTRATION OF COMMON STOCK.
7.1. MANDATORY REGISTRATION. If shares of Common Stock issuable upon
conversion of the principal amount of the Notes have not been registered under
the United States Securities Act of 1933, as amended (the "Securities Act")
prior to December 31, 1995, then the registered holder of this Note shall have
the right, at any time commencing on January 1, 1996 to demand in writing that
the Company use its best efforts to register shares of Common Stock issuable
upon conversion of this Note under the Securities Act. Upon receipt of a
demand for registration hereunder, the Company within 45 days thereafter will
file a registration statement under the Securities Act covering all shares
issuable upon conversion of this Note covered by any such request, and will
maintain the prospectus included in any registration statement which may be so
filed current for a period of at least nine (9) months subsequent to the
effective date of such registration statement. The obligations of the Company
under this Section 7.1 shall be fully satisfied upon the effective date of the
first such registration statement to which this Section 7.1 is applicable.
All costs and expenses of such registration statement incurred by the Company
including, without limitation, filing fees, and all legal, accounting and
printing costs and expenses, shall be paid by the Company. The holder of the
Notes and/or shares issued upon exercise of the Notes shall pay all sales and
brokerage commissions directly related to the sale of securities for their
account.
7.2. AMENDMENT OR SUPPLEMENT TO PROSPECTUS. If, at any time within
nine (9) months after a registration statement covering the shares of Common
Stock subject to or acquired upon conversion of this Note as provided in
Section 7.1 shall have become effective, to the knowledge of the Company any
event occurs as a result of which a prospectus included therein relating to
the shares of Common Stock subject to or acquired upon conversion of the Notes
as then amended or supplemented would include any untrue statement of a
material fact, or would not state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, the Company will promptly notify the holder or holders of record
of this Note and/or shares of Common Stock covered by such prospectus thereof
and the Company will at its own cost and expense amend or supplement such
prospectus in order to correct such statement or omission in order that the
prospectus as so amended or supplemented will comply with the requirements of
Section 10(a) of the Securities Act.
7.3. UNDERTAKINGS. In connection with any registration statement or
post-effective amendment pursuant to this Section 7:
(a) The Company will comply with all applicable rules and
regulations of the Securities and Exchange Commission or any similar
Federal commission and will make available to its security holders, as
soon as practicable, an earnings statement (which need not be audited)
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covering a period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of the
registration statement or post-effective amendment, as the case may be,
which earnings statement will satisfy the provisions of Section 11(a) of
the Securities Act.
(b) Each holder of the shares of Common Stock covered by such
registration statement or post-effective amendment of a registration
statement, as the case may be, will furnish in writing to the Company
such information regarding such holder and its proposed plan of
distribution of such shares as the Company shall reasonably request.
(c) The Company agrees to furnish to the holders of the Notes
and of the shares of Common Stock acquired upon the conversion thereof,
a prospectus containing certified financial statements and other
information meeting the requirements of the Securities Act and the rules
and regulations thereunder and relating to shares of Common Stock
issuable upon conversion of the Notes. The furnishing of such prospec-
tus shall be at the expense of the Company.
(d) The Company will use its best efforts to qualify the shares
of Common Stock covered by any registration statement or post-effective
amendment for public offering or sale on the effectiveness thereof in
the State of New York and such other jurisdictions, if any, as the
Company shall determine. The filing fees and reasonable fees and
expenses of counsel in connection with such qualification in the State
of New York shall be at the expense of the Company.
8. MISCELLANEOUS.
8.1. Any notice or demand which by any provision of this Note is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being
sent as registered or certified mail, postage prepaid, addressed to the
Company at its principal office in the United States.
8.2. No course of dealing between the Company and the holder of this
Note or any delay on the part of the holder in exercising any rights under
this Note shall operate as a waiver of any rights of any holder of this Note.
8.3. This Note is issued upon the express condition, to which the
holder of record and each successive holder expressly assents and by receiving
the same agrees, that no recourse under or upon any obligation, covenant or
agreement of this Note, or for the payment of the principal of or the interest
on, this Note, or for any claim based on this Note, or otherwise in respect
thereof, shall be had against any incorporator or any past, present or future
stockholder, officer or director, as such, of any subsidiary of the Company or
of the Company, whether by virtue of any constitution, statute or rule of law,
or by any assessment or penalty or otherwise, all such individual liability
being hereby expressly waived and released as a condition of and as part of
the consideration for the execution and issue of this Note.
8.4. This Note shall be governed by the laws of the State of New York.
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IN WITNESS WHEREOF, VISTA TECHNOLOGIES INC. has caused this Note to be
signed in its corporate name by an officer thereunder duly authorized, and to
be dated as of the day and year first above written.
VISTA TECHNOLOGIES INC.
By: /s/ Jac. J. Lam
------------------------------------
Jac. J. Lam, acting President and Chief Executive Officer
ATTEST:
/s/ William M. Curtis
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William M. Curtis, Secretary
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Date: June 1, 1995
VISTA TECHNOLOGIES INC.
12% Convertible Promissory Note
Secured by Majority of the Capital Stock of Vista Vision Scandinavia AB
Due June 15, 1998
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE
UNITED STATES TRUST INDENTURE ACT OF 1939, AS AMENDED (THE "ACTS") IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION S OF THE SECURITIES ACT
OF 1933. ACCORDINGLY, NO TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN MAY BE
MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACTS
UNLESS THE ISSUER HAS RECEIVED A SATISFACTORY OPINION OF COUNSEL THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACTS.
VISTA TECHNOLOGIES INC., a Nevada corporation (herein called the
"Company"), for value received, hereby promises to pay to QUINTILLION B.V.
(the "Payee"), or order, at the offices of Vista Vision Scandinavia AB, c/o
Clemens Wallens Ostlund Advokater AB, Vasterlanggatan 27, 111 29 Stockholm,
Sweden, on the 15th June, 1998 (the "Maturity Date") the principal sum of ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) in United States funds, together with
interest on the unpaid principal amount of this Note from the date hereof.
Interest on this Note shall be payable at the rate of twelve percent (12%) per
annum, interest payable semi-annually in arrears on December 31, 1995 and on
each June 30 and December 31 thereafter until this Note is paid in full;
interest shall also be payable on the date of any payment of principal on this
Note, whether at the Maturity Date or at an earlier date fixed for optional
redemption upon notice by the Company.
1. NOTES. This Note is one of a duly authorized issue of 12%
Convertible Notes (herein called the "Notes") made by the Company in an
aggregate principal amount of $277,777, United States funds, issued by the
Company in a private placement offering of securities in 1995. All of the
Notes are issuable and assignable substantially in the form of this Note only
to investors who are not United States persons as defined in Rule 902(o) of
Regulation S promulgated under the United States Securities Act of 1933.
2. COLLATERAL SECURITY; ROYALTY AGREEMENT; LIMITED RECOURSE.
2.1. COLLATERAL SECURITY. The obligations of the Company under this
Note are secured by the pledge of a majority, i.e. 51%, of the issued and
outstanding share capital in VISTA VISION SCANDINAVIA AB, a company organized
under the laws of Sweden (herein called "VVScandinavia") as collateral
security for the Notes (the "Collateral"), which shares of Collateral are
owned by CONVISTA VISION BV, a wholly-owned subsidiary of the Company
organized under the laws of The Netherlands. Upon issuance and delivery of
the Notes, the Company shall promptly cause ConVista Vision BV to (i) furnish
evidence of its corporate authority to pledge the Collateral as security for
the repayment of the Notes in the event any Event of Default hereunder shall
occur and remain uncured, and (ii) to deposit share certificates representing
the Collateral duly endorsed for transfer with an escrow agent for the benefit
of the holders of record of the Notes. Until notice to the contrary is
provided in writing to holders of record of the Notes, the escrow holder shall
be Clemens Wallens Ostlund Advokater AB, Vasterlanggatan 27, 111 29
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Stockholm, Sweden.
2.2 INTERCOMPANY CONDITIONAL SHAREHOLDER CONTRIBUTION AND ROYALTY
AGREEMENT. The record holder of this Note, by his or her acceptance hereof,
acknowledges that the original proceeds of the Notes, when issued and sold,
are to be advanced by the Company or its subsidiaries as a conditional
shareholder contribution to VVScandinavia for the purpose of providing for the
payment of obligations to Semera A.B. incurred in connection with the purchase
of assets of the Klara Clinic in June 1994. In consideration of the original
proceeds of the Notes being advanced as a conditional shareholder contribution
by the Company to VVScandinavia, the Company shall promptly cause
VVScandinavia to execute and deliver to the Company for the benefit of the
holders of record of the Notes a Royalty Agreement as provided by the original
subscription agreements for the notes ("Royalty Agreement").
3. OPTIONAL REDEMPTION. The Company, at its option and upon not
less than thirty (30) nor more than sixty (60) days prior written notice to
the holder of record of this Note (which notice may be waived in writing by
the registered holder), may at any time after June 15, 1996 call for
prepayment redemption and prepay all or any portion of the principal of this
Note at the time outstanding (except to the extent this Note has been
converted into the Company's common stock in accordance with Section 4 of this
Note), in each case at the following redemption price: if called for
redemption and prepaid prior to the Maturity Date, at one hundred and ten
percent (110%) of the principal amount so being prepaid plus all unpaid
interest accrued on the principal amount so prepaid to the date fixed for
prepayment. By its acceptance of this Note, the holder of this Note
covenants and agrees that upon any partial prepayment of this Note, and upon
the request of the Company, this Note shall be made available to the Company
for notation hereon of the payment of the portion of the principal so prepaid,
in which case the Company shall make such notation and return this Note to or
on the order of the holder of this Note.
4. CONVERSION RIGHTS.
4.1. CERTAIN DEFINITIONS. The following terms used in this Note shall
be defined as follows:
"Company Common Stock" shall mean the common stock of the Company as
such common stock was constituted on May 31, 1995, and as the same shall be
constituted thereafter including appropriate and equitable adjustment for any
capital reorganization or reclassification thereof.
"Conversion Price" shall mean, subject to possible adjustment in
accordance with the provisions of Section 4.2 of this Note, the amount of ONE
DOLLAR ($1.00) per share of Company Common Stock.
4.2. CERTAIN ADJUSTMENTS AND NOTICES RELATING TO THE CONVERSION PRICE
AND COMPANY COMMON STOCK. The Conversion Price and number of shares of
Company Common Stock issuable upon conversion of this Note shall be subject to
adjustment from time to time hereafter as follows:
(A) In case the Company at any time after May 31, 1995 shall
issue a stock dividend on its outstanding shares of Company Common Stock or
shall subdivide or combine the outstanding shares of Company Common Stock into
a greater or lesser number of shares, the Conversion Price and number of
shares issuable upon conversion of the this Note shall be proportionately and
equitably adjusted as if the holder of record of this Note had converted this
Note into Company Common Stock immediately prior to such event. Any such
adjustment shall become effective at the close of business on the date that
such stock dividend, subdivision or combination relating to the Company Common
Stock shall become effective. For the purposes of such adjustment, the
Conversion Price in effect immediately prior to such stock dividend,
subdivision or combination shall forthwith be changed to a Conversion Price
determined by:
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(i) dividing the total number of shares of Company Common Stock outstanding
immediately prior to the stock dividend, subdivision or combination, by
an amount equal to the total number of shares of Company Common Stock
outstanding immediately after such stock dividend, subdivision or
combination; and
(ii) multiplying the result of clause (i) above by the actual Conversion
Price in effect immediately prior to such stock dividend, subdivision or
combination.
and the total of shares of Company Common Stock thereafter issuable and
deliverable on conversion of the this Note shall be the number of shares
obtained by applying the Conversion Price as so adjusted.
(B) In case of any capital reorganization or any
reclassification of the shares of Company Common Stock (other than as a result
of a stock dividend, subdivision or combination, as aforesaid), or in case of
any consolidation with or merger of Company into or with another corporation,
or the sale, lease or other disposition of the properties of Company as an
entirety or substantially as an entirety, then as a part of such
reorganization, reclassification, consolidation, merger, sale, lease or other
disposition, as the case may be, lawful provision shall be made so that the
holder of this Note shall have the right thereafter to receive upon conversion
thereof the kind and amount of shares of stock or other securities or property
which such holder would have been entitled to receive if, immediately prior to
such reorganization, reclassification, consolidation, merger, sale, lease or
other disposition, such holder had held the number of shares of Company Common
Stock which were then issuable upon the conversion of this Note. In any such
case, appropriate adjustment shall be made in the application of the
provisions set forth herein with respect to the rights and interests
thereafter of the holders of record of this Note, to the end that the
provisions set forth herein (including provisions with respect to adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of this Note.
(C) Whenever the Conversion Price is adjusted, as herein pro-
vided, the Company shall forthwith transmit to the registered holder of this
Note a statement signed by the Secretary or the Treasurer of Company, stating
the adjusted Conversion Price determined as herein provided. Such statement
shall specify in detail the facts requiring such adjustment.
4.3. RIGHTS OF CONVERSION.
(a) At any time up through the second business day prior to a
date fixed for redemption of this Note, whether at its Maturity Date or by
optional redemption in accordance with Section 3 above (unless Company shall
default in payment due upon the redemption thereof), at the election of the
holder of this Note and subject to the terms and conditions set forth herein,
any and all of the principal and accrued and unpaid interest of this Note may
be converted into fully paid and nonassessable shares of Company Common Stock
at the Conversion Price then in effect (after taking into account any
adjustment thereof as hereinabove set forth).
(b) The value of this Note, for the purpose of determining the
number of shares of Company Common Stock to be issued in accordance with any
such conversion, shall be deemed to be principal amount tendered for
conversion and any accrued and unpaid interest thereon to the date this Note
is so tendered to Company for conversion hereunder; provided, however, that
the Company at its option may elect to pay such accrued and unpaid interest in
cash to the holder of this Note within two (2) business days after this Note
is tendered for conversion in lieu of converting such interest obligation into
shares of Company Common Stock.
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<PAGE>
(c) In order to exercise this conversion privilege, the holder
of this Note shall execute and deliver to the Company at its principal office
in the State of Pennsylvania a duly executed notice of the holder's election
to convert all or any portion of this Note into Company Common Stock. Such
notice shall specify the principal amount of this Note to be so converted and
shall also state the name or names (with addresses) in which the certificates
for shares of Company Common Stock issuable on such conversion shall be
issued.
(d) No certificates for fractional shares of Company Common
Stock shall be issued upon any such conversion of this Note, and in lieu
thereof Company shall pay the holder the cash equivalent of such fractional
share based upon the value of principal and/or accrued interest of this Note
representing such fractional share.
(e) So long as this Note shall remain outstanding, the Company
covenants and agrees to reserve unissued, out of the authorized but unissued
shares of Company Common Stock, that number of shares sufficient to provide
for conversion of all the principal of this Note then outstanding for Company
Common Stock as provided for herein.
5. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. The holder of this
Note, by his or her acceptance hereof, represents and warrants that this Note
has been acquired by said holder for its own account for investment, and
acknowledges that any proposed sale, assignment or transfer of this Note or
any shares issuable upon conversion of this Note is prohibited unless such
sale, assignment or transfer will not require the prior registration of this
Note under the United States Securities Act of 1933, as amended, or the
qualification of this Note under the United States Trust Indenture Act of
1939, as amended.
6. DEFAULT. If one or more of the following events (herein called
"Events of Default") shall happen, that is to say:
(a) If default be made in the punctual payment of the principal of this Note
as the same shall become due and payable at the Maturity Date in
accordance with its terms, and such default shall continue for three (3)
business days after the Company has received written notice of default
from the holder of this Note; or
(b) If default be made in the punctual payment of the interest on of this
Note as the same shall become due and payable in accordance with its
terms, and such default shall continue for thirty (30) business days
after the Company has received written notice of default from the holder
of this Note; or
(c) If default (not covered by clauses (a) or (b) above) be made in the due
observance or performance of any covenant, condition or agreement
contained in any provision of this Note, and such default shall continue
for forty-five (45) days after written notice thereof shall have been
given to the Company by the holder of this Note; or
(d) If (i) any court of competent jurisdiction shall enter a decree or order
not vacated or stayed within 30 days from the date of entry thereof (A)
appointing a trustee or receiver of the Company or of any substantial
part of the property of the Company, or (B) approving a petition for, or
effecting, an arrangement in bankruptcy of, or a reorganization pursuant
to any bankruptcy act of, the Company, or any other judicial
modification or alteration of the rights of the holders of this Note or
of other creditors of the Company, or (ii) the Company shall itself file
any such petition or take or consent to any other action seeking any
such judicial order or shall make an assignment for the
B-4
<PAGE>
benefit of its creditors or shall admit in writing its inability to pay
its debts generally as they become due.
6.1. RIGHT OF ACCELERATION. All of the unpaid principal and interest
of this Note shall become immediately due and payable upon demand made by the
holder of this Note if any one or more Events of Default shall occur and be
continuing at the time of such demand.
6.2. COSTS OF COLLECTION. The Company covenants that, if default be
made in any payment of the principal of or interest on this Note, the Company
will pay the holder of this Note such further amount as shall be sufficient to
cover the costs and expenses of collection, including without limitation
reasonable attorneys' fees of such holder and all other costs incurred for
court filings, witnesses, preparation, prosecution and enforcement of
collection.
7. REGISTRATION OF COMMON STOCK.
7.1. MANDATORY REGISTRATION. If shares of Common Stock issuable upon
conversion of the principal amount of the Notes have not been registered under
the United States Securities Act of 1933, as amended (the "Securities Act")
prior to December 31, 1995, then the registered holder of this Note shall have
the right, at any time commencing on January 1, 1996 to demand in writing that
the Company use its best efforts to register shares of Common Stock issuable
upon conversion of this Note under the Securities Act. Upon receipt of a
demand for registration hereunder, the Company within 45 days thereafter will
file a registration statement under the Securities Act covering all shares
issuable upon conversion of this Note covered by any such request, and will
maintain the prospectus included in any registration statement which may be so
filed current for a period of at least nine (9) months subsequent to the
effective date of such registration statement. The obligations of the Company
under this Section 7.1 shall be fully satisfied upon the effective date of the
first such registration statement to which this Section 7.1 is applicable.
All costs and expenses of such registration statement incurred by the Company
including, without limitation, filing fees, and all legal, accounting and
printing costs and expenses, shall be paid by the Company. The holder of the
Notes and/or shares issued upon exercise of the Notes shall pay all sales and
brokerage commissions directly related to the sale of securities for their
account.
7.2. AMENDMENT OR SUPPLEMENT TO PROSPECTUS. If, at any time within
nine (9) months after a registration statement covering the shares of Common
Stock subject to or acquired upon conversion of this Note as provided in
Section 7.1 shall have become effective, to the knowledge of the Company any
event occurs as a result of which a prospectus included therein relating to
the shares of Common Stock subject to or acquired upon conversion of the Notes
as then amended or supplemented would include any untrue statement of a
material fact, or would not state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, the Company will promptly notify the holder or holders of record
of this Note and/or shares of Common Stock covered by such prospectus thereof
and the Company will at its own cost and expense amend or supplement such
prospectus in order to correct such statement or omission in order that the
prospectus as so amended or supplemented will comply with the requirements of
Section 10(a) of the Securities Act.
7.3. UNDERTAKINGS. In connection with any registration statement or
post-effective amendment pursuant to this Section 7:
(a) The Company will comply with all applicable rules and
regulations of the Securities and Exchange Commission or any similar
Federal commission and will make available to its security holders, as
soon as practicable, an earnings statement (which need not be audited)
B-5
<PAGE>
covering a period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of the
registration statement or post-effective amendment, as the case may be,
which earnings statement will satisfy the provisions of Section 11(a) of
the Securities Act.
(b) Each holder of the shares of Common Stock covered by such
registration statement or post-effective amendment of a registration
statement, as the case may be, will furnish in writing to the Company
such information regarding such holder and its proposed plan of
distribution of such shares as the Company shall reasonably request.
(c) The Company agrees to furnish to the holders of the Notes
and of the shares of Common Stock acquired upon the conversion thereof,
a prospectus containing certified financial statements and other
information meeting the requirements of the Securities Act and the rules
and regulations thereunder and relating to shares of Common Stock
issuable upon conversion of the Notes. The furnishing of such prospec-
tus shall be at the expense of the Company.
(d) The Company will use its best efforts to qualify the shares
of Common Stock covered by any registration statement or post-effective
amendment for public offering or sale on the effectiveness thereof in
the State of New York and such other jurisdictions, if any, as the
Company shall determine. The filing fees and reasonable fees and
expenses of counsel in connection with such qualification in the State
of New York shall be at the expense of the Company.
8. MISCELLANEOUS.
8.1. Any notice or demand which by any provision of this Note is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being
sent as registered or certified mail, postage prepaid, addressed to the
Company at its principal office in the United States.
8.2. No course of dealing between the Company and the holder of this
Note or any delay on the part of the holder in exercising any rights under
this Note shall operate as a waiver of any rights of any holder of this Note.
8.3. This Note is issued upon the express condition, to which the
holder of record and each successive holder expressly assents and by receiving
the same agrees, that no recourse under or upon any obligation, covenant or
agreement of this Note, or for the payment of the principal of or the interest
on, this Note, or for any claim based on this Note, or otherwise in respect
thereof, shall be had against any incorporator or any past, present or future
stockholder, officer or director, as such, of any subsidiary of the Company or
of the Company, whether by virtue of any constitution, statute or rule of law,
or by any assessment or penalty or otherwise, all such individual liability
being hereby expressly waived and released as a condition of and as part of
the consideration for the execution and issue of this Note.
8.4. This Note shall be governed by the laws of the State of New York.
B-6
<PAGE>
IN WITNESS WHEREOF, VISTA TECHNOLOGIES INC. has caused this Note to be
signed in its corporate name by an officer thereunder duly authorized, and to
be dated as of the day and year first above written.
VISTA TECHNOLOGIES INC.
By: /s/ Jac. J. Lam
------------------------------------
Jac. J. Lam, acting President and Chief Executive Officer
ATTEST:
/s/ William M. Curtis
- ------------------------------
William M. Curtis, Secretary
B-7
Rev3 ROYALTY AGREEMENT
THIS AGREEMENT (the "Agreement"), made as of this 15th day of June,
1995, by and between VISTA VISION SCANDINAVIA AB, a company organized under
the laws of Sweden having a place of business c/o Clemens Wallens Ostlund
Advokater AB, Vasterlanggatan 27, 111 29 Stockholm, Sweden (herein called
"VVScandinavia") and the holders of record ("Beneficiaries") of those certain
12% Convertible Promissory Notes ("Vista Notes") issued by VISTA TECHNOLOGIES
INC., a corporation of the State of Nevada, United States of America, (herein
called "Vista-Parent"). For purposes of identification, the Vista Notes are
secured by a pledge of 51% of the issued share capital of VVScandinavia.
R E C I T A L S :
WHEREAS, Vista-Parent through its wholly-owned subsidiary ConVista
Vision BV, a company organized under the laws of The Netherlands, indirectly
is the beneficial owner of all of the issued share capital of VVScandinavia;
and
WHEREAS, VVScandinavia has received a conditional shareholder
contribution from Vista-Parent equal to $277,777 in U.S. funds, the original
proceeds of the Notes, for the purpose of satisfying certian obligations to
Semera A.B. incurred in connection with the purchase by VVScandinavia of the
assets of the Klara Clinic in June 1994; and
WHEREAS, in consideration of such conditional shareholder contribution,
and to induce the Beneficiaries to invest in Vista Notes issued by Vista-
Parent, VVScandinavia has agreed to execute and deliver this Royalty Agreement
for the benefit of the Beneficiaries, all with the consent of Vista-Parent;
NOW, THEREFORE, in consideration of the premises and covenants and
agreements contained herein, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS
The following terms used in this Agreement shall be defined as follows:
"Term of this Agreement" shall be a term commencing on June 1, 1995 and
expiring on May 31, 1998.
"Performance Year" shall mean a year of twelve months starting on June 1
and ending on May 31 of the following year.
"VVScandinavia Centers" shall mean the two (2) existing VVScandinavia
surgical centers in Stockholm and Malmoe, Sweden.
"PRK Procedure" shall mean each photorefractive keratectomy or other
laser surgical procedure to correct vision disorders for an eye performed by
VVScandinavia at its VVScandinavia Centers that generates revenues at standard
rates to VVScandinavia. Surgical
<PAGE>
procedures performed without charge for educational, promotional or other
purposes not generating revenues to VVScandinavia shall not be considered a
PRK Procedure for the purposes of this Agreement.
"Incremental PRK Procedure(s)" shall mean PRK Procedures performed at
the VVScandinavia Centers during each of the three Performance Years ended May
31, 1996, May 31, 1997 and May 31, 1998, respectively, as follows:
** For the Performance Year ended May 31, 1996, Incremental PRK
Procedures shall mean the number of such PRK Procedures in excess
of the first eight hundred (800) such PRK Procedures for such
Performance Year;
** For the Performance Year ended May 31, 1997, Incremental PRK
Procedures shall mean the number of such PRK Procedures in excess
of the number of PRK Procedures performed at the VVScandinavia
Centers during the prior Performance Year ended May 31, 1996; and
** For the Performance Year ended May 31, 1998, Incremental PRK
Procedures shall mean the number of such PRK Procedures in excess
of the number of PRK Procedures performed at the VVScandinavia
Centers during the prior Performance Year ended May 31, 1997.
"Gross Royalties" during each Performance Year in the Term of this
Agreement shall mean $100 per Incremental PRK Procedure for such Performance
Year.
"Beneficiary Proportionate Share", as applied to each of the
Beneficiaries, shall mean a percentage which represents the principal amount
of Vista Notes held by such Beneficiary of the aggregate original principal
amount of all the Vista Notes.
2. ROYALTY PAYMENTS AND ACCOUNTING
VVScandinavia shall pay earned royalties to the Beneficiaries during the
Term of this Agreement calculated and payable as follows:
2.1. At the end of each Performance Year during the Term of this
Agreement, VVScandinavia shall calculate the total number of PRK Procedures
performed at VVScandinavia Centers during such Performance Year and the
Incremental PRK Procedures for such Performance Year in accordance with the
definitions contained in this Agreement. The Gross Royalties for such
Performance Year shall then be calculated by multiplying the number of
Incremental PRK Procedures by $100 U.S. funds. The Gross Royalties for such
Performance Year shall then be allocated and paid to the Beneficiaries within
forty-five (45) days after the end of such Performance Year during the Term of
this Agreement in accordance with each Beneficiary Proportionate Share of the
Gross Royalties.
A-2
<PAGE>
2.2. All Gross Royalties payments to the Beneficiaries under this
Agreement shall be paid, at the option of VVScandinavia, in either United
States currency or in currency of the Republic of Sweden converted from United
States dollars at the rate of exchange in effect on the last day of the
Performance Year for which the Gross Royalties were earned. Any taxes
required to be withheld by law from royalty payments shall be withheld by
VVScandinavia and paid to the appropriate authority, and VVScandinavia shall
furnish each of the Beneficiaries with a written statement of such taxes and
evidence of payment, and any other information necessary for the Beneficiaries
to claim appropriate tax credits for such payments.
2.3. VVScandinavia agrees to keep separate and accurate records showing
the number of PRK Procedures performed at each of the VVScandinavia Centers
during the Term of this Agreement. Each of the Beneficiaries and their duly
authorized representatives shall have the right to inspect such records during
reasonable business hours after the end of each Performance Year during the
Term of this Agreement.
2.4. VVScandinavia shall, within thirty (30) days after the close of
each Performance Year during the Term of this Agreement, furnish to the
Beneficiaries a written report showing with accuracy and detail the number of
PRK Procedures performed at each of the VVScandinavia Centers during the last
Performance Year, together with a calculation of the Gross Royalties payable
hereunder for the period covered by such report.
3. REPRESENTATIONS AND WARRANTIES OF VVSCANDINAVIA
VVScandinavia represents and warrants to the Beneficiaries as follows:
3.1. VVScandinavia is duly organized and validly existing as a company
in good standing under the laws of Sweden with corporate power to enter into
this Agreement and to conduct its business as presently conducted.
3.2. This Agreement has been duly authorized, executed and delivered by
VVScandinavia and is a valid and binding agreement enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application to or affecting creditors'
rights generally. VVScandinavia has full power and authority necessary to
enter into this Agreement and to perform its obligations hereunder.
3.3. VVScandinavia has been advised that 51% of its issued share
capital has been pledged as collateral by ConVista Vision BV to secure the
obligations of Vista-Parent under the Vista Notes. VVScandinavia represents
and warrants that ConVista Vision is the registered owned of all of the issued
and outstanding share capital in VVScandinavia, and VVScandinavia has no
reason to believe that the pledge of 51% of VVScandinavia's issued share
capital as collateral to secure the Vista Notes is not a valid and binding
agreement enforceable in accordance with its terms against ConVista Vision BV.
A-3
<PAGE>
3.4. The execution and delivery of this Agreement, the consummation of
the transactions contemplated herein, and the pledge of 51% of VVScandinavia's
issued share capital as collateral to secure the Vista Notes, do not and will
not conflict with or result in a breach by VVScandinavia of any of the terms
or provisions of, or constitute a default under, its charter documents, its
by-laws, any action of its directors or stockholders, or any indenture,
mortgage, deed of trust or other agreement or instrument to which it is a
party or by which it or any of its properties or assets are bound, or any
existing applicable law, rule or regulation or any applicable decree, judgment
or order of any court, regulatory body, administrative agency or other
governmental body having jurisdiction over VVScandinavia or any of its
properties or assets.
4. OTHER PROVISIONS.
4.1. NOTICE. Any notice required or permitted herein shall be in
writing and shall be delivered in person or sent by commercial overnight
courier (such as DHL Express, Federal Express, etc.) with written verification
of receipt or by facsimile telecopy. All notices to VVScandinavia shall be
given to VVScandinavia at the address of its Klara PRK Surgical Center in
Stockholm, Sweden, and all notices to Beneficiaries shall be given to their
last known address. Any party may change its address for receiving notice
given by written notice given to the others named above in the manner provided
by this Section.
4.2. APPLICABLE LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of Sweden, and without
regard to principles of conflicts of law.
4.3. BINDING ARBITRATION AND VENUE; COSTS AND FEES. Any dispute
arising out of or relating to this Agreement and the payment of Gross
Royalties hereunder, or to the breach of this Agreement, shall be resolved by
binding arbitration in Stockholm, Sweden. The parties shall appoint an
independent public accountant that does not perform other services for any of
the parties to resolve such dispute. Fees and expenses of the arbitrator
shall be paid or reimbursed by the party losing such dispute.
4.4. SUCCESSORS AND ASSIGNS; NO VOLUNTARY ASSIGNMENT. This Agreement
shall bind and inure to the benefit of the parties named herein and their
respective successors and assigns. No Beneficiary of this Agreement shall be
entitled to assign its rights under this Agreement without the prior written
consent of VVScandinavia, which consent shall not be unreasonably withheld.
4.5. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof, and supersedes all prior arrangements or understandings, written or
oral, among the parties with respect thereto. This Agreement shall not be
modified except by an instrument in writing signed by duly authorized
representatives of each party.
A-4
<PAGE>
4.6. CAPTIONS. The captions appearing in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement.
IN WITNESS WHEREOF, this Royalty Agreement has been executed by
VVScandinavia as of the day and year first written above.
VISTA VISION SCANDINAVIA A.B.
By: ________________________
Title: _______________________
BENEFICIARIES (to be listed after all Vista Notes have been issued and sold):
Name and Address of Beneficiary Beneficiary Proportionate Share
- ------------------------------- -------------------------------
G. Lennart Perhagen 177,777 of 277,777, or 64%
Quintillion B.V. 100,000 of 277,777, or 36%
A-5
TERM SHEET
Between
JEFFREY DICKSON (J.D.)
and
ATLANTIC CENTRAL ENTERPRISES LTD. (ACE)
(The Parties)
1) The parties agree that they will form a new corporation to be called
First American AMO (FA-AMO).
2) The business of FA-AMO shall be that as described in the business plan
submitted to the ACE CEO on May 21, 1997 by J.D. in Bermuda.
3) ACE agrees to fund FA-AMO to the point at which separate funding is
acquired for FA-AMO, which funding shall be sought immediately.
ACE will fund FA-AMO up to $450,000 prior to any separate outside
funding of FA-AMO, and consistent with a detailed Business Plan
submitted to ACE by J.D. and as periodically revised.
4) The initial market capitalization of FA-AMO will be as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares
Outstanding
-------------
ACE 1,001,000
DICKSON 150,000
SEIDEL 50,000
GRECHNIW 50,000
-----------
1,201,000 (sic)
===========
</TABLE>
<PAGE>
5) The management team will be compensated consistent with the business
plan submitted by J.D. except that J.D. will be paid $10,000 per month
plus an annual bonus paid from a profit sharing plan to be developed.
6) J.D. agrees not to compete with FA-AMO for a period of one year after
severing employment with FA-AMO as long FA-AMO continues to pay J.D. at
the rate of pay enjoyed by J.D. in the year prior to severance.
This Agreement is binding on the parties as a condition of ACE moving forward
with a plan to fund FA-AMO immediately.
Any disputes will be subject to binding arbitration submitted to a recognized
independent Arbitration Board in the Country of Bermuda.
Agreed and Accepted Agreed and Accepted
-------------------------------- ----------------------------
Atlantic Central Enterprises, Ltd. Jeffrey Dickson
Date: ________________________ Date: ____________________
PROMISSORY NOTE
US $138,698.00 Due on Demand
FOR VALUE RECEIVED the undersigned promises to pay on demand to or to
the order of ATLANTIC CENTRAL ENTERPRISES LIMITED ("ACE"), 41 Cedar Avenue,
Hamilton, HM12, Bermuda the principal amount of ONE HUNDRED AND THIRTY EIGHT
THOUSAND SIX HUNDRED AND NINETY EIGHT DOLLARS ($138,698) in lawful money of
the United States of America, and to pay interest at the rate of Ten percent
(10%) per annum calculated annually not in advance, both before and after
default, demand and judgment, on the principal amount and overdue interest, if
any, from time to time remaining unpaid, such interest to accrue from and
including the date hereof and to be payable annually commencing on the 1st day
of October, 1998. Payments shall be applied firstly in payment of unpaid
accrued interest and the balance if any in reduction of principal.
The covenant to pay interest shall not merge on the taking of a judgment
or judgments with respect to any of the obligations herein stipulated for.
This note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the internal laws of the country
of Bermuda applicable to contracts made and to be performed entirely within
such jurisdiction without regard to the principles of conflict of law. Any
action, suit or proceeding in connection with this note may be brought against
ACE in a court of record of Bermuda, ACE hereby consenting and submitting to
the non-exclusive jurisdiction thereof. Service of process may be made upon
ACE, by certified or registered mail, at the address first set forth above, or
at such other address as may be given in writing by ACE in the future.
The Borrower hereby waives demand and presentment for payment, notice of
non-payment, protest, notice of protest, notice of dishonor, bringing of suit
and diligence in taking any action.
DATED at this day of , 1997.
FIRST AMERICAN-AMO, INC.
Per: /s/ Jeffrey D. Dickson c/s
------------------------------
Jeffrey Dickson, President
ATLANTIC CENTRAL ENTERPRISES, LTD.
Hamilton, Bermuda
TERM SHEET BETWEEN
WSM CONSULTANTS, LTD. (WSM)
AND
THE ATLANTIC CENTRAL ENTERPRISES, LTD. (ACE)
(the parties)
1. Ace will form a company to be called www.net Ltd. (Bermuda) (w.net)
which will be 100% owned by ACE.
2. w.net will agree to fund WSM for the following amounts.
(i) $15,000 in the month of August, 1997
and
(ii) The lower of (a) or (b) below:
(a) A maximum of $15,000 per month for 4 months, September 1997 to
December 1997
or
(b) the cash flow shortfall from operations for September, October,
November and December.
(iii) w.net will have the right to continue to fund WSM for the six month
period January 1 through June 30, 1998 on the same basis as 2(ii) above.
W.net will give WSM notice by 11/30/97 if it is going to exercise this
option. The provisions of item 7 below concerning the non-cancellable
right of w.net to force a merger of WSM into w.net will be extended
through 6/30/98 under this scenario.
3. The investment will be witnessed by 10% secured note in WSM and will be
collaterallized by 100% of all assets, current and future, and 100% of
the stock position of WSM owned by Warren Schmidt (WS), the major
shareholder of WSM.
4. The notes will be payable in one year in amounts equal to the funding
plus 10% due on the 12 month anniversary of each monthly funding.
- -----------------------------------------------------------------------------
48 Par La Ville, Suite 615, Hamilton HM 11, Bermuda
<PAGE>
5. w.net will receive 300,000 warrants to acquire WSM Consultants, Ltd.
shares exercisable at .25 on July 2, 1998 or any date whether pre or
post 7/2/98 if a merger has been consummated under the provisions of
items 7 or 8 below then exerciseable simultaneously with the merger.
After July 2 and assuming no merger exercisable at 50 cents a share. The
exercise period at 50 cents will extend through 6/30/2000.
The 300,000 warrants will have an antidilution clause which will protect
w.net against dilution for the period, i.e., number of warrants and
exercise price will be adjusted by dividing $75,000 by the lowest price
that shares are sold for, or issued for in lieu of services or options
granted or warrants issued and with the quotient increasing the number
of warrants issued to w.net. The exercise price will then be adjusted to
that price, if lower.
6. w.net will own and maintain all equipment which it acquires and places
on the premises of WSM operations and will have the right to remove the
same at their discretion.
7. w.net will have the non-cancellable right until January 31, 1998 to
request and cause WSM to trade all of its net assets and operations
(exclusive of any personal or related party liabilities due to current
WSM principals) for 25% of the w.net equity if w.net and/or ACE has
caused at least $750,000 of new funding including the amounts funded in
item 3 to be infused into WSM and/or w.net on a combined basis. If the
option of w.net as outlined in 2(iii) above is exercised, the provisions
of item 7 will be extended through 6/30/1998.
8. Conversely, WSM will have the non-cancellable right until January 31,
1998 to trade all of its net assets and operations (exclusive of any
personal liabilities due to current WSM principals) which right will not
be contingent upon performance criteria. The right of WSM will be
extended through 7/31/98 if w.net exercises its option as outlined in
2(iii).
9. Warren Schmidt and Pat Rooney will take no salary for either WSM or
w.net except out of profits of these operations or after full funding
and/or merger as herein described.
10. WSM and w.net will perform all intercompany work for each other using
existing personnel at no additional cost. W.net will fund on a current
basis the additional personnel necessary to create new business acquired
by w.net and pay WSM 20% over that cost. The definition of cost will be
negotiated on a project by project basis. The intent of the parties is
for cost to represent actual out of pocket expenses.
<PAGE>
11. Upon the merger of WSM and w.net, w.net will give to WSM an option to
acquire 300,000 shares of the newly merged company for $75,000. The
option will have an exercise period through 6/30/2000.
12. WSM has agreed that it would issue an option to T. Tobias for 101,600
shares of its common stock exercisable $101.60 through 6/30/2000.
W.net has agreed that it will issue an option to T. Tobias for 80,000
shares of its common stock exercisable at 25 cents per share through
6/30/2000.
Both options set will be issued or granted only if a merger of WSM and
w.net is consummated.
13. The transaction herein contemplated will cause the following
capitalizations to result for WSM and w.net.
<TABLE>
<CAPTION>
NAME WSM WWW.net ADJUSTMENTS %
<S> <C> <C> <C> <C> <C>
--------- -------- --------- -----
Warren Schmidt 1,518,400 +300,000 1,818,400 22.3
Employee and Investors 80,500 80,500 1.0
---------
1,580,500
Option to Tobias 101,600 +80,000 181,600 2.5
---------
1,700,500
Option to WWW.net 300,000 (300,000)
---------
2,000,000 2,000,000
Shares of WWW.net
owned by ACE 6,000,000 (80,000) 5,920,000 74%
--------- -------- --------- ----
8,000,000 0 8,000,000 100%
========= ======== ========= ====
</TABLE>
The conditions herein presented represent the understanding of the parties.
Any changes shall be made and acknowledged by the parties in writing.
<TABLE>
<S> <C>
Agreed and accepted Agreed and accepted
/s/ Warren Schmidt /s/ Patrick J. Rooney
- ------------------------------ -----------------------------
WSM, Consultants Atlantic Central Enterprises, Ltd.
Warren Schmidt Patrick J. Rooney
CEO CEO
8/18/97 8/18/97
- ------------------------------ -----------------------------
Date Date
</TABLE>
Rev-96d VISTA TECHNOLOGIES INC.
STOCK PURCHASE AGREEMENT
200,000 shares of Common Stock, par value $0.005 per share
~~~~~~~~~~~~~~~~~~~~~~~~~~~
THE SECURITIES OFFERED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). ACCORDINGLY, NO RESALE OR OTHER TRANSFER
OF SUCH SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER HAS RECEIVED
AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACT.
All references to Common Stock of Vista Technologies Inc. in this Agreement
are after giving effect to a one (1) for five (5) reverse stock split effected
with respect to its authorized and outstanding common stock pursuant to a
Certificate of Amendment recorded with the Secretary of State of Nevada on
September 12, 1995.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Vista Technologies Inc.
126 E. 56th Street, 3rd Floor
New York, NY 10022
1. SUBSCRIPTION TO SHARES. PHARMA PATCH PLC, a public limited company
organized under the laws of the Republic of Ireland with its principal offices
at Pharma Patch PLC, 15-16 FitzWilliam Place, Dublin 2, Ireland (herein called
"Pharma Patch") hereby subscribes for the purchase of 200,000 shares of the
Common Stock, par value $0.005 per share, in Vista Technologies Inc., a Nevada
corporation ("VISTA"), for the account of the Foreign Investor at a purchase
price of Five Hundred Thousand Dollars ($500,000.00) United States funds,
payable in cash on March 1, 1996.
2. REPRESENTATIONS AND WARRANTIES OF PHARMA PATCH. In connection
with this Agreement and the transactions contemplated herein, Pharma Patch
represents and warrants to VISTA as follows:
2.1. Pharma Patch is duly organized and validly existing as a public
limited company under the laws of the Republic of Ireland. Pharma Patch
acknowledges that its chief executive officer is a director of VISTA and that
Pharma Patch is familiar with the business, financial condition and plan of
operations of VISTA.
Stock Purchase Agreement - 1 -
<PAGE>
2.2. Pharma Patch acknowledges that the VISTA Common Stock purchased
hereunder has not been registered under the U.S. Securities Act of 1933, as
amended ("Securities Act") or qualified under applicable state securities laws
and that the transferability thereof is restricted by the registration
provisions of the Securities Act as well as such state laws. Based upon the
representations and agreements being made by Pharma Patch herein, the VISTA
Common Stock is being sold pursuant to an exemption from such registration
provided by Section 4(2) of the Securities Act for transactions not involving
a public offering. Pharma Patch understands that the certificates
representing the VISTA Common Stock will bear a legend indicating that
transfer of these securities is restricted by reason of the fact that they
have not been so registered.
Pharma Patch represents that it is acquiring the Common Stock for
its own account, for investment purposes only, and not with a view to resale
or other distribution thereof, nor with the intention of selling, transferring
or otherwise disposing of all or any part of such securities based upon any
particular event or circumstance except upon full compliance with all
applicable provisions of the Securities Act. Pharma Patch further understands
and agrees that the VISTA Common Stock may be sold only if subsequently
registered under the Securities Act and qualified under any applicable state
securities laws or, in the opinion of counsel satisfactory to VISTA, an
exemption from such registration and qualification is available, and that any
routine sales of securities made in reliance upon Rule 144 promulgated by the
Commission can be made only in the amounts set forth in and pursuant to the
other terms and conditions, including applicable holding periods, of that
Rule.
2.3. Pharma Patch has sufficient knowledge and experience of financial
and business matters so that it is able to evaluate the relative merits and
risks of purchasing the VISTA Common Stock. Pharma Patch is aware that an
investment in the VISTA Common Stock is a speculative investment, is not
liquid, and involves a high degree of risk of loss. Pharma Patch acknowledges
that VISTA has made available to Pharma Patch, prior to this subscription, the
opportunity to ask questions of, and receive written answers from, authorized
representatives and executive officers of VISTA concerning the operations and
financial condition of VISTA and its consolidated subsidiaries, and any other
relevant matters, and to obtain any additional written information, to the
extent that VISTA possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information provided by VISTA to Pharma Patch.
2.4. This Agreement has been duly authorized, executed and delivered by
Pharma Patch and is a valid and binding agreement enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general application to or
affecting creditors' rights generally and to general principles of equity.
Pharma Patch has full power and authority necessary to enter into this
Agreement and to perform its obligations hereunder.
2.5. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated herein, do not and will not conflict with or
result in a breach by Pharma Patch of any of the terms or provisions of, or
constitute a default under, its charter documents, its memorandum or articles
of association or incorporation, its by-laws, any action of its directors or
shareholders, or any indenture, mortgage, deed of trust or other agreement or
instrument to which Pharma Patch is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court,
regulatory body, administrative agency or other governmental body having
jurisdiction over Pharma Patch.
Stock Purchase Agreement - 2 -
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF VISTA.
By its acceptance of this Agreement, VISTA represents and warrants to
Pharma Patch as follows:
3.1. VISTA is duly incorporated and validly existing as a corporation
in good standing under the laws of the State of Nevada with corporate power to
enter into this Agreement and to conduct its business as presently conducted.
3.2. VISTA's Common Stock is a class of securities registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"). VISTA has filed all reports and documents required to be filed
pursuant to the Exchange Act preceding the date hereof, except that VISTA is
currently delinquent in the filing of its Form 10-KSB Report for the fiscal
year ended March 31, 1995 and its quarterly Form 10-QSB Reports for the
periods ended June 30, 1995 and September 30, 1995.
3.3. VISTA has made available to Pharma Patch copies of audited
consolidated financial statements of VISTA and its consolidated subsidiaries
for VISTA's fiscal year ended March 31, 1995 and preliminary copies of interim
unaudited consolidated financial statements of VISTA and its consolidated
subsidiaries for the three months ended June 30, 1995 and for the three months
and six months periods ended September 30, 1995, all of which together are
herein called the "Vista Financial Statements". The Vista Financial
Statements are: (a) accurate, correct and complete in all material respects;
(b) in accordance with the books of account and records of VISTA and its
consolidated subsidiaries; (c) fair presentations of the financial condition
and results of operations of VISTA and its consolidated subsidiaries as of the
dates and for the periods indicated therein; and (d) prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods indicated. Since September 30, 1995,
there has not been (a) any material adverse change in the financial condition,
assets, liabilities, personnel or business of VISTA and its consolidated
subsidiaries from that reflected in the Vista Financial Statements as of
September 30, 1995; (b) any damage, destruction or loss, whether or not
covered by insurance, materially adversely affecting VISTA or its consolidated
subsidiaries; (c) any event or condition or series of events or conditions
which could, individually or in the aggregate, reasonably be expected to have
a material adverse effect on VISTA or its consolidated subsidiaries; or (d)
any development which could or will have a material adverse effect on VISTA or
its consolidated subsidiaries or their business operations. Pharma Patch
acknowledges that VISTA has terminated and rescinded all executory obligations
under its prior agreements with Medical Development Resources, Inc. ("MDRI")
and certain of its stockholders, has written down to zero VISTA's prior
investments in MDRI and its subsidiaries KMI I, Inc. and Micra Instruments
Limited, and that MDRI and its subsidiaries are not included as consolidated
subsidiaries of VISTA for purposes of the foregoing representations relating
to the Vista Financial Statements as of September 30, 1995.
3.3. The VISTA Common Stock to be sold to Pharma Patch hereunder, when
issued and delivered upon receipt of the purchase price, will be duly and
validly authorized and issued, fully paid and nonassessable securities of
VISTA and will not subject the holders thereof to personal liability by reason
of being such holders.
3.4. This Agreement has been duly authorized, executed and delivered
by VISTA and is a valid and binding agreement enforceable in accordance with
its terms, subject only to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general application to or
affecting creditors' rights generally and to general principles of equity.
VISTA has full power and authority necessary to enter into this Agreement and
to perform its obligations hereunder.
Stock Purchase Agreement - 3 -
<PAGE>
3.5. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated herein, do not and will not
conflict with or result in a breach by VISTA of any of the terms or provisions
of, or constitute a default under, its articles of incorporation, its by-laws,
any action of its directors or stockholders, or any indenture, mortgage, deed
of trust or other agreement or instrument to which it is a party or by which
it or any of its properties or assets are bound, or any existing applicable
law, rule or regulation or any applicable decree, judgment or order of any
court, regulatory body, administrative agency or other governmental body
having jurisdiction over the undersigned or any of its properties or assets.
3.6. REGISTRATION RIGHTS. In the event the Common Stock sold to
Pharma Patch hereunder has not been registered by VISTA under the Securities
Act prior to September 30, 1996 by a registration statement then effective
under the Securities Act, at any time after September 30, 1996, Pharma Patch
may make a written request for the registration of such Common Stock under the
Securities Act (a "Demand Registration"). Notwithstanding the foregoing
provisions of this Section 3.6:
(a) VISTA shall have no obligation to register Common Stock for the account
of Pharma Patch at any time during a period of twelve (12) months
following any notice in which Pharma Patch was offered the opportunity
of participating in a registration statement which has become effective
under the Securities Act.
(b) After March 31, 1997, VISTA at its discretion shall have no obligation
during any fiscal year of VISTA thereafter to register Common Stock for
the account of Pharma Patch unless the demand for registration is
received by VISTA within a period of four (4) months following the
beginning of such VISTA fiscal year on April 1.
(c) VISTA shall have no obligation to register Common Stock for the account
of Pharma Patch after one (1) registration statement has been demanded
under this Section 3.6 which has become effective under the Securities
Act.
(d) VISTA shall have no obligation to register Common Stock for the account
of Pharma Patch which may then be sold by Pharma Patch in accordance
with the provisions of Rule 144 promulgated under the Securities Act.
3.6.1. Upon receipt of any such demand, VISTA will use its
best efforts to effect such Demand Registration and will maintain the
prospectus included in any registration statement which may be so filed
current for a period of at least nine (9) months subsequent to the effective
date of such registration statement.
3.6.2. Any request for a Demand Registration under Section
3.6 shall specify the aggregate number of shares of Common Stock proposed to
be sold and shall also specify the intended method of disposition thereof and
any other information within the unique knowledge and control of Pharma Patch
necessary for VISTA to comply with applicable registration requirements of the
Securities Act.
4. OTHER TERMS AND AGREEMENTS.
4.1. The parties hereto acknowledge that Murray B. Watson and Malcolm
J. Rowe are each directors of both Pharma Patch and VISTA and that G. Lennart
Perlhagen, a director of Pharma Patch, was formerly a director and the chief
executive officer of VISTA. Each of the parties hereto waives any claim or
cause of action that may exist as a result of any conflicts of interest
arising from such common director positions and the equity interests and
compensation arrangements of such individuals with the parties hereto.
Stock Purchase Agreement - 4 -
<PAGE>
Each of Pharma Patch and VISTA further represent and warrant to the other that
full disclosure of such relationships has been made to all members of their
respective boards of directors and that the transactions contemplated by this
Agreement have been authorized and approved by all directors of such party who
are not members of the other party's board of directors.
4.2. Each of the undersigned agrees to pay its own expenses incident to
the performance of its obligations hereunder.
4.3. Each of the undersigned agree that this Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, and without regard to principles of conflicts of law.
4.4. This Agreement may be executed in one or more counterparts and it
is not necessary that the signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. The headings of the sections of this Agreement have been
inserted for convenience of reference only, and shall not be deemed to be a
part of this Agreement.
4.5. Time shall be of the essence of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the respective dates set forth below.
March 1, 1996 PHARMA PATCH PLC
By: /s/ Murray D. Watson
-----------------------
Murray B. Watson,
President and Chief Executive Officer
March 1, 1996 VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
----------------------
Thomas A. Schultz,
President and Chief Executive Officer
Stock Purchase Agreement - 5 -
Rev4
NEITHER THIS AGREEMENT NOR ANY SECURITIES WHICH ARE TO BE EXCHANGED HEREUNDER
HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"ACT") OR THE UNITED STATES TRUST INDENTURE ACT OF 1939. ACCORDINGLY, NO
TRANSFER OF SUCH SECURITIES OR ANY INTEREST THEREIN IN THE MARKETS OF THE
UNITED STATES MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT UNLESS THE ISSUER OF THE SECURITIES HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACT.
Unless otherwise stated, all dollar references in this Agreement refer to
United States currency.
AGREEMENT
THIS AGREEMENT (the "Agreement"), made on the 1st day of March, 1996, is
by and among:
PHARMA PATCH PLC, a public limited company of the Republic of Ireland
(herein called "PHARMA PATCH") with its principal office at 15-16
FitzWilliam Place, Dublin 2, Ireland;
VISTA TECHNOLOGIES INC., a body corporation of the State of Nevada
(herein called "VISTA"), having its principal office at 126 E. 56th
Street, 2nd Floor, New York, New York, United States of America 10022.
RECITALS:
WHEREAS, the parties have previously entered into and executed that
certain Stock Purchase Agreement dated March 1, 1996 providing for the
purchase by PHARMA PATCH from VISTA of 200,000 newly-issued shares of VISTA
common stock for a cash purchase price of $500,000;
WHEREAS, under separate agreements with certain shareholders of VISTA,
PHARMA PATCH has agreed to acquire 900,000 shares of VISTA common stock in
exchange for 4,500,000 American Depositary Receipts evidencing an aggregate of
4,500,000 newly-issued ordinary shares of PHARMA PATCH;
WHEREAS, PHARMA PATCH owns of record and beneficially shares of the
common capital stock in TECHNICAL CHEMICALS & PRODUCTS, INC., a publicly-
traded corporation ("TCPI");
WHEREAS, VISTA desires to obtaining additional equity financing to
sustain its corporate operations and to support VISTA's program of organizing,
developing and sponsoring additional companies to provide laser vision
correction equipment and related services in the United States and Canada
through independently financed regional joint venture enterprises in which
VISTA will hold an equity interest (the "VLC Affiliated Companies");
<PAGE>
WHEREAS, PHARMA PATCH desires to make additional equity investments in
VISTA with a view to acquiring a controlling interest in VISTA, all upon the
terms and conditions set forth in this Exchange Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
mutually covenant, promise and agree as follows:
1. FINANCING TRANSACTIONS AND EXCHANGES OF SECURITIES.
1.1. CLOSING. The closing for the consummation of the transactions
contemplated by this Agreement ("Closing") shall occur on March 29, 1996 (the
"Closing Date") and shall take place at the offices of PHARMA PATCH at 15-16
FitzWilliam Place, Dublin 2, Ireland, unless another time and place is
mutually agreed to by the parties. Upon the Closing, all the conditions set
forth in this Agreement shall have been satisfied except to the extent any
such conditions shall have been expressly waived in writing by all of the
parties hereto.
1.2. DELIVERY OF VISTA SHARES TO PHARMA PATCH. On the Closing Date,
VISTA shall issue and deliver to PHARMA PATCH certificates evidencing
2,060,000 newly-issued shares of VISTA common stock (the "Vista SHARES")
registered in the name of PHARMA PATCH. The parties acknowledge and agree
that the Vista SHARES are valued for purposes of this Agreement at $2.50 per
share, for a total of $5,150,000.
1.3. DELIVERY OF VISTA WARRANTS TO PHARMA PATCH. On the Closing Date,
VISTA shall issue and deliver to PHARMA PATCH a certificate evidencing 500,000
VISTA Class C common stock purchase warrants, in substantially the form of
EXHIBIT A attached hereto (the "Vista WARRANTS"), registered in the name of
PHARMA PATCH. The issuance of the Vista WARRANTS is additional consideration
for the transactions hereunder, and no separate value has been allocated
thereto by the parties.
1.4. DELIVERY OF PHARMA PATCH NOTE TO VISTA. On the Closing Date,
PHARMA PATCH shall execute and deliver to VISTA a promissory note payable to
VISTA in the principal amount of $750,000 due in six months and without
bearing interest during such six month period, in substantially the form of
EXHIBIT B attached hereto (the "Pharma Patch NOTE"), registered in the name of
VISTA. The parties acknowledge and agree that the Pharma Patch NOTE is
valued for purposes of this Agreement at its principal amount of $750,000.
1.5. DELIVERY OF TCPI SHARES TO VISTA. On the Closing Date, PHARMA
PATCH shall endorse and deliver to VISTA certificates evidencing an aggregate
of 200,000 shares of TCPI common stock (the "TCPI SHARES"), each duly endorsed
in favor of PHARMA PATCH with medallion signature guarantee and accompanied by
a certificate in substantially the form of EXHIBIT C attached hereto
confirming the authority of the officer, managing director or other agent
executing the aforesaid endorsement. The parties acknowledge and agree that
the TCPI SHARES are valued for purposes of this Agreement at $22.00 per share,
for a total of $4,400,000.
2
<PAGE>
1.6. REGISTRATION RIGHTS AGREEMENT. On the Closing Date, VISTA shall
execute and deliver to PHARMA PATCH a Registration Rights Agreement in
substantially the form of EXHIBIT D attached hereto.
2. SIX-MONTH OPTION TO PHARMA PATCH and EQUITABLE ADJUSTMENT PROVISION
2.1. SIX-MONTH OPTION TO PHARMA PATCH. As additional consideration for
the transactions provided by this Agreement, VISTA hereby grants PHARMA PATCH
an option to purchase up to an additional 250,000 shares of VISTA common stock
at an option exercise price of $2.50 per share (the "$2.50 Option"). The
$2.50 Option may be exercised by PHARMA at any time, or from time to time, at
any time during the six month period ending September 30, 1996 for any portion
of all of the VISTA shares covered thereby by providing written notice of
PHARMA PATCH's election to exercise accompanied by payment in cash to VISTA of
the applicable option exercise price. Within five business days thereafter,
VISTA shall issue and deliver to PHARMA PATCH certificates evidencing the
shares of VISTA common stock purchased pursuant to such option exercise.
2.2. EQUITABLE ADJUSTMENT FOR CHANGES IN CAPITALIZATION. If there
shall be any stock split, reverse stock split, stock dividend, merger or
similar reorganization, recapitalization, reclassification or other
transaction after the date of this Agreement affecting generally the common
stock of VISTA or the common stock of TCPI (excluding, however, that certain
1-for-5 reverse stock split as to VISTA common stock approved by its
stockholders in 1995), or any extraordinary or stock dividend hereafter paid
on or with respect to the common stock of VISTA or TCPI prior to the date that
such shares are delivered to the parties to this Agreement, appropriate and
equitable adjustments shall be made hereunder with respect to the number of
shares of VISTA common stock or TCPI common stock delivered under Section 1
and Section 2 of this Agreement such that the aggregate relative rights and
obligations of the parties hereto shall not be adversely affected by any such
action.
3. U.S. SECURITIES LAWS.
All of the parties hereto acknowledge that the common stock of VISTA
and the common stock of TCPI are traded in the United States securities
markets. Neither the Vista SHARES, the Vista WARRANTS, the Pharma Patch NOTE
nor the TCPI SHARES to be exchanged hereunder have been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act") or qualified
under the Trust Indenture Act of 1939, as amended (the "Indenture Act"). Each
party acknowledges that the exchange of securities hereunder is among
sophisticated investors who are acquiring such securities for their own
account for investment, and not with a view to the resale or other
distribution thereof, in connection with a private placement offer, sale and
exchange relating to such securities. Each party acknowledges it is familiar
with and understands the terms of applicable securities laws of the United
States, and has had the opportunity to consult with its legal counsel
concerning such laws. Accordingly, each party acknowledges that the
subsequent transfer of all securities covered by this Agreement within the
United States markets or otherwise within the jurisdiction of the United
States is restricted by the Securities Act and/or the Indenture Act as well as
state laws within the United States.
3
<PAGE>
4. VISTA ACKNOWLEDGEMENT OF CONTRACTUAL "LOCK-UP" PROVISIONS AS TO THE TCPI
SHARES
4.1. VISTA acknowledges that the TCPI SHARES to be transferred to VISTA
under the provisions of Section 1.5 of this Agreement are subject to certain
contractual restrictions on transfer under agreements to which PHARMA PATCH is
a party arising as a result of PHARMA PATCH's acquisition of TCPI common stock
and amendments thereto concerning a proposed underwriting of a portion of such
shares, copies of which have been delivered to VISTA (collectively, the
"Lock-Up Agreements"). VISTA covenants and agrees that it will observe all of
such contractual restrictions applicable to the TCPI SHARES as if VISTA had
been a party to such "Lock-Up Agreements" in the name, place and stead of
PHARMA PATCH.
5. VISTA TAG-ALONG RIGHTS AS TO PHARMA PATCH SALE OF TCPI COMMON STOCK.
5.1. The parties acknowledge that PHARMA PATCH proposes to sell a
portion of the TCPI shares of common stock currently owned by PHARMA PATCH,
exclusive of the TCPI SHARES to be transferred to VISTA under Section 1.5 of
this Agreement, in a pending proposed underwritten public offering of TCPI
securities. The parties acknowledge and agree that the provisions of Section
5.2 of this Agreement shall not apply to any shares of TCPI common stock sold
for the account of PHARMA PATCH upon the closing of the aforesaid proposed
underwritten public offering of TCPI securities or upon the closing of any
over-allotment option relating thereto. However, PHARMA PATCH covenants and
agrees it will reserve from a portion of such proceeds an amount necessary to
discharge in full the unpaid obligations of PHARMA PATCH under the Pharma
Patch NOTE and shall promptly pay the same to VISTA whether at, before, or
after the original maturity date thereof.
5.2. Subject to Section 5.1 above, in the event PHARMA PATCH hereafter
proposes to sell for its own account shares of TCPI common stock owned by
PHARMA PATCH, whether in a private transaction or pursuant to a subsequent
underwritten or secondary public offering of TCPI common stock for the account
of PHARMA PATCH, then VISTA shall have the right to participate (the
"Tag-Along Right") in such sale or sales with respect to any of the TCPI
SHARES then held by VISTA on a pari passu basis (i.e., for up to 50% of the
total shares of TCPI common stock sold for the combined accounts of PHARMA
PATCH and VISTA) for the same consideration per share and otherwise on the
same terms and conditions as PHARMA PATCH agrees to sell its TCPI common
shares. A distribution of TCPI common stock to the shareholders of PHARMA
PATCH in a transaction of the type contemplated by Section 9.6 of this
Agreement shall not be deemed a sale of TCPI common stock for the purposes of
this Section 5.2. In the event rights of sale for which a Tag-Along Right may
exist are not assignable by PHARMA PATCH to VISTA, then PHARMA PATCH agrees to
sell for its own account a sufficient number of TCPI common shares to account
for the Tag-Along Right and VISTA shall transfer an equal number of TCPI
common shares to PHARMA PATCH against payment to VISTA of its share from net
proceeds from such sale. If circumstances occur which give rise to a
Tag-Along Right, then PHARMA PATCH shall give written notice thereof to VISTA
providing all particulars of the proposed sale of TCPI common stock and
advising VISTA of its Tag-Along Right. VISTA may elect to exercise its Tag-
Along Right by written notice to PHARMA PATCH within ten (10) business days
thereafter and shall state the number of TCPI SHARES that VISTA wishes to
sell, up to the maximum
4
<PAGE>
number permitted (being its pari passu amount referred to above and as
disclosed in the notice to given to VISTA by PHARMA PATCH). If VISTA gives
written notice indicating that it wishes to participate in the proposed sale,
VISTA shall be obligated to sell that number of TCPI SHARES specified in its
written acceptance notice upon the same terms and conditions as PHARMA PATCH
is selling shares of TCPI common stock for its own account conditional upon,
and contemporaneous with, completion of the transaction of purchase and sale.
6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF VISTA.
VISTA hereby represents and warrants to PHARMA PATCH that:
6.1. ORGANIZATION AND AUTHORITY. VISTA is a corporation duly organ-
ized, validly existing and in good standing under the laws of the State of
Nevada, with all requisite power and authority to own its property and assets,
to carry on its business as it is now being conducted and to enter into and
execute this Agreement and perform its obligations hereunder. All acts or
proceedings required to be taken by VISTA to authorize the execution and
delivery of this Agreement by VISTA and the performance by VISTA in accordance
with its obligations under this Agreement have been duly and properly taken.
6.2. VALIDITY. This Agreement has been, and the documents and
instruments to be delivered and delivered at the Closing hereunder by VISTA
will be, duly executed and delivered and constitute lawful, valid and binding
obligations of VISTA enforceable in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally
and by general equitable principles. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in the creation of any lien, charge or encumbrance of any kind or
the acceleration of any indebtedness or other obligation of VISTA and are not
prohibited by, do not violate or conflict with any provision of, and do not
constitute a default under or a breach of (a) the charter or by-laws of VISTA,
(b) any note, bond, indenture, contract, agreement, permit, license or other
instrument to which VISTA is a party or by which any of its assets are bound,
(c) any order, writ, injunction, decree or judgment of any court or government
agency, or (d) any law, rule or regulation applicable to VISTA. No approval,
authorization, registration, consent, order or other action of or filing with
any person, including any court, administrative agency or other government
authority, is required for the execution and delivery by VISTA of this
Agreement or the consummation by VISTA of the transactions contemplated hereby
or the performance by VISTA of its obligations hereunder.
6.3. SEC REPORTING. VISTA's common stock is a class of securities
registered under Section 12(g) of the U.S. Securities Exchange Act of 1934
("Exchange Act"), and VISTA has filed all reports and documents required to be
filed pursuant to the Exchange Act for a period of at least twelve months
preceding the date hereof. VISTA has furnished to PHARMA PATCH copies of (i)
VISTA's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1995
and the exhibits thereto, (ii) VISTA's Quarterly Reports on Form 10-QSB for
the Quarterly Periods ended June 30, 1995, September 30, 1995 and December 31,
1995 and the exhibits
5
<PAGE>
thereto, and (iii) VISTA's proxy statement for its special meeting of
stockholders called for June 30, 1995; all of which are herein called the
"VISTA SEC Reports".
Each of the VISTA SEC Reports at the time the same was filed with
the Securities and Exchange Commission complied with the Exchange Act in all
material respects. None of the VISTA SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. VISTA has
delivered to PHARMA PATCH a correct and complete copy of each of the VISTA SEC
Reports (together with all material exhibits and schedules thereto and as
amended to date).
6.4. SUBSIDIARIES. Except as disclosed in the VISTA SEC Reports and
shares that VISTA intends to acquire in the VLC Affiliated Companies, VISTA
does not own stock or have any equity investment or other interest in, does
not have the right to acquire any such interest, and does not control,
directly or indirectly, any corporation, association, partnership, joint
venture or other entity and has not had such an ownership or control
relationship with any such entity during the three years preceding this
Agreement. Each subsidiary disclosed in the VISTA SEC Reports is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has full power and authority
and all requisite rights, licenses, permits and franchises to own, lease and
operate its assets and to carry out the business in which it is engaged
(except that VISTA makes no representations or warranties as to Medical
Development Resources, Inc. and its subsidiaries). The percentage ownership
held by VISTA in each such subsidiary is accurately stated in the VISTA SEC
Reports (except that VISTA makes no representations or warranties as to
Medical Development Resources, Inc. and its subsidiaries). The parties
understand and agree that references hereinafter to VISTA's "consolidated
operating subsidiaries" do not include Medical Development Resources, Inc. and
its subsidiaries.
6.5. CAPITALIZATION. The authorized capital stock of VISTA consists
of 15,000,000 shares of VISTA common stock, par value $.001 per share, and
15,000,000 shares of VISTA preferred stock, par value $.001 per share. As of
the date of this Agreement, and after giving effect to (i) the 1-for-5
reverse stock split as to its common stock approved by stockholders in 1995,
(ii) the issuance of 200,000 shares to Vista Laser Centers of Michigan, Inc.
in November 1995, (iii) the issuance of 1,000,000 shares of common stock
authorized by its board of directors in December 1995, (iv) the exercise of a
put option as to 4,000 shares by Drago A. Cerchiari and (v) the issuance of
200,000 shares to PHARMA PATCH pursuant to the Stock Purchase Agreement dated
March 1, 1996, there are 2,846,104 shares of VISTA common stock and no shares
of VISTA preferred stock issued and outstanding. All of the issued and
outstanding shares of VISTA common stock are, and all Vista SHARES and Vista
WARRANTS to be issued in accordance with this Agreement upon receipt of the
consideration therefor will be, duly authorized, validly issued, fully paid
and nonassessable, and were and will not be issued in violation of any
preemptive, subscription or other right of any person to acquire securities of
VISTA. VISTA has reserved a sufficient number of its shares of common stock
to provide for the exercise of the Vista WARRANTS to be issued to PHARMA PATCH
hereunder and the exercise of the $2.50 Option granted to PHARMA PATCH
hereunder.
6
<PAGE>
Except for (a) 677,960 VISTA Class A common stock purchase
warrants, (b) 31,000 VISTA Class B common stock purchase warrants, (c)
outstanding stock options to purchase up to 8,000 shares of VISTA common stock
under its Restricted Stock option Plan, (d) outstanding stock options to
purchase up to 1,697,000 shares of VISTA common stock under its 1994 Stock
Option Plan, (e) shares of VISTA common stock reserved for conversion at $5.00
per share for up to $277,777 in principal amount of, plus any accrued interest
on, its 12% notes due on June 15, 1998, and (f) shares of VISTA common stock
reserved for exchange at $1.25 per share for up to $100,000 in principal
amount, plus any accrued interest on, certain debentures issued by Micra
Instruments Limited to Quintillion B.V., there are no outstanding
subscriptions, options, convertible or exchangeable securities, preemptive
rights, warrants, calls, agreements, arrangements or other rights (other than
this Agreement and the Stock Purchase Agreement dated March 1, 1996 between
the parties) relating to the capital stock of VISTA or other obligation or
commitment of VISTA to issue or transfer any shares of capital stock, except:
(1) VISTA proposes to issue additional shares of its common stock to VLC
Affiliated Companies in exchange for an equity interest in such VLC Affiliated
Companies; (2) VISTA proposes to offer, issue and sell additional shares of
its common stock or other securities for cash in one or more future private
placements and/or public offerings; and (3) VISTA proposes to offer to
exchange one share of VISTA common stock for every four Class A and Class B
common stock purchase warrants of VISTA currently outstanding.
There are no voting trusts or other agreements, arrangements or
understandings applicable to the exercise of voting or any other rights with
respect to the capital stock of VISTA except that VISTA proposes to obtain
proxies in favor of its board of directors to vote shares of VISTA common
stock issued and issuable to the VLC Affiliated Companies. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to VISTA.
6.6. FINANCIAL STATEMENTS AND NO ADVERSE CHANGE.
6.6.1. FINANCIAL STATEMENTS. The audited consolidated
financial statements of VISTA for the fiscal year ended March 31, 1995, and
for the nine months ended December 31, 1995 set forth in the VISTA SEC Reports
(the "VISTA Financial Statements") are: (a) accurate, correct and complete
in all material respects; (b) in accordance with the books of account and
records of VISTA and its consolidated operating subsidiaries; (c) fair
presentations of the financial condition and results of operations of VISTA
and its consolidated operating subsidiaries as of the dates and for the
periods indicated above; and (d) prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated except as described in footnotes to the VISTA Financial
Statements. Except to the extent reflected on the consolidated balance sheets
and notes thereto included in the VISTA Financial Statements and continuing
obligations in the ordinary course of business under
7
<PAGE>
agreements to which VISTA and its consolidated operating subsidiaries are
parties, VISTA and its consolidated operating subsidiaries do not have and
will not have as of Closing Date, any indebtedness, duty, responsibility,
liability or obligation of any nature, whether absolute, accrued, contingent
or otherwise except as disclosed in the VISTA SEC Reports.
6.6.2. INTERIM CHANGE. Except for continuing losses from
operations in the ordinary course of their business, since December 31, 1995
there has not been (a) any material adverse change in the financial condition,
assets, liabilities, personnel or business of VISTA and its consolidated
operating subsidiaries or their relationships with ophthalmologists, lenders,
lessors or others; (b) any damage, destruction or loss, whether or not covered
by insurance, materially adversely affecting VISTA and its consolidated
operating subsidiaries; or (c) any event or condition or series of events or
conditions which could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on VISTA and its consolidated
operating subsidiaries.
6.7. TITLE TO ASSETS. VISTA and its consolidated operating
subsidiaries are the legal and equitable owner of all right, title and
interest in and has good and marketable title to all of the assets which they
purport to own and which are reflected on the last dated balance sheet
included in the VISTA Financial Statements and acquired in the ordinary course
of business subsequent to December 31, 1995. None of the assets which VISTA
and its consolidated operating subsidiaries purport to own are subject to (a)
any title defect or objection; (b) any contract of lease, license or sale,
except for equipment acquired through installment purchase or lease financing
arrangements; (c) any security interest except for equipment acquired through
installment purchase or lease financing arrangements; (d) any royalty or
commission arrangement except royalties payable by Vista Vision Scandinavia AB
to holders of VISTA's 12% notes in the principal amount of $277,777,
commissions payable in the ordinary course of business and royalties to
equipment suppliers of excimer lasers; or (e) any claim, covenant or
restriction. Such assets are in good operating condition and repair, taken as
a whole (reasonable wear and tear excepted), are suitable for the purposes for
which they are presently being used, and are adequate to meet all present
requirements of the business of VISTA and its consolidated operating
subsidiaries as currently conducted. VISTA and its operating subsidiaries do
not own any real property.
6.8. LEGAL PROCEEDINGS. Except as set forth in the VISTA SEC Reports,
VISTA and its consolidated operating subsidiaries are not engaged in or a
party to or threatened with any material action, suit, proceeding, complaint,
charge, investigation or arbitration or other method of settling disputes or
disagreements, and neither the VISTA nor its operating subsidiaries knows,
anticipates or has notice of any reasonable basis for any such action.
Neither VISTA nor any of its operating subsidiaries has received notice of any
investigation threatened or contemplated by any government or regulatory
authority, including those involving the safety of products, the working
conditions of employees, employment practices or policies, or compliance with
environmental regulations. Neither VISTA and its operating subsidiaries nor
any of their assets is subject to any judgment, order, writ, injunction or
decree of any court or any government agency or any arbitrator.
8
<PAGE>
6.9. COMPLIANCE WITH LAW. To the best of VISTA's knowledge, VISTA and
its consolidated operating subsidiaries and their business and assets conform
to all applicable statutes, codes, ordinances, licensing requirements, laws,
rules and regulations. To the best of VISTA's knowledge, VISTA and its
consolidated operating subsidiaries have complied with all statutes, codes,
ordinances, licensing requirements, laws, rules, regulations, decrees, awards
or orders applicable to their business or operations, including those relating
to employment, environmental matters, employee benefits, the service,
marketing, sale and distribution of products and services, labeling of
products, trade regulation, antitrust, warranties and control of foreign
exchange; and to the best of VISTA's knowledge, there is not and will not be
any liability arising from or related to any past violations thereof. No
notice from any governmental body or other person of any violation of any
statute, code, ordinance, law, rule or regulation or requiring or calling
attention to the necessity of any repairs, installation or alteration in
connection with the business or assets of VISTA and its consolidated operating
subsidiaries has been served, and neither VISTA nor its operating subsidiaries
knows of any meritorious basis therefor.
6.10. INVESTMENT COMPANY ACT OF 1940. VISTA is not an investment
company registered or required to register as such under the United States
Investment Company Act of 1940.
6.11. INVESTMENT INTENT. VISTA is acquiring the Pharma Patch NOTE and
the TCPI SHARES hereunder for its own account for investment, and not with a
view to the resale or other distribution of such securities. VISTA
acknowledges that if any subsequent transfer of the TCPI SHARES is to be made
in reliance upon an exemption under the Securities Act of 1933, the issuer of
the securities being so transferred may require an opinion of counsel
satisfactory to the issuer that such transfer may be made pursuant to an
applicable exemption under the Securities Act of 1933; VISTA further
acknowledges that, so long as appropriate, a legend similar to the following
may appear on the certificates representing the TCPI SHARES: "These
securities have not been registered under the Securities Act of 1933 and may
be reoffered and sold only if registered or if an exemption from such
registration is available in the opinion of counsel satisfactory to the
issuer."
6.12. DUE DILIGENCE OPPORTUNITY. VISTA acknowledges that its
executive officers and directors, exclusive of persons who may be affiliates
of PHARMA PATCH, have sufficient knowledge and experience in financial and
business matters so that VISTA is able to evaluate the merits and risks of
this Agreement and an investment in restricted securities of TCPI; VISTA and
such executive officers and directors have had substantial experience in
previous private and public purchases of speculative and restricted
securities, and understands that an investment in TCPI securities is
speculative and subject to risk of loss. VISTA acknowledges that it has had an
opportunity to ask questions of and to receive answers from one or more of the
executive officers of PHARMA PATCH as VISTA deems necessary in order for it to
make an informed decision with respect to this Agreement and its agreement to
acquire restricted securities of TCPI and the Pharma Patch NOTE and has
received complete and satisfactory answers to all such inquiries.
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<PAGE>
6.13. DISCLOSURE. The representations and warranties of VISTA contained
in this Agreement and in each schedule, certificate or other written
statements delivered by VISTA pursuant to this Agreement or in connection with
the transactions contemplated herein are each accurate, correct and complete
in all material respects, and do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements and information contained herein or therein not misleading.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PHARMA PATCH.
PHARMA PATCH hereby represents and warrants to VISTA that:
7.1. ORGANIZATION AND AUTHORITY. PHARMA PATCH is a public limited
company duly organized, validly existing and in good standing under the laws
of the Republic of Ireland, with all requisite power and authority to own its
property and assets, to carry on its business as it is now being conducted and
to enter into and execute this Agreement and perform its obligations
hereunder. All acts or proceedings required to be taken by PHARMA PATCH to
authorize the execution and delivery of this Agreement by PHARMA PATCH and the
performance by PHARMA PATCH in accordance with its obligations under this
Agreement have been duly and properly taken.
7.2. VALIDITY. This Agreement has been, and the documents and
instruments to be delivered and delivered at the Closing hereunder by PHARMA
PATCH will be, duly executed and delivered and constitute lawful, valid and
binding obligations of PHARMA PATCH enforceable in accordance with their
respective terms, except as enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally and by general equitable principles. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any lien,
charge or encumbrance of any kind or the acceleration of any indebtedness or
other obligation of PHARMA PATCH and are not prohibited by, do not violate or
conflict with any provision of, and do not constitute a default under or a
breach of (a) the charter, articles or memorandum of association or
incorporation or by-laws of PHARMA PATCH, (b) subject to the Lock-Up
Agreements, any note, bond, indenture, contract, agreement, permit, license or
other instrument to which PHARMA PATCH is a party or by which any of its
assets are bound, (c) any order, writ, injunction, decree or judgment of any
court or government agency, or (d) any law, rule or regulation applicable to
PHARMA PATCH. No approval, authorization, registration, consent, order or
other action of or filing with any person, including any court, administrative
agency or other government authority, is required for the execution and
delivery by PHARMA PATCH of this Agreement or the consummation by PHARMA PATCH
of the transactions contemplated hereby or the performance by PHARMA PATCH of
its obligations hereunder.
7.3. TCPI SHARES. All of the TCPI SHARES to be transferred, assigned
and delivered by PHARMA PATCH to VISTA hereunder are owned beneficially and of
record by PHARMA PATCH, are validly issued, fully paid and nonassessable
securities of TCPI, and PHARMA PATCH owns, possesses and has good and
marketable title to transfer such TCPI
10
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SHARES to PHARMA PATCH at Closing hereunder free and clear of all liens,
charges, demands, security interests or other adverse claims whatsoever or
howsoever arising except as otherwise provided by the Lock-Up Agreements.
7.4. SEC REPORTING. PHARMA PATCH is a reporting issuer with a class of
securities registered under Section 12(g) of the Exchange Act, and PHARMA
PATCH has filed all reports and documents required to be filed pursuant to the
Exchange Act for a period of at least twelve months preceding the date hereof.
PHARMA PATCH has furnished to VISTA copies of (i) PHARMA PATCH's Annual Report
on Form 10-K for the fiscal year ended February 28, 1995 and the exhibits
thereto, (ii) PHARMA PATCH's Reports on Form 10-Q for the Interim Periods
ended November 30, 1995 and the exhibits thereto, and (iii) PHARMA PATCH's
Reports on From 8-K dated November 1, 1995 and January 12, 1996; all of which
are herein called the "PHARMA PATCH SEC Reports".
Each of the PHARMA PATCH SEC Reports at the time the same was
filed with the Securities and Exchange Commission complied with the Exchange
Act in all material respects. None of the PHARMA PATCH SEC Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. PHARMA PATCH has delivered to VISTA a correct and complete copy
of each of the PHARMA PATCH SEC Reports (together with all material exhibits
and schedules thereto and as amended to date).
7.5. SUBSIDIARIES AND INVESTMENTS. Except for its investment in
786,214 shares of TCPI common stock, PHARMA PATCH does not own stock or have
any equity investment or other interest in, does not have the right to acquire
any such interest, and does not control, directly or indirectly, any
corporation, association, partnership, joint venture or other entity.
7.6. FINANCIAL STATEMENTS AND NO ADVERSE CHANGE.
7.6.1. FINANCIAL STATEMENTS. The audited consolidated
financial statements of PHARMA PATCH for the fiscal year ended February 28,
1995 and for the nine months ended November 30, 1995 set forth in the PHARMA
PATCH SEC Reports (the "PHARMA PATCH Financial Statements") are: (a)
accurate, correct and complete in all material respects; (b) in accordance
with the books of account and records of PHARMA PATCH and its consolidated
subsidiaries; (c) fair presentations of the financial condition and results of
operations of PHARMA PATCH and its consolidated subsidiaries as of the dates
and for the periods indicated above; and (d) prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated except as described in footnotes to the
PHARMA PATCH Financial Statements. Except to the extent reflected on the
consolidated balance sheets and notes thereto included in the PHARMA PATCH
Financial Statements and continuing obligations in the ordinary course of
business under agreements to which PHARMA PATCH is party, PHARMA PATCH does
not have and will not have as of Closing Date, any indebtedness, duty,
responsibility, liability or obligation of any nature, whether absolute,
accrued, contingent or otherwise except as disclosed in the PHARMA PATCH SEC
Reports.
11
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7.6.2. INTERIM CHANGE. Except for general and administrative
expenses in the ordinary course of its business, since November 30, 1995 there
has not been (a) any material adverse change in the financial condition,
assets, liabilities, personnel or business of PHARMA PATCH or their
relationships with creditors, lessors or others; (b) any damage, destruction
or loss, whether or not covered by insurance, materially adversely affecting
PHARMA PATCH; or (c) any event or condition or series of events or conditions
which could, individually or in the aggregate, reasonably be expected to have
a material adverse effect on PHARMA PATCH.
7.7. TITLE TO ASSETS. PHARMA PATCH is the legal and equitable owner of
all right, title and interest in and has good and marketable title to all of
the assets which its purports to own including, without limitation, 786,214
shares of TCPI common stock and any assets reflected on the last balance sheet
included in the PHARMA PATCH Financial Statements (except those sold to TCPI)
and acquired in the ordinary course of business subsequent to November 30,
1995. None of the assets which PHARMA PATCH purports to own are subject to
(a) any title defect or objection; (b) any contract of lease, license or sale;
(c) any security interest except for equipment acquired through installment
purchase or lease financing arrangements; (d) any royalty or commission
arrangement; or (e) any claim, covenant or restriction, except for the Lock-Up
Agreements. Such assets are in good operating condition and repair, taken as
a whole (reasonable wear and tear excepted), are suitable for the purposes for
which they are presently being used, and are adequate to meet all present
requirements of the business of PHARMA PATCH as currently conducted.
7.8. LEGAL PROCEEDINGS. Except as set forth in the PHARMA PATCH SEC
Reports, PHARMA PATCH is not engaged in or a party to or threatened with any
material action, suit, proceeding, complaint, charge, investigation or
arbitration or other method of settling disputes or disagreements, and PHARMA
PATCH does not know, anticipate or have notice of any reasonable basis for any
such action. PHARMA PATCH has not received notice of any investigation
threatened or contemplated by any government or regulatory authority,
including those involving the safety of products, the working conditions of
employees, employment practices or policies, or compliance with environmental
regulations. Neither PHARMA PATCH nor any of its assets is subject to any
judgment, order, writ, injunction or decree of any court or any government
agency or any arbitrator.
7.9. INVESTMENT INTENT. PHARMA PATCH is acquiring the Vista SHARES,
the Vista WARRANTS and any common stock issuable upon exercise of the Vista
WARRANTS hereunder for its own account for investment, and not with a view to
the resale or other distribution of such securities. PHARMA PATCH
acknowledges that if any subsequent transfer of such VISTA securities is to be
made in reliance upon an exemption under the Securities Act of 1933, the
issuer of the securities being so transferred may require an opinion of
counsel satisfactory to the issuer that such transfer may be made pursuant to
an applicable exemption under the Securities Act of 1933; PHARMA PATCH
further acknowledges that, so long as appropriate, a legend similar to the
following may appear on the certificates representing the VISTA securities
acquired by PHARMA PATCH hereunder: "These securities have not been
registered under the Securities Act of 1933 and may be reoffered and sold only
if registered or if an exemption from such registration is available in the
opinion of counsel satisfactory to the issuer."
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7.10. DUE DILIGENCE OPPORTUNITY. PHARMA PATCH acknowledges that its
executive officers and directors have sufficient knowledge and experience in
financial and business matters so that PHARMA PATCH is able to evaluate the
merits and risks of this Agreement and an investment in restricted securities
of VISTA; PHARMA PATCH and its executive officers and directors have had
substantial experience in previous private and public purchases of speculative
and restricted securities, and PHARMA PATCH understands that an investment in
VISTA securities is speculative and subject to risk of loss. PHARMA PATCH
acknowledges that it has had an opportunity to ask questions of and to receive
answers from one or more of the executive officers of VISTA, other than
executive officers and directors affiliated with PHARMA PATCH, as PHARMA PATCH
deems necessary in order for it to make an informed decision with respect to
this Agreement and its agreement to acquire restricted securities of VISTA
hereunder and has received complete and satisfactory answers to all such
inquiries.
7.11. DISCLOSURE. The representations and warranties of PHARMA PATCH
contained in this Agreement and in each schedule, certificate or other written
statements delivered by PHARMA PATCH pursuant to this Agreement or in
connection with the transactions contemplated herein are each accurate,
correct and complete in all material respects, and do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements and information contained herein or therein not
misleading.
8. OTHER CONDITIONS TO CLOSING. At the Closing:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of all parties set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date.
8.2. COMPLIANCE WITH AGREEMENT. All parties hereto shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date.
8.3. NO INJUNCTION. None of the parties hereto shall be subject to any
injunction or preliminary restraining order against the consummation of the
transactions contemplated by this Agreement.
8.4. ABSENCE OF ANY ADVERSE CHARGES. There shall have been no
material adverse change in the business, financial condition or prospects of
VISTA or PHARMA PATCH between the date of this Agreement and the Closing Date.
8.5. LEGAL MATTERS. The form and substance of all legal matters con-
templated hereby and of all instruments and documents delivered hereunder
shall be reasonably acceptable to counsel for each of the parties.
8.6. AUTHORIZING RESOLUTIONS. Each of the parties hereto shall have
delivered to each of the other parties a copy of resolutions, certified by the
secretary or an assistant secretary of such corporate party, adopted by its
board of directors necessary to evidence its authorization
13
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of the execution and delivery by such party of this Agreement and the
transactions contemplated herein.
9. OTHER PROVISIONS.
9.1. NO GOVERNMENTAL APPROVAL. Each of the parties understand that no
governmental agency of any jurisdiction has passed upon or made any
recommendation or endorsement of the transactions contemplated by this
Agreement or an investment in any of the securities covered by this Agreement.
9.2. TRANSACTION EXPENSES. Each of the undersigned agrees to pay its
own expenses incident to the performance of its obligations hereunder.
9.3. GOVERNING LAW. Each of the undersigned agree that except to the
extent U.S. securities laws may be applicable as a matter of public policy,
this Agreement shall be governed by and construed in accordance with the laws
of the State of New York, United States, and without regard to principles of
conflicts of law.
9.4. TIME. Time shall be of the essence of this Agreement.
9.5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties with respect to the transactions contemplated hereby, and
supersedes all prior arrangements or understandings, written or oral, among
the parties with respect thereto. This Agreement may be amended or modified
only by a writing executed by the party or parties to be bound by such
amendment or modification.
9.6. SUCCESSORS AND ASSIGNS. All representations, warranties,
covenants and agreements of the parties shall bind their respective successors
and assignees and shall inure to the benefit of their respective successors
and permitted assignees. In the event of the distribution or other transfer
by PHARMA PATCH of more than 50% of its assets to another corporate entity
formed for the purpose of reincorporating PHARMA PATCH's business, or in the
event of the merger of PHARMA PATCH into another corporate entity in which
PHARMA PATCH is not the surviving entity, it shall be an express condition to
such distribution, transfer or merger that the transferee and/or assignee of
such PHARMA PATCH assets shall agree in writing to assume all rights and
obligations of PHARMA PATCH under the terms and provisions of this Agreement
as if said transferee and/or assignee was the PHARMA PATCH party named herein,
and an executed copy of such undertaking and assumption shall be delivered to
VISTA prior to consummating any such distribution, transfer or merger.
9.7. INTERPRETATION. This Agreement shall be interpreted according to
its fair meaning and not for or against either party who may have drafted
provisions hereof.
9.8 CAPTIONS. The headings and captions appearing in this Agreement
are inserted for convenience of reference only and shall not constitute a part
thereof and shall not be used in construction or interpretation.
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9.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
<TABLE>
<S> <C> <C>
SIGNED, SEALED AND DELIVERED ) PHARMA PATCH PLC.
in the presence of )
)
) Per: /s/ Murray D. Watson
/s/ Kenneth G. Howling ) -----------------------
- ---------------------------- ) Title: Chairman and Chief
Witness ) Executive Officer
Kenneth F. Howling, Vice President )
of Finance and Chief Financial )
Officer of Pharma Patch PLC )
)
)
)
SIGNED, SEALED AND DELIVERED ) VISTA TECHNOLOGIES INC.
in the presence of )
)
) Per: /s/ Thomas A. Schultz
/s/ William M. Curtis ) ------------------------
- ---------------------------- ) Thomas A. Schultz
Witness ) Title: President and Chief
William M. Curtis, Secretary ) Executive Officer
of Vista Technologies Inc. )
15
</TABLE>
Rev1
NEITHER THIS AGREEMENT NOR THE SECURITIES WHICH ARE TO BE EXCHANGED HEREUNDER
HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"ACT"). ACCORDINGLY, NO TRANSFER OF SUCH SECURITIES OR ANY INTEREST THEREIN
IN THE MARKETS OF THE UNITED STATES MAY BE MADE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER OF THE
SECURITIES HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACT.
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), made on the 1st day of
March, 1996 and effective as of March 29, 1996, is by and among:
PHARMA PATCH PLC, a public limited company of the Republic of Ireland
(herein called "PHARMA PATCH") with its principal office at 15-16
FitzWilliam Place, Dublin 2, Ireland;
THERAPEUTIC PATCH RESEARCH N.V., a body corporate organized under the
laws of The Netherlands Antilles (herein called "TPR"), with its
principal office at De Ruyterkade 62, P.O. Box 812, Willemstad, Curacao,
The Netherlands Antilles and its mailing address at Statenhof Building,
Reaal 5-V, P.O. Box 4, 2350 AA Leiderdorp, The Netherlands;
SALIVA RESEARCH LIMITED, a body corporate organized under the laws of
Gibraltar (herein called "SRL"), with its principal office at 4 Irish
Place, P.P. Box 240, Gibraltar, Europe and its mailing address at
Statenhof Building, Reaal 5-V, P.O. Box 4, 2350 AA Leiderdorp, The
Netherlands; and
WESTCLIFF PARTNERS INC., a body corporate organized under the laws of
the Republic of Panama (herein called "WPI"), with its principal office
and mailing address at Statenhof Building, Reaal 5-V, P.O. Box 4, 2350
AA Leiderdorp, The Netherlands.
RECITALS:
WHEREAS, TPR, SRL and WPI each own of record and beneficially 300,000
shares of the common capital stock in VISTA TECHNOLOGIES INC., a body
corporate of the State of Nevada, United States (herein called "VISTA"), for
an aggregate of 900,000 shares of VISTA common stock (the "Vista SHARES");
WHEREAS, effective as of March 1, 1996, PHARMA PATCH desires to acquire
from TPR, SRL and WPI all of the Vista SHARES solely in exchange for 4,500,000
newly issued American Depositary Receipts ("Pharma Patch ADRs") each Pharma
Patch ADR representing one Ordinary Share, IR Pound .01 par value, in PHARMA
PATCH, all upon the terms and conditions set forth in this Exchange Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
mutually covenant, promise and agree as follows:
Exchange Agreement -1-
<PAGE>
1. EXCHANGE OF VISTA SHARES FOR PHARMA PATCH ADRS
1.1. CLOSING. The closing for the consummation of the transactions
contemplated by this Agreement ("Closing") shall occur on March 29, 1996 (the
"Closing Date") and shall take place at the offices of Multibreen, B.V., at
Statenhof Building, Reaal 5-V, 2350 AA Leiderdorp, The Netherlands, unless
another time and place is mutually agreed to by the parties. Upon the
Closing, all the conditions set forth in this Agreement shall have been
satisfied except to the extent any such conditions shall have been expressly
waived in writing by all of the parties hereto.
1.2. DELIVERY OF VISTA SHARES. On the Closing Date, each of TPR, SRL
and WPI shall deliver to PHARMA PATCH certificates evidencing 300,000 of the
Vista SHARES (for a total of 900,000 Vista SHARES), each duly endorsed in
favor of PHARMA PATCH with medallion signature guarantee and accompanied by a
certificate in the form attached hereto confirming the authority of the
officer, managing director or other agent executing the aforesaid endorsement.
1.3. DELIVERY OF PHARMA PATCH ADRS. On the Closing Date, PHARMA PATCH
shall deliver to each of TPR, SRL and WPI certificates evidencing 1,500,000 of
the Pharma Patch ADRs (for a total of 4,500,000 Pharma Patch ADRs), each duly
registered in the names of TPR, SRL and WPI, respectively.
2. U.S. SECURITIES LAWS. All of the parties hereto acknowledge that the
common stock of VISTA and the American Depositary Receipts evidencing ordinary
shares of PHARMA PATCH are traded in the United States securities markets.
Neither the Vista SHARES nor the Pharma Patch ADRs to be exchanged hereunder
have been registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"). Each party acknowledges that the exchange of securities
hereunder is among investors who are not U.S. persons as defined in Rule
902(o) of Regulation S ("Regulation S") promulgated under the Securities Act
in reliance upon the transactional exemption afforded by Regulation S in
connection with a private placement offshore offer, sale and exchange relating
to securities of VISTA and PHARMA PATCH. Each party acknowledges it is
familiar with and understands the terms of Regulation S, and has had the
opportunity to consult with its legal counsel concerning this Agreement and
Regulation S. Accordingly, each party acknowledges that the subsequent
transfer of all securities covered by this Agreement within the United States
markets or otherwise within the jurisdiction of the United States is
restricted by the Securities Act as well as state laws within the United
States.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF TPR, SRL AND WPI. Each of
TPR, SRL and WPI represents and warrants to PHARMA PATCH that:
3.1. such party is a body corporate duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
indicated in the preamble to this Agreement, with all requisite power and
authority to own its property and assets, to carry on its business as it is
now being conducted and to enter into and execute this Agreement and perform
its obligations hereunder.
3.2. at the Closing Date, all of the Vista SHARES to be transferred,
assigned and delivered by such party to PHARMA PATCH hereunder will be owned
beneficially and of record by such party, shall be validly issued, fully paid
and nonassessable securities of VISTA, and such party owns, possesses and has
good and marketable title to transfer such Vista SHARES to PHARMA PATCH at
Closing hereunder free and clear of all liens, charges, demands, security
interests or other adverse claims whatsoever or howsoever arising.
Exchange Agreement -2-
<PAGE>
3.3. such party is not a "U.S. Person" as that term is defined in Rule
902(o) of Regulation S; such party was not formed specifically for the purpose
of investing in Regulation S securities or formed specifically for the purpose
of investing in this Agreement or the securities of PHARMA PATCH; such party
is not registered as an issuer under the Securities Act and is not required to
be registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940; such party has no reason to believe that any
offer to enter into this Agreement has been made by PHARMA PATCH to such party
in the United States; at the times of the original offer relating to, and
execution of, this Agreement, such party was located and resident outside the
United States; and such party is entering into this Agreement and acquiring
Pharma Patch ADRs hereunder for its own account for investment, and not on
behalf of any U.S. Person as defined in Rule 902(o) of Regulation S or with a
view to the distribution of such securities.
3.4. neither such party, nor any of its affiliates nor any person
acting on its behalf or any behalf of any such affiliate, has engaged, or will
engage, in any activity undertaken for the purpose of, or that could
reasonable be expected to have the effect of, conditioning the markets in the
United States for any of the securities of PHARMA PATCH or VISTA, including
but not limited to effecting any sale or short sale or the acquisition of any
put option relating to the securities of PHARMA PATCH for the account of such
party or any of its affiliates prior to the expiration of any restricted
period contained in Regulation S or engaging in any course of conduct that
would have the effect of influencing the public market price of such
securities (any such activity, or any other course of conduct defined as a
Directed Selling Effort in Rule 902 of Regulation S, being herein called a
"Directed Selling Effort"); such party and its representatives have not
conducted any Directed Selling Effort and will not engage in any such Directed
Selling Effort within the United States through the expiration of any
restricted period set forth in Rule 903 of Regulation S.
3.5. such party agrees that all offers and sales of any securities of
PHARMA PATCH or VISTA for the account of such party or for the account of any
of its affiliates as of the date hereof and through the expiration of the any
restricted period set forth in Rule 903 of Regulation S shall not be made to
U.S. Persons or for the account or benefit of U.S. Persons and shall otherwise
be made in compliance with the provisions of Regulation S and any other
applicable provisions of the United States securities laws.
3.6. such party acknowledges and agrees that following the expiration
of any restricted period provided by Rule 903 of Regulation S, any interest in
this Agreement or in the Pharma Patch ADRs may be resold within the
jurisdiction of the United States or to U.S. Persons [as defined in Rule
902(o) of Regulation S] by or for the account of the parties hereto only (i)
pursuant to a registration statement under the Securities Act, or (ii)
pursuant to an exemption from such registration and only following the
expiration of any restricted period required by Regulation S.
3.7. such party acknowledges that if any subsequent transfer of the
Pharma Patch ADRs is to be made in reliance upon an exemption under the
Securities Act, the issuer of the securities being so transferred may require
an opinion of counsel satisfactory to the issuer that such transfer may be
made pursuant to an applicable exemption under the Securities Act; such party
further acknowledges that, so long as appropriate, a legend similar to the
following may appear on the certificates representing the Pharma Patch ADRs:
"These securities have not been registered under the Securities Act of 1933
and may be reoffered and sold only if registered or if an exemption from such
registration is available in the opinion of counsel satisfactory to the
issuer."
3.8. such party has sufficient knowledge and experience in financial
and business matters so that it is able to evaluate the merits and risks of
this Agreement and an investment in restricted securities
Exchange Agreement -3-
<PAGE>
of PHARMA PATCH; such party has had substantial experience in previous
private and public purchases of speculative and restricted securities,
understands that an investment in PHARMA PATCH securities is speculative, and
can afford to sustain a complete loss of its investment.
3.9. such party acknowledges that it has had an opportunity to ask
questions of and to receive answers from one or more of the executive officers
of PHARMA PATCH as such party deems necessary in order for it to make an
informed decision with respect to this Agreement and its agreement to acquire
restricted securities of PHARMA PATCH and has received complete and
satisfactory answers to all such inquiries.
3.10. this Agreement has been duly authorized, executed and delivered by
such party and is a valid and binding agreement enforceable in accordance with
its terms, subject only to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general application to or
affecting creditors' rights generally and to general principles of equity;
such party has full power and authority necessary to enter into this Agreement
and to perform its obligations hereunder.
3.11. the execution and delivery of this Agreement, and the consummation
of the transactions contemplated herein, do not and will not conflict with or
result in a breach by such party of any of the terms or provisions of, or
constitute a default under, its charter documents, its memorandum or articles
of association or incorporation, its by-laws, any action of its directors or
shareholders, or any indenture, mortgage, deed of trust or other agreement or
instrument by which such party or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, regulatory body, administrative agency or
other governmental body having jurisdiction over such party or any of its
properties or assets.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PHARMA PATCH. PHARMA
PATCH represents and warrants to each of TPR, SRL and WPI that:
4.1. PHARMA PATCH is a body corporate duly organized, validly existing
and in good standing as a public limited company under the laws of the
Republic of Ireland, with all requisite power and authority to own its
property and assets, to carry on its business as it is now being conducted and
to enter into and execute this Agreement and perform its obligations
hereunder.
4.2. PHARMA PATCH is not an investment company registered or required
to register as such under the United States Investment Company Act of 1940.
4.3. The American Depositary Receipts evidencing ordinary shares of
PHARMA PATCH is a class of securities registered under Section 12(g) of the
U.S. Securities Exchange Act of 1934 ("Exchange Act"), and PHARMA PATCH has
filed all reports and documents required to be filed pursuant to the Exchange
Act for a period of at least twelve months preceding the date hereof (or for
such shorter period as PHARMA PATCH was required to file such materials).
4.4. The Pharma Patch ADRs and the underlying ordinary shares of PHARMA
PATCH represented thereby, when issued and delivered at Closing by PHARMA
PATCH hereunder, will be duly and validly authorized and issued, fully paid
and nonassessable securities of PHARMA PATCH and will not subject the holders
thereof to personal liability by reason of being such holders.
4.5. PHARMA PATCH is acquiring the Vista SHARES hereunder for its own
account for investment, and not with a view to the distribution of such
securities.
Exchange Agreement -4-
<PAGE>
4.6. Neither PHARMA PATCH, nor any of its affiliates nor any person
acting on its behalf or any behalf of any such affiliate, has engaged, or will
engage, in any activity undertaken for the purpose of, or that could
reasonable be expected to have the effect of, conditioning the markets in the
United States for any of the securities of PHARMA PATCH or VISTA, including
but not limited to effecting any sale or short sale or the acquisition of any
put option relating to the securities of VISTA for the account of PHARMA PATCH
or any of its affiliates prior to the expiration of any restricted period
contained in Regulation S or engaging in any course of conduct that would have
the effect of influencing the public market price of such securities (any such
activity, or any other course of conduct defined as a Directed Selling Effort
in Rule 902 of Regulation S, being herein called a "Directed Selling Effort");
PHARMA PATCH and its representatives have not conducted any Directed Selling
Effort and will not engage in any such Directed Selling Effort within the
United States through the expiration of any restricted period set forth in
Rule 903 of Regulation S.
4.7. PHARMA PATCH acknowledges and agrees that any interest in this
Agreement or in the Vista SHARES may be resold within the markets or the
jurisdiction of the United States only (i) pursuant to a registration
statement under the Securities Act, or (ii) pursuant to an exemption from
such registration.
4.8. PHARMA PATCH acknowledges that if any subsequent transfer of the
Vista SHARES is to be made in reliance upon an exemption under the Securities
Act, the issuer of the securities being so transferred may require an opinion
of counsel satisfactory to the issuer that such transfer may be made pursuant
to an applicable exemption under the Securities Act; PHARMA PATCH further
acknowledges that, so long as appropriate, a legend similar to the following
may appear on the certificates representing the Vista SHARES: "These
securities have not been registered under the Securities Act of 1933 and may
be reoffered and sold only if registered or if an exemption from such
registration is available in the opinion of counsel satisfactory to the
issuer."
4.9. PHARMA PATCH has sufficient knowledge and experience in financial
and business matters so that it is able to evaluate the merits and risks of
this Agreement and an investment in restricted securities of VISTA; PHARMA
PATCH and its executive officers have had substantial experience in previous
private and public purchases of speculative and restricted securities, and
understands that an investment in VISTA securities is speculative and subject
to risk of loss.
4.10. PHARMA PATCH acknowledges that it has had an opportunity to ask
questions of and to receive answers from one or more of the executive officers
of VISTA as PHARMA PATCH deems necessary in order for it to make an informed
decision with respect to this Agreement and its agreement to acquire
restricted securities of VISTA and has received complete and satisfactory
answers to all such inquiries.
4.11. This Agreement has been duly authorized, executed and delivered by
PHARMA PATCH and is a valid and binding agreement enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general application to or
affecting creditors' rights generally and to general principles of equity;
PHARMA PATCH has full power and authority necessary to enter into this
Agreement and to perform its obligations hereunder.
4.12. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated herein, do not and will not conflict with or
result in a breach by PHARMA PATCH of any of the terms or provisions of, or
constitute a default under, its charter documents, its memorandum or articles
of association or incorporation, its by-laws, any action of its directors or
shareholders, or any indenture, mortgage, deed of trust or other agreement or
instrument by which PHARMA PATCH or any
Exchange Agreement -5-
<PAGE>
of its properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court,
regulatory body, administrative agency or other governmental body having
jurisdiction over such party or any of its properties or assets.
5. OTHER CONDITIONS TO CLOSING. At the Closing:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of all parties set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date.
5.2. COMPLIANCE WITH AGREEMENT. All parties hereto shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date.
5.3. NO INJUNCTION. None of the parties hereto shall be subject to any
injunction or preliminary restraining order against the consummation of the
transactions contemplated by this Agreement.
5.4. ABSENCE OF ANY ADVERSE CHARGES. There shall have been no
material adverse change in the business, financial condition or prospects of
VISTA or PHARMA PATCH between the date of this Agreement and the Closing Date.
5.5. LEGAL MATTERS. The form and substance of all legal matters con-
templated hereby and of all instruments and documents delivered hereunder
shall be reasonably acceptable to counsel for each of the parties.
5.6. AUTHORIZING RESOLUTIONS. Each of the parties hereto shall have
delivered to each of the other parties a copy of resolutions, certified by the
secretary or an assistant secretary of such corporate party, adopted by its
board of directors necessary to evidence its authorization of the execution
and delivery by such party of this Agreement and the transactions contemplated
herein.
6. OTHER PROVISIONS.
6.1. NO GOVERNMENTAL APPROVAL. Each of the parties understand that no
governmental agency of any jurisdiction has passed upon or made any
recommendation or endorsement of the transactions contemplated by this
Agreement or an investment in any of the securities covered by this Agreement.
6.2. TRANSACTION EXPENSES. Each of the undersigned agrees to pay its
own expenses incident to the performance of its obligations hereunder.
6.3. GOVERNING LAW. Each of the undersigned agree that except to the
extent U.S. securities laws may be applicable as a matter of public policy,
this Agreement shall be governed by and construed in accordance with the laws
of The Netherlands, and without regard to principles of conflicts of law.
6.4. TIME. Time shall be of the essence of this Agreement.
6.5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties with respect to the transactions contemplated hereby, and
supersedes all prior arrangements or understandings, written or oral, among
the parties with respect thereto. This Agreement may be amended or modified
only by a writing executed by the party or parties to be bound by such
amendment or modification.
Exchange Agreement -6-
<PAGE>
6.6. SUCCESSORS AND ASSIGNS. All representations, warranties,
covenants and agreements of the parties shall bind their respective successors
and assignees and shall inure to the benefit of their respective successors
and permitted assignees.
6.7. INTERPRETATION. This Agreement shall be interpreted according to
its fair meaning and not for or against either party who may have drafted
provisions hereof.
6.8 CAPTIONS. The headings and captions appearing in this Agreement
are inserted for convenience of reference only and shall not constitute a part
thereof and shall not be used in construction or interpretation.
6.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SIGNED, SEALED AND DELIVERED ) PHARMA PATCH PLC.
in the presence of )
)
) Per: ___________________________
____________________________ ) Murray B. Watson
Witness ) Title: Chairman and Chief
) Executive Officer
)
)
SIGNED, SEALED AND DELIVERED ) THERAPEUTIC PATCH RESEARCH N.V.
in the presence of )
)
) Per: ___________________________
____________________________ ) Dick van der Vennen
Witness ) Title: Managing Director
)
)
SIGNED, SEALED AND DELIVERED ) SALIVA RESEARCH LIMITED
in the presence of )
)
) Per: ____________________________
____________________________ ) Jac. J. Lam
Witness ) Title: Managing Director
)
)
SIGNED, SEALED AND DELIVERED ) WESTCLIFF PARTNERS INC.
in the presence of )
)
) Per: ____________________________
____________________________ ) Jac. J. Lam
Witness ) Title: President and Managing
Director
Exchange Agreement -7-
December 10, 1996 $300,000.00
Los Altos, California
VISTA TECHNOLOGIES INC.
12% Secured Promissory Note
Due June 30, 1997
(or Earlier Upon Completion of Certain Events defined herein)
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED (THE "ACTS"). ACCORDINGLY, NO TRANSFER OF
THIS NOTE OR ANY INTEREST HEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACTS UNLESS THE ISSUER HAS RECEIVED A
SATISFACTORY OPINION OF COUNSEL THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACTS.
VISTA TECHNOLOGIES INC., a Nevada corporation (herein called the
"Company"), for value received, hereby promises to pay to CASTLE ROCK PARTNERS
L.P., c/o 200 Park Avenue, Suite 3900, New York, NY 10166 (the "Payee"), or
order, at the principal office of the Company in the State of California not
later than on the 30th day of June, 1997 or within five (5) business days
after an Accelerating Event as defined below (the earliest of such dates being
herein called the "Maturity Date") the principal sum of THREE HUNDRED THOUSAND
DOLLARS ($300,000.00) in United States funds, together with interest on the
unpaid principal amount of this Bridge Note from the date hereof.
1. BRIDGE NOTES. This note is one of a duly authorized issue of not
more than one million dollars ($1,000,000) in 12% Secured Promissory Notes
(herein called the "Bridge Notes") made by the Company and originally issued
by the Company pursuant to a private placement of securities in 1996.(1) All
of the Bridge Notes are issuable substantially in the form of this Bridge
Note.
2. ACCELERATION OF MATURITY DATE. The Maturity Date of this Bridge
Note shall be automatically accelerated, and all principal and interest on
this Bridge Note shall be immediately due and payable, of the fifth business
day after receipt by the Company of at least $5 million in gross proceeds as a
result of the sale of its Series A convertible preferred stock pursuant to
financing arrangements negotiated with Paramount Capital Incorporated.(2)
3. INTEREST. Interest on the unpaid principal of this Bridge Note
from the date hereof shall be payable at the rate of twelve percent (12%) per
annum, interest payable in arrears on the Maturity Date of this Bridge Note
and to accrue until this Note is paid in full. Interest shall also be
payable on any earlier date fixed for optional prepayment by the Company.
________________________
(1) The total issue of the Bridge Notes was limited to an aggregate of
$300,000.
(2) Rights of acceleration due to sale of the Company's interest in shares
of Technical Chemical and Products, Inc. was waived by separate letter
agreement dated December 10, 1996.
<PAGE>
4. COLLATERAL SECURITY. The principal and interest of the Bridge
Notes are secured by the pledge as collateral of all of the assets of the
Company pursuant to the terms of that certain Security Agreement dated
November 11, 1996 executed by the Company for the benefit of the holders of
the Bridge Notes, a copy of which has been delivered to the Payee by the
Company.
5. OPTIONAL PREPAYMENT. The Company, at its option and without
prior notice, may at any time prepay all or any portion of the principal and
interest of the Bridge Notes at the time outstanding, in each case at the
principal amount so being prepaid plus all unpaid interest accrued thereon to
the date fixed for prepayment, without any premium or other penalty for such
prepayment.
6. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. The Payee and any
other holder of this Bridge Note, by acceptance hereof, represents and
warrants that this Bridge Note has been acquired by said holder for its own
account for investment, and acknowledges that any proposed sale, assignment or
transfer of this Bridge Note is prohibited unless such sale, assignment or
transfer in the opinion of counsel for the Company will not require the prior
registration of this Bridge Note under the Securities Act of 1933, as amended,
or the qualification of this Bridge Note under the Trust Indenture Act of
1939, as amended.
5. DEFAULT AND ACCELERATION. If one or more of the following events
(herein called "Events of Default") shall happen, that is to say:
(a) If default be made in the punctual payment of the principal of, or
interest on, this Bridge Note, as the same shall become due and payable,
whether at the Maturity Date or a date fixed for optional or mandatory
prepayment of this Bridge Note or any portion thereof in accordance with
its terms, and such default shall continue for three (3) business days
after the Company has received written notice of default from the
registered holder of this Bridge Note; or
(b) If (i) any court of competent jurisdiction shall enter a decree or order
not vacated or stayed within 30 days from the date of entry thereof (A)
appointing a trustee or receiver of the Company or of any substantial
part of the property of the Company, or (B) approving a petition for, or
effecting, an arrangement in bankruptcy of, or a reorganization pursuant
to any bankruptcy act of, the Company, or any other judicial
modification or alteration of the rights of the holders of this Bridge
Note or of other creditors of the Company, or (ii) the Company shall
itself file any such petition or take or consent to any other action
seeking any such judicial order or shall make an assignment for the
benefit of its creditors or shall admit in writing its inability to pay
its debts generally as they become due.
then all of the unpaid principal and interest of this Bridge Note shall become
immediately due and payable upon demand made by the holder of this Bridge Note
if any one or more Events of Default shall occur and be continuing at the time
of such demand.
2
<PAGE>
6. COSTS OF COLLECTION. The Company covenants that, if default be
made in any payment of the principal of or interest on this Bridge Note, the
Company will pay the holder of this Bridge Note such further amount as shall
be sufficient to cover the costs and expenses of collection, including without
limitation reasonable attorneys' fees of such holder and all other costs
incurred for court filings, witnesses, preparation, prosecution and
enforcement of collection.
7. OTHER PROVISIONS.
7.1. This Bridge Note is issued upon the express condition, to which
the Payee and each successive holder expressly assents and by receiving the
same agrees, that no recourse under or upon any obligation, covenant or
agreement of this Bridge Note, or for the payment of the principal of or the
interest on, this Bridge Note, or for any claim based on this Bridge Note, or
otherwise in respect thereof, shall be had against any incorporator or any
past, present or future stockholder, officer or director, as such, of either
Company or of any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by any assessment or penalty or
otherwise howsoever, all such individual liability being hereby expressly
waived and released as a condition of and as part of the consideration for the
execution and issue of this Bridge Note; provided, however, that nothing
herein shall prevent enforcement of the liability, if any, of any stockholder
or subscriber to capital stock upon or in respect of capital stock not fully
paid.
7.2. Any notice or demand which by any provision of this Bridge Note is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being
sent as registered or certified mail, postage prepaid, addressed to the
Company at its principal office in the State of California, marked for the
attention of its Chief Executive Officer.
7.3. No course of dealing between the Company and the holder of this
Bridge Note or any delay on the part of the holder in exercising any rights
under this Bridge Note shall operate as a waiver of any rights of any holder
of this Bridge Note.
7.4. This Bridge Note shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the Company has caused this Bridge Note to be signed
in its corporate name by an officer thereunder duly authorized, and to be
dated as of the day and year first above written.
VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
----------------------------
Thomas A. Schultz, President
ATTEST:
/s/ William M. Curtis
- ----------------------------
William M. Curtis, Secretary
3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and dated this 11th day of November,
1996, for the benefit of the registered holders of those certain 12% Secured
Promissory Notes (herein collectively called the "Secured Parties" and
individually a "Secured Party") in an aggregate principal amount not exceeding
one million dollars issued by VISTA TECHNOLOGIES INC., a Nevada corporation
("Debtor") with its principal offices at 167 S. San Antonio Road, Suite 9, Los
Altos, California 94022.
A. Debtor has issued and sold 12% Secured Promissory Notes due June
30, 1997 or earlier upon the occurrence of certain events as set forth therein
(herein called the "Bridge Notes"), pursuant to which Secured Parties have
advanced loans to the Debtor on the terms and subject to the conditions set
forth therein. All terms not otherwise defined herein are used with the same
meaning as set forth in the Bridge Notes.
B. As security for the payment and performance of its obligations to
the Secured Parties under the Bridge Notes and under this Security Agreement,
it is the intent of Debtor to pledge and to grant to Secured Party and create
a security interest in all of the assets of the Debtor, as hereinafter
provided, subject only to a first priority security interest of Pharma Patch
Plc in certain shares of Technical and Chemical Products Inc. common stock so
long as the same, or any portion thereof, are owned as an asset by the Debtor
and subject to purchase money equipment lease and installment note obligations
for the acquisition of laser vision correction equipment.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST. Debtor hereby pledges and grants to
Secured Parties a security interest in the property described in Paragraph 2
below (collectively and severally, the "Collateral") to secure payment and
performance of the obligations of Debtor to the Secured Parties described in
Paragraph 3 below (collectively and severally, the "Obligations").
2. COLLATERAL. The Collateral shall consist of the following assets
of the Debtor:
(a) All inventory of Debtor, now owned or hereafter acquired,
including, without limitation, all raw materials, work in process, materials
used or consumed in Debtor's business and finished goods, and merchandise,
parts and supplies of every kind, including inventory temporarily out of
Debtor's custody or possession, and all additions, accessions, improvements,
replacements and substitutions thereto and products thereof, together with all
returns on accounts;
(b) All goods and equipment of Debtor, now owned or hereafter
acquired, or in which Debtor now has or may hereafter acquire any interest,
including, without limitation, all machinery, supplies, tools, dies,
blueprints, catalogs, computer hardware and software, furniture, furnishings
and fixtures, motor vehicles of every kind and description, and all additions,
accessions, improvements, replacements and substitutions thereto and products
thereof;
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(c) All accounts, contract rights and general intangibles now owned or
hereafter created or acquired by Debtor, including, without limitation, all
receivables, goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records;
(d) All documents, instruments and chattel paper now owned or
hereafter acquired by Debtor;
(e) All monies, deposit accounts, certificates of deposit and
securities of Debtor now or hereafter in Secured Parties's or its agents'
possession including, without limitation, shares of Technical Chemicals and
Products Inc. common stock owned by the Debtor subject only to a first
priority security interest of Pharma Patch Plc in such shares of Technical and
Chemical Products Inc. common stock so long as the same, or any portion
thereof, are owned as an asset by the Debtor.
(f) All now existing and hereafter acquired books and records relating
to the foregoing Collateral and all now owned and hereafter acquired equipment
containing such books and records; and
(g) All proceeds of the foregoing Collateral. For purposes of this
Security Agreement, the term "proceeds" includes whatever is receivable or
received when Collateral or proceeds is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes, without limitation, all rights to payment, including return
premiums, with respect to any insurance relating thereto.
3. OBLIGATIONS. The Obligations of Debtor secured by this Security
Agreement shall consist of any and all debts, obligations and liabilities of
Debtor to Secured Parties under the terms and conditions of the Bridge Notes
including, without limitation, all rights to payment of principal, interest
and costs of collection set forth in the Bridge Notes and all obligations of
the Debtor in this Security Agreement and all amendments or extensions or
renewals of the Bridge Notes, and/or this Security Agreement, whether now
existing or hereafter and howsoever arising, voluntary or involuntary, whether
or not jointly owed with others, direct or indirect, absolute or contingent,
due or to become due, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred.
4. SECURED PARTIES ACTION BY MAJORITY CONSENT. Any action permitted
to be taken by the Securities Parties under this Agreement, and any notices
given by Securities Parties, shall require the written consent or approval of
at least a majority-in-interest of the unpaid principal represented by the
Bridge Notes evidenced by a writing executed by the registered holders
thereof. Upon the request of any Secured Party, Debtor shall promptly
furnish to all Secured Parties a current listing of the names and addresses of
the registered holders of all of the Bridge Notes and the amount of
outstanding and principal represented by each of the same.
5. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Debtor hereby
represents and warrants that: (a) except as heretofore disclosed to Secured
Parties in writing, Debtor is the owner of the Collateral (or, in the case of
after-acquired Collateral, at the time Debtor acquires
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rights in the Collateral, will be the owner thereof) and that no other person
has (or, in the case of after-acquired Collateral, at the time Debtor acquires
rights therein, will have) any right, title, claim or interest (by way of
security interest or other lien or charge or otherwise) in, against or to the
Collateral, except for purchase equipment money lease and installment purchase
financing as to laser vision correction equipment and except for the security
interest of Pharma Patch Plc in shares of Technical Chemicals and Products
Inc., (b) all information heretofore, herein or hereafter supplied to Secured
Parties by or on behalf of Debtor with respect to the Collateral when supplied
was, is or will be true and correct, respectively; (c) each account, contract
right, item of chattel paper, instrument or any other right to the payment of
money constituting Collateral is genuine and enforceable in accordance with
its terms against the party obligated to pay the same (an "Account Debtor"),
which terms have not been modified or waived in any respect or to any extent;
(d) the amount represented by Debtor to Secured Parties as owing by any
Account Debtor is the correct amount actually and unconditionally owing by
such Account Debtor, except for normal discounts where applicable; and (e) no
Account Debtor has any defense, set off, claim or counterclaim against Debtor
which can be asserted against Secured Parties, whether in any proceeding to
enforce Secured Parties's rights in the Collateral, or otherwise.
6. COVENANTS OF DEBTOR. Debtor hereby agrees (a) to do all acts that
may be necessary to maintain, preserve and protect the Collateral; (b) not to
use or permit any Collateral to be used unlawfully; (c) to pay promptly when
due all taxes, assessments, charges, encumbrances and liens now or hereafter
imposed upon or affecting any Collateral; (d) to notify Secured Parties
promptly of any change in Debtor's name or place of business, or, if Debtor
has more than one place of business, its head office, or office in which
Debtor's records relating to the Collateral are kept; (e) to procure, execute
and deliver from time to time any endorsements, assignments, financing
statements and other writings deemed necessary or appropriate by Secured
Parties to perfect, maintain and protect their security interest hereunder and
the priority thereof; (f) to appear in and defend any action or proceeding
which may affect its title to or Secured Parties' interest in the Collateral;
(g) to keep separate, accurate and complete records of the Collateral and to
provide Secured Parties with such records and such other reports and
information relating to the Collateral as Secured Parties may request from
time to time; (h) not to surrender or lose possession of (other than to
Secured Parties), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein except in the ordinary
course of Debtor's business and except that Debtor is authorized to sell the
Technical Chemical and Products Inc. common stock and to apply proceeds
thereof to payment of Debtor's obligations to Pharma Patch Plc and the holders
of the Bridge Notes as their interests shall appear, and to otherwise keep the
Collateral free of all levies and security interests or other liens or charges
except those contemplated by this Security Agreement or approved in writing by
Secured Parties; (i) to account fully for and promptly deliver to Secured
Parties, in the form received, all proceeds of the Collateral received,
endorsed to Secured Parties as appropriate, and until so delivered all
proceeds shall be held by Debtor in trust for Secured Parties, separate from
all other property of Debtor and identified as the property of Secured
Parties; (j) to keep the Collateral in good condition and repair; (k) not to
cause or permit any waste or unusual or unreasonable depreciation of the
Collateral; (l) at any reasonable time, upon demand by Secured Parties, to
exhibit to and allow inspection by Secured Parties (or persons designated by
Secured Parties) of the Collateral; (m) to keep the records concerning the
Collateral at the principal office
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of the Debtor in the State of California; and (m) to insure the Collateral,
with Secured Parties named as loss payee, in form and amounts, with companies,
and against risks and liabilities satisfactory to Secured Parties.
7. AUTHORIZED ACTION BY SECURED PARTIES. In the event of a default
under the Bridge Notes, Debtor hereby irrevocably appoints Secured Parties as
the Debtor's attorney-in-fact to do (but Secured Parties shall not be
obligated to and shall incur no liability to Debtor or any third party for
failure so to do) any act which Debtor is obligated by this Security Agreement
to do, and to exercise such rights and powers as Debtor might exercise with
respect to the Collateral, including, without limitation, the right to (a)
collect by legal proceedings or otherwise and endorse, receive and receipt all
dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter into any
extension or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c) insure,
process and preserve the Collateral; (d) transfer the Collateral to its own or
its nominee's name; and (e) make any compromise or settlement, and take any
action it deems advisable, with respect to the Collateral. Debtor agrees to
reimburse Secured Parties upon demand for any costs and expenses, including,
without limitation, attorneys' fees, Secured Parties may incur while acting as
Debtor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby.
8. SALE OR LEASE OF COLLATERAL. Until otherwise notified by Secured
Parties, Debtor may sell or lease Collateral consisting of inventory or
equipment in the ordinary course of Debtor's business and in the ordinary
course of business of any subsidiary corporations in which Debtor shall own an
equity interest.
9. NOTIFICATION OF ACCOUNT DEBTORS; COLLECTION. In the event of a
default under the Bridge Notes, Debtor agrees that Secured Parties may at any
time, but shall not be obligated to, notify any Account Debtor on any Col-
lateral to make payment directly to Secured Parties. Until otherwise notified
by Secured Parties, Debtor shall collect, enforce and receive delivery and
payment of the Collateral.
10. DEFAULT AND REMEDIES. Debtor shall be deemed in default under
this Security Agreement upon the occurrence of any of the following (an "Event
of Default"): (i) any representation or warranty of Debtor contained herein
or otherwise made in connection with the transactions contemplated hereby
shall be false or misleading in any material respect on the date as of which
made, (ii) Debtor shall fail to perform any of the terms, provisions,
covenants, conditions, agreements or obligations contained in this Security
Agreement or (iii) an Event of Default shall occur under (and as defined in)
the Bridge Notes. Upon the occurrence of any such Event of Default, Secured
Parties may, at their option, and without notice to or demand on Debtor and in
addition to all rights and remedies available to Secured Parties under the
Bridge Notes, do any one or more of the following: (a) foreclose or
otherwise enforce Secured Parties' security interest in any manner permitted
by law, or provided for in this Security Agreement; (b) sell, lease or
otherwise dispose of any Collateral at one or more public or private sales,
whether or not such Collateral is present at the place of sale, for cash or
credit or future delivery, on such commercially reasonable terms and in such
manner as Secured Parties may determine; (c) recover from Debtor all costs and
expenses, including, without limitation, reasonable attorneys' fees, incurred
or paid by Secured Parties in exercising any right, power
4
<PAGE>
or remedy provided by this Security Agreement or by law; (d) require Debtor to
assemble the Collateral and make it available to Secured Parties at a place to
be designated by Secured Parties; (e) enter onto property where any
Collateral is located and take possession thereof with or without judicial
process; (f) prior to the disposition of the Collateral, store, process,
repair or recondition it or otherwise prepare it for disposition in any manner
and to the extent Secured Parties deem appropriate; and (g) exercise any and
all other rights and remedies available to a secured party under the
California Uniform Commercial Code.
11. WAIVER OF HEARING. Debtor expressly waives any constitutional or
other right to a judicial hearing prior to the time Secured Parties takes
possession or disposes of the Collateral upon default as provided herein.
12. WAIVER. Any forbearance or delay by Secured Parties in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Secured Parties shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Secured Parties. Debtor waives any right to require
Secured Parties to proceed against any person or to exhaust any Collateral or
to pursue any remedy in Secured Parties's power.
13. BINDING UPON SUCCESSORS. All rights of Secured Parties under this
Security Agreement shall inure to the benefit of their respective successors
and assigns, and all obligations of Debtor shall bind its heirs, executors,
administrators, successors and assigns.
14. ENTIRE AGREEMENT; SEVERABILITY. The terms of this Security
Agreement are intended by the parties as a final expression of their agreement
with respect to such terms as are included in this Security Agreement and may
not be contradicted by evidence of any prior or contemporaneous agreement.
The parties' further intend that this Security Agreement constitutes the
complete and exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial proceeding, if any, involving
this Security Agreement. If any of the provisions of this Security Agreement
shall be held invalid or unenforceable, this Security Agreement shall be
construed as if not containing those provisions and the rights and obligations
of the parties hereto shall be construed and enforced accordingly.
15. CHOICE OF LAW. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, and,
where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the California Uniform Commercial Code.
EXECUTED as of this 11th day of November, 1996 in the City of Los Altos,
State of California.
"Debtor" VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
------------------------------
Thomas A. Schultz, President
5
Resolution adopted by Vista Technologies Inc. Board of Directors on March 6,
1997 authorizing grant of security interest in capital stock of European
subsidiaries to secure advances from Atlantic Central Enterprises., Ltd.:
AUTHORIZATION FOR GRANT OF SECURITY INTEREST TO ATLANTIC CENTRAL
ENTERPRISES, LTD.
RESOLVED, that this Corporation is authorized and empowered to
grant a security interest in, and to pledge, shares of capital stock
owned by this Corporation in its European subsidiary corporations (to
wit, Vista Vision S.p.A., Convista Vision B.V., and Vista Vision
Scandinavia A.B.), in favor of Atlantic Central Enterprises, Ltd. for
the purpose of securing all past and future advances by Atlantic Central
Enterprises, Ltd. to or for the account of this Corporation.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement') dated as of January 31, 1996,
between VISTA TECHNOLOGIES INC., a Nevada corporation with its principal place
of business in the United States at 126 E. 56th Street, 2nd Floor, New York,
NY 10022 (herein called the "Company") and THOMAS A. SCHULTZ (herein called
the "Employee") residing at 833 Orchid Place, Los Altos, California, 94024.
1. EMPLOYMENT. The Company hereby employs Employee initially as a non-officer
employee of the Company for a period no longer than 30 days from the
Employment Date as defined in Section 2, and thereafter as the Company's
President and Chief Executive Officer reporting to the Company's Board of
Directors, responsible for management and supervision of the Company's
business and financial affairs for the term of this Agreement. Upon the
signing of this Agreement, the Company agrees to elect Employee to its Board
of Directors and thereafter will use its best efforts to assure the
continuation of Employee's membership on the Board. The Employee hereby
accepts such employment upon the terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of January 15, 1996 (the
"Employment Date") and shall continue in effect for a term of 36 months,
unless previously terminated in accordance with the provisions of Section 6 of
this Agreement. Thereafter, this Agreement shall be automatically renewed on a
year-to-year basis unless either party shall provide the other with notice in
writing of the termination of this Agreement at least 60 days' prior to the
expiration of this Agreement at the end of its original term or any renewal
thereof. For purposes of this Agreement, the "term of this Agreement" shall
refer to the initial term and all renewal terms hereof. In the event of
termination by the Company prior to the expiration of this Agreement at the
end of its
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Thomas A. Schultz Employment Agreement 1
<PAGE>
original term or any renewal thereof, the Company shall pay the Employee
severance pay and benefits required by Section 6(e) of this Agreement unless
termination by the Company is for a reason specified in Sections 6(a), 6(b) or
6(c) hereunder
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a salary and fringe benefits as
follows;
CASH COMPENSATION: The Company shall pay the Employee a base salary
during the term of this Agreement, payable monthly, at the rate of
$150,000 per year per annum. Employee will be eligible to receive an
annual performance bonus of up to 100% of base salary based upon
achievement of reasonable and achievable Company goals as determined and
approved in good faith by the Board of Directors to be paid no later
than 90 days from the end of such year. Employee shall be eligible for
annual performance appraisal and merit increase. Company may, but is not
obligated to, increase Employee's salary as Company deems appropriate.
(b) STOCK OPTIONS: The Company shall adopt an incentive stock option
plan and shall grant the Employee incentive stock options under that
plan to purchase 300,000 common shares of the Company at $2.50 per
share; 150,000 options shall vest in equal monthly increments over a
period of 36 months from the Employment Date and the remaining 150,000
shares shall vest upon achievement of Company stock price goal, as set
forth in the Stock Option Agreement.
(c) MEDICAL, INSURANCE, AND OTHER BENEFITS: The Employee shall at his
option be entitled to participate with other employees of the Company in
all group fringe benefit plans or other group arrangements authorized
and adopted from time to time. Employee shall also receive such other
benefits including vacation, holidays, and sick leave, as Company
generally provides to its employees holding similar positions as that of
Employee. For the initial 12 months of the term of this Agreement, the
Company agrees to pay the premiums of Employee's personal long-term
disability insurance (Provident Life & Accident Policy #777182), and
life insurance policies (Northwestern Mutual Policy #8496834 and
#10873969) as well as pay the Employee a monthly cash payment of $780 to
cover out-of-pocket and other medical expenses. After the initial 12
months
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Thomas A. Schultz Employment Agreement 2
<PAGE>
of this Agreement, the Company may discontinue these payments to the
extent that it has established and made available to Employee
Company-paid medical, life insurance and long-term disability plans of
substantially equivalent value.
(d) CAFETERIA PLAN: The Company agrees to reimburse Employee an amount
equal to no more than seven and one half per cent (7 1/2%) of base
salary in any year for personal benefit expenses related to Employee and
his family as determined by Employee at his sole discretion. Cafeteria
Plan benefits shall not be accumulated and carried over from one year to
the next, and shall be forfeited to the extent not used within any
calendar year.
(e) EXPENSES: The Company shall either pay directly or reimburse
Employee for reasonable travel, entertainment and other business
expenses incurred by Employee in the performance of his duties
hereunder; provided that the incurring of such expenses shall be subject
to such policies as shall be established by the Board of Directors of
the Company from time to time, and Employee shall submit to the Company
such documentation to substantiate such expenses as the Company shall
reasonably request.
(f) INITIAL EMPLOYMENT BONUS: Company will pay Employee a cash bonus of
$75,000 upon filing of a Form SB-2 with the Securities and Exchange
Commission ("SEC") of Vista Laser Centers of the Southwest, Inc. ("Vista
Southwest") on or before February 22, 1996, otherwise bonus payment will
be paid upon the Form SB-2 (or other substantially equivalent form)
filing of the second of two Vista initial public offerings (one of which
may be the Vista Southwest).
Nothing herein shall be deemed to preclude the Company from awarding
additional compensation or benefits to Employee during the term of this
Agreement, upon approval of Company's Board of Directors, whether in the form
of raises, bonuses, additional fringe benefits, or otherwise.
4. DUTIES. During the term of this Agreement, the Employee hereby promises to
perform and discharge faithfully the duties which may be assigned to him from
time to time by the Board of Directors of the Company in connection with the
conduct of its
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Thomas A. Schultz Employment Agreement 3
<PAGE>
business so long as such duties are reasonably related to the Employee's
duties as the President and Chief Executive Officer of the Company. Employee
is employed to actively serve on a full-time basis as an executive officer of
the Company reporting directly to its Board of Directors and to serve as a
member of the Company's Board of Directors.
5. EXTENT OF SERVICES; OTHER INTERESTS. During the term of this Agreement, the
Employee shall devote all of his working time, attention and energies which is
reasonably required for the performance of his duties and the business of the
Company and shall travel as reasonably required to discharge the duties of his
position with the Company as assigned by its Board of Directors. The Employee
shall not during the term of this Agreement be engaged in any other business
activities that are, or could potentially be, in competition with the business
activities of the Company whether or not such business activities are pursued
for gain, profit or other pecuniary advantage. Subject to the foregoing, the
Employee may engage in investment, business, professional and continuing
education activities so long as such activities do not interfere with the
performance of his duties as the President and Chief Executive Officer of the
Company.
6. TERMINATION. Payment of severance described in this Section 6 shall be paid
no later than ten (10) days after becoming due.
(a) DEATH: In the event of Employee's death during the term hereof,
this Agreement shall terminate immediately and, except as expressly set
forth in this paragraph, the Company shall have no further liability
hereunder to Employee or his estate. The Company shall continue to pay
to Employee's estate his salary and continued stock option vesting for a
period of one (1) month from and after the date of death during the term
of this Agreement.
(b) PERMANENT DISABILITY. In the event that Employee becomes totally
disabled during the term hereof and such total disability continues for
a period in excess of ninety (90) days, whether consecutive or in the
aggregate during any 12 month period, at the end of such period of
disability the Employee shall be considered as permanently disabled and
this Agreement shall terminate
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Thomas A. Schultz Employment Agreement 4
<PAGE>
immediately and, except as expressly set forth in this paragraph, the
Company shall have no further liability hereunder to Employee. The
Company shall continue to pay to Employee his salary and continue stock
option vesting for the period of disability and a period of two (2)
months from and after the date of total disability commencing with the
expiration of the first 90 day period of such disability as severance
pay hereunder.
Employee shall be considered as totally disabled if, and when because of
injury, illness or physical or mental disability, he is prevented from
effectively performing the duties of his employment. The determination
of total disability shall be made by the Board of Directors of the
Company, but said decision shall not be unreasonable or arbitrary and
shall be supported by the opinion (at the Company's expense) of at least
one licensed physician unless Employee shall without justification fail
to submit to the necessary physical or mental examinations. It is
understood that Employee's occasional sickness of short duration shall
not result in Employee being considered totally disabled, and Employee
shall continue to be compensated hereunder during such periods of
occasional sickness so long as they shall not exceed twelve (12) days In
a calendar year.
(c) INVOLUNTARY TERMINATION FOR CAUSE. The Company may terminate this
Agreement for cause. For the purposes of this Agreement, a termination
for "cause" shall mean a termination resulting from a determination by
the Company's Board of Directors that Employee (i) has committed a
felony or act of moral turpitude which would materially injure the
Company or its reputation or, (ii) has intentionally or willfully and
repeatedly breached his duties hereunder in a material respect and, if
curable, has failed to cure the same within thirty (30) days after
receiving written notice of such breach from the Board of the Company.
Such notice must be given to Employee following each claimed breach,
whether or not curable. In the event of termination for cause, the
Company shall have no further liability hereunder to Employee from and
after the date of such termination.
(d) TERMINATION WITHOUT CAUSE. Termination of Employee for any reason
other than in paragraphs 6(a), 6(b), and 6(c) hereof shall be considered
Termination Without Cause. In addition, Employee's resignation from the
employ of the
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Thomas A. Schultz Employment Agreement 5
<PAGE>
Company shall be deemed Termination Without Cause ("Constructive
Discharge") if resulting from: 1) a material reduction in cash
compensation (excluding performance bonuses) or other benefits other
than as a result of a decrease in compensation payable to Employee and
to all other executive officers of Company on the basis of Company's
financial performance; 2) a change in reporting relationships or a
significant change in the nature or scope of Employee's
responsibilities, authorities, powers, functions or duties as
President and Chief Executive; 3) a requirement imposed by Company that
Employee relocate to an office that is more than 25 miles from his
current residence; 4) failure of Company materially to perform its
obligations pursuant to this Agreement. If Employee continues his
employment with the Company after a Constructive Discharge event occurs,
that continuation shall not constitute a waiver of Employee's right to
treat such event as an event of Termination Without Cause thereafter.
(e) SALARY AND BENEFIT CONTINUATION UPON TERMINATION WITHOUT CAUSE. Upon
the termination of Employee's employment with the Company for any reason
whatsoever prior to the expiration of the original term or any annual
renewal of the term of this Agreement, except for (i) termination upon
death as set forth in paragraph 6(a) hereof; (ii) termination upon
permanent disability as set forth in paragraph 6(b) hereof; (iii)
termination for cause pursuant to paragraph 6(c) hereof; or (iv)
Employee's voluntarily electing not to continue in the employment of the
Company under conditions other than those set forth in paragraph 6(d)
hereof; then the Company within thirty (30) days after such termination,
and in lieu of all other obligations of the Company hereunder, shall:
1) pay to Employee an lump-sum payment equal to his then base salary for
a period equal to twelve (12) months; 2) continue vesting of
outstanding Employee stock options for twelve (12) months from
termination date (which provision shall be added to Employee's option(s)
at the date(s) of grant from the beginning); 3) will provide Employee,
at Company's cost, with employment benefits consisting of life, health,
dental and long-term disability insurance for a period of 12 months
after termination. Thereafter, any continuation of benefits under the
Consolidated Omnibus Budget Reconciliation Act (COBRA) will be at
Employee's cost.
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Thomas A. Schultz Employment Agreement 6
<PAGE>
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that the Company's trade secrets and proprietary processes as
they may exist from time to time are valuable, special and unique assets of
the Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not during
or after the term of his employment, disclose such secrets or processes to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, nor shall the Employee make use of any such secrets or
processes for his own purposes or for the benefit of any person, firm,
corporation, or other entity (except the Company) under any circumstances
during or after the term of his employment; provided that after the term of
his employment these restrictions shall not apply to such secrets and
processes which are then, or from tine to time thereafter, in the public
domain (provided that he was not responsible, directly or indirectly, for
permitting such secrets or processes to enter the public domain without the
Company's consent).
8. COVENANT NOT TO COMPETE OR INTERFERE. The Employee agrees that during the
term of this Agreement or for a period of one (1) year after the date of
Termination under this Agreement, whichever occurs first; (a) Employee shall
not intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise between the Company and any customer,
supplier, lessor or employee of the Company or any of its subsidiaries and (b)
Employee shall not as a sole proprietor or otherwise for his own account or as
a partner, employee, officer, director, manager, agent, distributor,
consultant, marketing representative, associate, investor or otherwise (except
as to a less than 5% interest in a public company listed on the Nasdaq, a
national, or a regional exchange), directly or indirectly, own, purchase,
organize or take preparatory steps for the organization of, finance, work for,
provide services to, advise, acquire, lease, operate, manage or invest in or
permit his name to be used or employed in connection with any business which
engages in providing equipment and/or support services for corrective eye
surgery in competition with the Company (the "Business"). Employee further
agrees that the covenants and other provisions of this paragraph shall cover
his activities in the whole of North America, Europe and Asia (the
"Territory"). The parties hereto agree that the covenants contained in this
paragraph (b) shall be construed as if the covenants are divided into separate
and distinct covenants in respect of each of the products and services of the
Business, each capacity in which the party is prohibited from competing, and
each part of the world in which such competition is prohibited
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Thomas A. Schultz Employment Agreement 7
<PAGE>
from taking place. The territorial restrictions contained in this paragraph
(b) are properly required for the adequate protection of the Business and in
the event any covenant or other provision contained this paragraph (b) shall
be deemed to be illegal, unenforceable, or unreasonable by a court or other
tribunal of competent jurisdiction. With respect to any part of the Territory
or otherwise, such covenant or provision shall not be affected with respect to
any other part of the Territory or otherwise, and each of the parties hereto
agrees and submits to the reduction of said territorial restriction or other
provisions to such an area or otherwise, as said court shall deem reasonable.
The parties further agree that if any provision of this Agreement is found to
be unenforceable, it shall not affect the enforceability of the remaining
provisions and the court shall enforce all remaining provisions to the extent
permitted by law
9. INVENTIONS. The Employee hereby sells, transfers, and assigns to the
Company, or to any person or entity designated by the Company, at of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures, and improvements, whether patented or unpatented, and
copyrightable material made or conceived by the Employee, solely or jointly
during the term hereof which relate to methods, apparatus, formulae, designs,
products, processes or devices, sold, leased, used, or under consideration or
development by the Company, or which otherwise relate to or pertain to the
business, functions, or operations of the Company. The Employee agrees to
communicate promptly and to disclose to the Company, in such form as the
Employee may be required to do so, all information, details, and data
pertaining to the aforementioned inventions, ideas, disclosures, and
improvements and to execute and deliver to the Company such formal transfers
and assignments and such other papers and documents as may be required of the
Employee to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and, as to copyrightable
material, to obtain copyright thereof.
For the purposes of this Agreement, an invention shall be deemed to have been
made during the term of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice by the Company,
and Employee agrees that any patent application filed within one (1) year
after termination of this employment shall be presumed to relate to an
invention which was made during the term of Employee's employment unless
Employee can provide satisfactory evidence to the contrary.
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Thomas A. Schultz Employment Agreement 8
<PAGE>
10. INJUNCTIVE RELIEF. The parties hereto acknowledge that (a) the covenants
and restrictions set forth in Sections 8, 9 and 10 of this Agreement are
necessary, fundamental and required for the protection of the business of the
Company, (b) such covenants and restrictions are material inducements to
investors to enter into agreements to invest in the Company, and (c) a breach
of any of such covenants and restrictions by Employee will result in
irreparable harm and damages to the Company which cannot be adequately
compensated by a monetary award. Accordingly, in the event of breach or
threatened breach of such provisions by Employee, Employee expressly agrees
that the Company shall be entitled to the immediate remedy of a temporary
restraining order, preliminary injunction or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin the Employee from breaching any such covenant or provision
or to specifically enforce the provisions hereof. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
11. INSURANCE. The Company, at its election and for its benefit, may insure
the Employee against accidental loss or death and the Employee shall submit to
such physical examination and supply such information as may be required in
connection therewith.
12. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered or certified mail
to his last known residence in the case of the Employee or to its last known
principal office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed by a waiver of any
subsequent breach.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
- -----------------------------------------------------------------
Thomas A. Schultz Employment Agreement 9
<PAGE>
15. ASSIGNMENT. The rights and obligations of the parities under this
Agreement shall inure to the benefit of and shall be binding upon the
successors of such parties.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and supercedes the Consulting Agreement between Employee and Company
dated December 12, 1995. It may not be changed orally but only by an agreement
in writing signed by the party against whom enforcement of any waiver,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first written above.
EMPLOYEE: /s/ Thomas A. Schultz
-------------------------------
THOMAS A. SCHULTZ
COMPANY: VISTA TECHNOLOGIES INC.
By: /s/ Jac. J. Lam
---------------------------
Jac. J. Lam, President
- -----------------------------------------------------------------
Thomas A. Schultz Employment Agreement 10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement') dated as of November 1, 1996,
between VISTA TECHNOLOGIES INC., a Nevada corporation with its principal place
of business in the United States at 167 S. San Antonio Road, Suite 9, Los
Altos, CA 94022 (herein called the "Company") and Allen J. Simon (herein
called the "Employee") residing at 3030 Washington St., San Francisco, CA
94115
1. EMPLOYMENT. The Company hereby employs Employee as the Company's
Executive Vice President and Chief Operating Officer reporting to the
Company's Chief Executive Officer. Employee will be responsible for management
and supervision of the Company's operations for the term of this Agreement,
and the Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of November 1, 1996
(the "Employment Date") and shall continue in effect for a term of 36 months,
unless previously terminated in accordance with the provisions of Section 6 of
this Agreement. Thereafter, this Agreement shall be automatically renewed on a
year-to-year basis unless either party shall provide the other with notice in
writing of the termination of this Agreement at least 60 days' prior to the
expiration of this Agreement at the end of its original term or any renewal
thereof. For purposes of this Agreement, the "term of this Agreement" shall
refer to the initial term and all renewal terms hereof. In the event of
termination by the Company prior to the expiration of this Agreement at the
end of its original term or any renewal thereof, the Company shall pay the
Employee severance pay and benefits required by Section 6(e) of this Agreement
unless termination by the Company is for a reason specified in Sections 6(a),
6(b) or 6(c) hereunder
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a salary and fringe benefits as
follows;
(a) CASH COMPENSATION: The Company shall pay the Employee a base salary
during the term of this Agreement, payable monthly, at the rate of
$175,000 per year per
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1
<PAGE>
annum. In lieu of an annual bonus for the current fiscal year ending
March 31, 1997, Employee will receive a payment of $50,000 on May 1,
1997. Thereafter Employee will be eligible to receive an fiscal annual
performance bonus of up to 100% of base salary based upon achievement of
reasonable and achievable Company goals as determined and approved in
good faith by the Board of Directors to be paid no later than 90 days
from the end of such year. Employee shall be eligible for annual
performance appraisal and merit increase. Company may, but is not
obligated to, increase Employee's salary as Company deems appropriate.
(b) Stock Options: The Company shall grant the Employee Incentive Stock
Options under the Vista Technologies Inc. 1994 Stock Option Plan to
purchase 500,000 common shares of the Company at $2.625 per share which
shall vest in equal quarterly increments over a period of 12 quarters
from the Employment Date as set forth in the Stock Option Agreement.
(c) MEDICAL, INSURANCE, AND OTHER BENEFITS: The Employee shall at his
option be entitled to participate with other employees of the Company in
all group fringe benefit plans or other group arrangements authorized
and adopted from time to time. Employee shall also receive such other
benefits including vacation, holidays, and sick leave, as Company
generally provides to its employees holding similar positions as that of
Employee. The Company agrees to make available to Employee Company-paid
medical and long-term disability plans, and will make the annual
payments for Employee's life insurance policy #1A22073200 provided by
Pacific Mutual Insurance.
(d) CAFETERIA PLAN: The Company agrees to reimburse Employee an amount
equal to no more than seven and one half per cent (7 1/2%) of base
salary in any year for personal benefit expenses related to Employee and
his family as determined by Employee at his sole discretion. Cafeteria
Plan benefits shall not be accumulated and carried over from one year to
the next, and shall be forfeited to the extent not used within any
calendar year.
(e) EXPENSES: The Company shall either pay directly or reimburse
Employee for reasonable travel, entertainment and other business
expenses incurred by Employee in the performance of his duties
hereunder; provided that the incurring
____________________________________________________________________________
2
<PAGE>
of such expenses shall be subject to such policies as shall be
established by the Board of Directors of the Company from time to time,
and Employee shall submit to the Company such documentation to
substantiate such expenses as the Company shall reasonably request.
(f) INITIAL EMPLOYMENT BONUS: Company will pay Employee a cash bonus
of $25,000 on or before December 15, 1996. In addition, the Company
shall grant Employee upon effective date of the Agreement 100,000 Class
G Common Stock Purchase Warrants for Company common shares exercisable
at a price of $2.625 per share in exchange for $100. The Company has
the right to repurchase these warrants for $100 should Employee be
Terminated by the Company for any reason other than in paragraphs 6(a),
6(b), and 6(d) hereof.
Nothing herein shall be deemed to preclude the Company from awarding
additional compensation or benefits to Employee during the term of this
Agreement, upon approval of Company's Board of Directors, whether in the form
of raises, bonuses, additional fringe benefits, or otherwise.
4. DUTIES. During the term of this Agreement, the Employee hereby promises
to perform and discharge faithfully the duties which may be assigned to him
from time to time by the President of the Company in connection with the
conduct of its business so long as such duties are reasonably related to the
Employee's duties Executive Vice President and Chief Operating Officer of the
Company. Employee will be responsible for all domestic and foreign operations
of the Company and will have all relevant executives and their respective
subordinates report to him with the exception of the Chief Financial Officer
and his subordinates. Employee is employed to actively serve on a full-time
basis as an executive officer of the Company reporting directly to its
President.
5. EXTENT OF SERVICES; OTHER INTERESTS. During the term of this Agreement,
the Employee shall devote all of his working time, attention and energies
which is reasonably required for the performance of his duties and the
business of the Company and shall travel as reasonably required to discharge
the duties of his position with the Company as assigned by its Board of
Directors. The Employee shall not during the term of this Agreement be
engaged in any other business activities that are, or could
____________________________________________________________________________
3
<PAGE>
potentially be, in competition with the business activities of the Company
whether or not such business activities are pursued for gain, profit or other
pecuniary advantage. Subject to the foregoing, the Employee may engage in
investment, business, professional and continuing education activities so long
as such activities do not substantially interfere with the performance of his
duties as the Executive Vice President and Chief Operating Officer of the
Company.
6. TERMINATION. Payment of severance described in this Section 6 shall be
paid no later than ten (10) days after becoming due.
(a) DEATH: In the event of Employee's death during the term hereof,
this Agreement shall terminate immediately and, except as expressly set
forth in this paragraph, the Company shall have no further liability
hereunder to Employee or his estate. The Company shall continue to pay
to Employee's estate his salary and continued stock option vesting for a
period of one (1) month from and after the date of death during the term
of this Agreement.
(b) PERMANENT DISABILITY. In the event that Employee becomes totally
disabled during the term hereof and such total disability continues for
a period in excess of ninety (90) days, whether consecutive or in the
aggregate during any 12 month period, at the end of such period of
disability the Employee shall be considered as permanently disabled and
this Agreement shall terminate immediately and, except as expressly set
forth in this paragraph, the Company shall have no further liability
hereunder to Employee. The Company shall continue to pay to Employee his
salary and continue stock option vesting for the period of disability
and a period of two (2) months from and after the date of total
disability commencing with the expiration of the first 90 day period of
such disability as severance pay hereunder.
Employee shall be considered as totally disabled if, and when because of
injury, illness or physical or mental disability, he is prevented from
effectively performing the duties of his employment. The determination
of total disability shall be made by the Board of Directors of the
Company, but said decision shall not be unreasonable or arbitrary and
shall be supported by the opinion (at the Company's expense) of at least
one licensed physician unless Employee shall
____________________________________________________________________________
4
<PAGE>
without justification fail to submit to the necessary physical or mental
examinations. It is understood that Employee's occasional sickness of
short duration shall not result in Employee being considered totally
disabled, and Employee shall continue to be compensated hereunder during
such periods of occasional sickness so long as they shall not exceed
twelve (12) days In a calendar year.
(c) INVOLUNTARY TERMINATION FOR CAUSE. The Company may terminate this
Agreement for cause. For the purposes of this Agreement, a termination
for "cause" shall mean a termination resulting from a good faith and
reasonable determination by the Company's Board of Directors that
Employee (i) has committed a felony or act of moral turpitude which
would materially injure the Company or its reputation or, (ii) has
intentionally or willfully and repeatedly breached his duties hereunder
in a material respect and, if curable, has failed to cure the same
within thirty (30) days after receiving written notice of such breach
from the Board of the Company. Such notice must be given to Employee
following each claimed breach, whether or not curable. In the event of
termination for cause, the Company shall have no further liability
hereunder to Employee from and after the date of such termination.
(d) TERMINATION WITHOUT CAUSE. Termination of Employee for any reason
other than in paragraphs 6(a), 6(b), and 6(c) hereof shall be considered
Termination Without Cause. In addition, Employee's resignation from the
employ of the Company shall be deemed Termination Without Cause
("Constructive Discharge") if resulting from: 1) a reduction of more
than 25% of monthly base salary in cash compensation (excluding
performance bonuses) or other benefits other than as a result of a
decrease in compensation payable to Employee and to all other executive
officers of Company on the basis of Company's financial performance; 2)
a change in reporting relationship to the Company President or a
significant reduction in the nature or scope of Employee's
responsibilities, authorities, powers, functions or duties as an
Executive Vice President and Chief Operating Officer of the Company; 3)
a requirement imposed by Company that Employee relocate to an office
that is more than 25 miles from the Company's current headquarters; 4)
failure of Company materially to perform its obligations pursuant to
this Agreement. If Employee continues his employment with the Company
after a Constructive Discharge event occurs, that continuation
____________________________________________________________________________
5
<PAGE>
shall not constitute a waiver of Employee's fight to treat such event as
an event of Termination Without Cause unless (i) his employment under
adjusted terms of employment after the Constructive Discharge Event
shall continue for more than 12 months after such Constructive Discharge
Event or (ii) his employment is subsequently terminated for cause under
paragraph 6(c) above. Any waiver of a Constructive Discharge Event as a
result of continued employment for more than 12 months thereafter shall
not, however, be deemed a waiver as to any other Constructive Discharge
Event which may subsequently occur.
(e) SALARY AND BENEFIT CONTINUATION UPON TERMINATION WITHOUT CAUSE.
Upon the termination of Employee's employment with the Company for any
reason whatsoever prior to the expiration of the original term or any
annual renewal of the term of this Agreement, except for (i) termination
upon death as set forth in paragraph 6(a) hereof; (ii) termination upon
permanent disability as set forth in paragraph 6(b) hereof; (iii)
termination for cause pursuant to paragraph 6(c) hereof; or (iv)
Employee's voluntarily electing not to continue in the employment of the
Company under conditions other than those set forth in paragraph 6(d)
hereof; then the Company within thirty (30) days after such termination,
and in lieu of all other obligations of the Company hereunder, shall: 1)
pay to Employee an lump-sum payment equal to his then base salary for a
period equal to twelve (12) months; 2) will provide Employee, at
Company's cost, with employment benefits consisting of life, health,
dental and long-term disability insurance for a period of 12 months
after termination; and 3) enter into a Post-termination Consulting
Agreement as defined below in paragraph 6(f) hereof. Thereafter, any
continuation of benefits under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) will be at Employee's cost.
(f) POST-TERMINATION CONSULTING AGREEMENT. Upon the Termination Without
Cause, Employee will hold himself available to provide consulting
services to the Company for a period terminating one year after the
Termination Date (the "Consulting Period"). Employee will provide the
consulting services only upon the request of the Company's Chief
Executive Officer and for no more than ten hours per week (any period
shorter than one week will include a proportionate number of hours) at
such times and places as are mutually convenient to Employee and the
Company. However, Employee will perform those services at times and
places that do not reasonably conflict with his responsibilities to his
____________________________________________________________________________
6
<PAGE>
then current employer. Employee will perform services as an independent
contractor with the customary and usual independence associated
therewith, and he will not be deemed an employee or agent of the Company
or have the authority to bind, or to enter into any contract on behalf
of, the Company, unless expressly authorized in writing to do so. The
Company will pay Employee a consulting fee of $150.00 per hour for each
hour actually worked at the Company's request. The Company's Board of
Directors has determined that Employee will be providing "substantial
services" to the Company during the Consulting Period such that any
option held by Employee on the Termination Date, if not fully vested at
the time, will continue to vest during the Consulting Period according
to its terms. Any option held by Employee at the Termination Date will
remain exercisable for the current term of the option during the
Consulting Period even though the employment of Employee will terminate
on the Termination Date.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that the Company's trade secrets and proprietary processes as
they may exist from time to time are valuable, special and unique assets of
the Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not during
or after the term of his employment, disclose such secrets or processes to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, nor shall the Employee make use of any such secrets or
processes for his own purposes or for the benefit of any person, firm,
corporation, or other entity (except the Company) under any circumstances
during or after the term of his employment; provided that after the term of
his employment these restrictions shall not apply to such secrets and
processes which are then, or from tine to time thereafter, in the public
domain (provided that he was not responsible, directly or indirectly, for
permitting such secrets or processes to enter the public domain without the
Company's consent).
8. COVENANT NOT TO COMPETE OR INTERFERE. The Employee agrees that during
the term of this Agreement or for a period of one ( 1 ) year after the date of
Termination under this Agreement, whichever occurs first; (a) Employee shall
not intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise between the
____________________________________________________________________________
7
<PAGE>
Company and any customer, supplier, lessor or employee of the Company or any
of its subsidiaries and (b) Employee shall not as a sole proprietor or
otherwise for his own account or as a partner, employee, officer, director,
manager, agent, distributor, consultant, marketing representative, associate,
investor or otherwise (except as to a less than 5% interest in a public
company listed on the Nasdaq, a national, or a regional exchange), directly or
indirectly, own, purchase, organize or take preparatory steps for the
organization of, finance, work for, provide services to, advise, acquire,
lease, operate, manage or invest in or permit his name to be used or employed
in connection with any business which engages in providing equipment and/or
support services for corrective eye surgery in competition with the Company
(the "Business"). Employee further agrees that the covenants and other
provisions of this paragraph shall cover his activities in the whole of North
America, Europe and Asia (the "Territory"). The parties hereto agree that the
covenants contained in this paragraph (b) shall be construed as if the
covenants are divided into separate and distinct covenants in respect of each
of the products and services of the Business, each capacity in which the party
is prohibited from competing, and each part of the world in which such
competition is prohibited from taking place. The territorial restrictions
contained in this paragraph (b) are properly required for the adequate
protection of the Business and in the event any covenant or other provision
contained this paragraph (b) shall be deemed to be illegal, unenforceable, or
unreasonable by a court or other tribunal of competent jurisdiction. With
respect to any part of the Territory or otherwise, such covenant or provision
shall not be affected with respect to any other part of the Territory or
otherwise, and each of the parties hereto agrees and submits to the reduction
of said territorial restriction or other provisions to such an area or
otherwise, as said court shall deem reasonable. The parties further agree that
if any provision of this Agreement is found to be unenforceable, it shall not
affect the enforceability of the remaining provisions and the court shall
enforce all remaining provisions to the extent permitted by law
9. INVENTIONS. The Employee hereby sells, transfers, and assigns to the
Company, or to any person or entity designated by the Company, at of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures, and improvements, whether patented or unpatented, and
copyrightable material made or conceived by the Employee, solely or jointly
during the term hereof which relate to methods, apparatus, formulae, designs,
products, processes or devices, sold, leased, used, or under consideration or
development by the Company, or which otherwise relate to or pertain to
____________________________________________________________________________
8
<PAGE>
the business, functions, or operations of the Company. The Employee agrees to
communicate promptly and to disclose to the Company, in such form as the
Employee may be required to do so, all information, details, and data
pertaining to the aforementioned inventions, ideas, disclosures, and
improvements and to execute and deliver to the Company such formal transfers
and assignments and such other papers and documents as may be required of the
Employee to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and, as to copyrightable
material, to obtain copyright thereof.
For the purposes of this Agreement, an invention shall be deemed to have been
made during the term of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice by the Company,
and Employee agrees that any patent application filed within one (1 ) year
after termination of this employment shall be presumed to relate to an
invention which was made during the term of Employee's employment unless
Employee can provide satisfactory evidence to the contrary.
10. INJUNCTIVE RELIEF. The parties hereto acknowledge that (a) the
covenants and restrictions set forth in Sections 8, 9 and 10 of this Agreement
are necessary, fundamental and required for the protection of the business of
the Company, (b) such covenants and restrictions are material inducements to
investors to enter into agreements to invest in the Company, and (c) a breach
of any of such covenants and restrictions by Employee will result in
irreparable harm and damages to the Company which cannot be adequately
compensated by a monetary award. Accordingly, in the event of breach or
threatened breach of such provisions by Employee, Employee expressly agrees
that the Company shall be entitled to the immediate remedy of a temporary
restraining order, preliminary injunction or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin the Employee from breaching any such covenant or provision
or to specifically enforce the provisions hereof. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
11. INSURANCE. The Company, at its election and for its benefit, may insure
the Employee against accidental loss or death and the Employee shall submit to
such
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9
<PAGE>
physical examination and supply such information as may be required in
connection therewith.
12. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to his last known residence in the case of the Employee or to
its last known principal office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed by a waiver of
any subsequent breach.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
15. ASSIGNMENT. The rights and obligations of the parities under this
Agreement shall inure to the benefit of and shall be binding upon the
successors of such parties.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, modification,
extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first written above.
EMPLOYEE: /s/ Allen J. Simon
------------------------
Allen J. Simon
COMPANY: VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
------------------------------------
Thomas A. Schultz, President & CEO
____________________________________________________________________________
10
AGREEMENT
THIS AGREEMENT executed as of the 6th day of January, 1997 BETWEEN:
VISTA TECHNOLOGIES, INC., PHARMAPATCH,
plc and RS-800, INC.
(hereinafter collectively referred to as "Vista")
- AND -
VISTA LASER CENTRES OF THE NORTHEAST INC.
(hereinafter referred to as "Northeast")
- AND -
CHERRY DEVELOPMENT CORPORATION, CHERRY
SHARRER AND DR. SHELDON HERZIG
(hereinafter collectively referred to as the
"Northeast Parties")
WHEREAS Northeast and the Northeast Parties desire and Vista
desires to terminate their relationship;
AND WHEREAS Northeast desires to transfer Vista Stock to Vista in
accordance with this agreement;
AND WHEREAS Vista desires to relinquish its interest in Northeast
and forgive any and all indebtedness;
NOW THEREFORE IN CONSIDERATION OF the mutual covenants contained
herein, (the receipt and sufficiency whereof being hereby mutually
acknowledged by all parties hereto) the parties agree as follows:
1. In consideration of Northeast releasing Vista of the operation
funding guarantee, Vista hereby transfers, conveys and assigns all right,
title and interest to its stock or ownership in Northeast. Vista does hereby
forever releases and hold Vista harmless from any liability or claim of
ownership. Northeast and the Northeast Parties similarly hereby jointly and
severally release and hold Vista and Vista's directors, officers, employees
and shareholders harmless from any liability or claim arising from Vista's
involvement with Northeast. Northeast will purchase Vista's equity interest
in Northeast in consideration of one dollar (the receipt and sufficiency of
which is hereby acknowledged). Vista shall forthwith cause its nominees to
resign from the Board of Directors and as officers of Northeast. Northeast
and its
<PAGE>
Page 2
management shareholders shall provide these individuals with releases and
indemnities from personal liability in connection with such positions.
Northeast shall forthwith change its corporate name to delete "Vista" from its
corporate name.
2. Vista hereby assigns to Cherry Development Corporation on behalf
of such nominee as it may designate all of its outstanding capital
contributions, advances and loans made by Vista to Northeast and/or its
subsidiary, in consideration of one dollar (the receipt and sufficiency of
which is hereby acknowledged).
3. Upon execution hereof, Vista agrees to pay to Northeast the entire
principal amount outstanding under the 12% collateralized notes, together with
interest (the "Notes") issued to private investors, by Northeast (the "Note
Investors"), being $75,000, plus interest, against the receipt from each
investor of a full and final release of each of Vista and their respective
officers, directors, employees and shareholders from any and all liability in
connection therewith and the release by the Note Investors of all claims to
the Vista Shares (as defined in section 8) held as collateral for the Notes.
Northeast agrees to register any and all discharges under the PPSA necessary
in order to reflect the foregoing.
4. Upon execution hereof, Vista agrees to pay a lump sum payment in
the amount of $50,000 to Northeast to assist it in carrying on its business
activities. In addition to the foregoing, Vista agrees to pay $75,000 to
Northeast and $200,000 (the "Escrow Funds") to Grubner, Krauss, Barristers and
Solicitors (the "Escrow Agents") upon Vista completing its financing with
Paramount Capital or any other investor or lender, in a minimum aggregate
gross amount of $2 million dollars, which it contemplates doing on or before
January 20, 1997. (The parties acknowledge and agree that any equipment
leasing will not be considered part of any such Vista financing for purposes
of calculating the minimum aggregate gross amount of $2 million dollars). The
$200,000 being remitted to the Escrow Agents shall be held by the Escrow
Agents and remitted by the Escrow Agents upon the following terms and
conditions:
a. The Escrow Agents shall remit directly to Northeast's premises
lessor and equipment lessors to the extent that Escrow Funds are available, on
the first day of each month commencing in February, the amount of $25,000 to
assist Northeast in defraying the aforesaid expenses. The Escrow Agents agree
to provide confirmation of such payment to Vista forthwith following
remittance thereof.
b. The Escrow Agents shall release $50,000 to Northeast upon
Northeast delivering to the Escrow Agents, a final release of Northeast's
license of the Vista name as contemplated by paragraph 5 hereof.
Provided however that the Escrow Agents shall remit to Vista any amounts not
already advanced to Northeast pursuant to the terms hereof (with any interest
earned on such Escrow Funds which has not already been advanced to Northeast
pursuant to the terms hereof) at such time as Northeast has completed one or
more
<PAGE>
Page 3
financings in the aggregate gross minimum amount of $500,000 by way of debt or
equity. Northeast agrees to use reasonable best efforts to complete such
financings as soon as possible. In addition, the Escrow Agents shall remit to
Vista any Escrow Funds not already advanced to Northeast pursuant to the terms
hereof, upon:
(i) a direct or indirect change in control of Northeast; or
(ii) the bankruptcy or commercial insolvency of Northeast;
(iii) Dr. Herzig opening, operating, being involved with, affiliated
with, lending his name to or becoming otherwise related to any of the
Corporations or firms listed on Schedule "A" attached or their successors,
save and except for Dr. Herzig continuing any previously established patient
referral relationships with 20/20 (now owned by TLC Laser Centers) and Clear
Vision.
Provided further, that the Escrow Agents shall return to Vista the $50,000
referred to in paragraph (b) hereof (without set-off), if Northeast fails to
deliver a release to the license agreement by the 1st day of July, 1997.
Provided further that upon execution hereof Vista shall deliver an irrevocable
direction to Paramount Capital directing Paramount Capital to remit to the
Escrow Agents and to Northeast the amounts payable pursuant to this paragraph
forthwith following it or its nominee having available the moneys it
contemplates raising on behalf of, or in connection with its offering or its
investment or its financing of Vista, in the aggregate minimum amount of $2
million dollars. Vista shall forthwith cause Paramount Capital to acknowledge
receipt of the aforesaid irrevocable direction and Paramount Capital's
agreement to be bound for by the terms thereof.
5. Northeast will agree to cease using the "Vista" name and
associated trademarks in connection with its business operations and shall
take the necessary steps to change the signage at its Toronto clinic on or
before July 1, 1997 and acknowledges that such name and trademark are the sole
property of Vista to utilize the name and trademarks as aforesaid. Northeast
acknowledges that in the event of bankruptcy or a material breach of the
provisions hereof the license shall terminate. Vista will be permitted to
advise creditors of Northeast, other than the equipment lessor and the
premises lessor, that it is no longer associated with Northeast.
6. Vista will agree to forthwith cease using the name of Dr. Sheldon
Herzig and the reference to the Toronto clinic in its advertisements and
investor materials. Vista will allow Northeast's representatives to speak
with a representative of Paramount Capital to ensure that it is understood
that neither Northeast nor Dr. Herzig is associated with Vista. Northeast
agrees that a representative of Vista may participate in such meeting or
discussion.
7. Vista will remain as guarantor under the premises lease respecting
the Northeast Toronto clinic located at the Collonade and under the equipment
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Page 4
lease for the equipment located at that clinic, provided that Northeast shall
use reasonable best efforts to amend such leases to provide that at such time
as Northeast raises capital in the amount of $2 million or more or in the
event of a direct or indirect change in control of Northeast, Vista's
guarantee on such leases shall be unconditionally released (For purposes of
this agreement "control" shall have the meaning set out in section 1(5) of the
Ontario Business Corporations Act. Cherry Sharrer, Dr. Sheldon Herzig and
Cherry Development Corporation represent and warrant that Northeast is
presently jointly controlled by Cherry Development Corporation and Shefa
Enterprises Limited and the parties agree that a direct or indirect change in
control of either Cherry Development Corporation or Shefa Enterprises Limited,
other than a change in favour of Cherry Sharrer or Sheldon Herzig, shall be
considered a change in control of Northeast. In the event that despite the
exercise of such reasonable best efforts, the lessors under such leases are
unwilling to make such amendments, Northeast will provide a secured indemnity
to hold Vista harmless under such guarantees at such time as it raises capital
in the amount of $2 million or more or in the event of a direct or indirect
change in control of Northeast. Northeast shall also agree to provide Vista
with the right to assume the leases in the event of an unremedied default, and
following 15 days written notice thereof to Northeast, and shall agree to
provide immediate written notice of any defaults thereunder and shall agree
not to move such equipment outside the Metropolitan Toronto clinic without the
prior consent of Vista. Vista's guarantee hereunder shall only operate for
the initial term of such leases and shall not continue upon renewal.
Northeast agrees to provide a quarterly statement to Vista to the effect that
there has been no direct or indirect change of control in Northeast or Cherry
Development Corporation or Shefa Enterprises Limited and that the lease is not
in default. Provided that following July 1, 1997, Northeast shall have no
obligation to provide any information other than in respect to the status of
the lease. Provided that Vista may confirm the status of the leases with the
lessors directly from time to time. So long as Vista has not been released
from such leases, Northeast shall not assign or sublet the equipment or the
premises under such leases without the consent of Vista, such consent not to
be unreasonably withheld or delayed.
8. The 450,000 shares of common stock in the capital of Vista (the
"Vista Shares") being the property of Northeast shall be assigned to Vista
forthwith following the deposit with the Escrow Agents of all funds
contemplated by paragraphs 4 and 9 hereof. The Vista Shares shall be assigned
to Vista free and clear of any encumbrances or liens. Upon the execution
hereof, Northeast agrees to deposit the Vista shares with the Escrow Agents to
ensure that they are not assigned or encumbered in contravention of this
agreement. Should Vista fail to advance the sums required pursuant to section
4 and 9 hereof, the Escrow Agents shall return the Vista Shares to Northeast.
9. Vista shall concurrently with the payments to the Escrow Agents of
the amounts referred to in paragraph 4 hereof, also remit to the Escrow Agents
the amount of $50,000 which shall be made available to Northeast, by the
Escrow Agents to assist Northeast in the preparation of documentation and the
raising of capital, whether by way of financing or equity.
<PAGE>
Page 5
It is understood that $25,000 of the amount shall be advanced to third party
professionals assisting in the raising of capital, at the inception of that
process and the balance of which shall be advanced only at such time as the
Escrow Agents are reasonably satisfied that sufficient investors have been
procured to make completion of the financing in the aggregate gross amount of
$500,000 a reasonable likelihood. At such time, the Escrow Agents shall
provide notice to Vista of such disbursement.
Northeast shall be obligated to repay this $50,000, without interest (except
in the event of default), to Vista upon the raising of capital, in aggregate,
of the gross amount of $500,000. Northeast agrees to provide a general
security agreement and promissory note and general security agreement shall be
subordinate to any and all third party financing.
The Escrow Agents shall provide Vista with a quarterly accounting of the
disbursement of escrow funds. In the event that there is a legitimate
material dispute with respect to the provisions hereof or the disbursements of
the Escrow Funds, the Escrow Agents are hereby irrevocably directed to deposit
such Escrow Funds with a Court of competent jurisdiction pending the
resolution of the dispute. In such event, the Escrow Agents shall deliver
written notice to all parties.
10. Vista does hereby release and hold Northeast and its shareholders
and officers harmless and forever discharged from any liability in connection
with any funds advanced or contributed to Northeast on any other agreement.
Northeast does hereby release and hold Vista and its directors, officers,
employees and shareholders harmless and forever discharged from any liability
in connection with any agreement or instrument entered into in furtherance of
Northeast's business. All other agreements including without limitation the
Option Agreement and the Consulting Agreement entered into between the parties
hereto shall automatically terminate and be of no further force and effect.
The parties shall exchange full and final releases and shall agree to keep the
terms of this agreement confidential, except as set forth above.
All amounts stated in the agreement are stated in United States currency. In
addition, each of Northeast and Vista and their respective principals agree
that they will take no steps to interfere with or frustrate the financing
efforts of the other and shall take no steps and make no comments to third
parties which would reasonably have this result or disparage the reputation of
the other.
11. The parties hereto acknowledge that any promotional or marketing
material, logos, designs, brochures, trademarks, stationary, advertising, or
any other material of a related nature shall, remain the property of Vista but
shall be licensed to Northeast (on a non-assignable basis) for a period of 21
years (with an automatic renewal every 21 years) within the Greater Toronto
Area (for purposes of this agreement Greater Toronto Area means all Canadian
territory within a radius of 100 kilometres of the Vista Eye Institute at 131
Bloor Street, Toronto. For greater certainty the parties acknowledge and
agree that the Greater Toronto Area does not include Windsor, Ontario). Such
licence shall
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Page 6
terminate upon the bankruptcy or insolvency of Northeast or upon a material
breach of this agreement by Northeast or the Northeast Parties. The parties
further acknowledge and agree that the copy and text of such promotional
materials may be used by both Vista and Northeast in their respective areas
provided that Vista's use of such copy and text will not include any reference
to Dr. Herzig and, subject to the licence agreement set out in section 1
hereof, Northeast's use of such copy and text shall not use the word "Vista"
or associated logo). Notwithstanding the foregoing, Vista shall be entitled
to provide such promotional material to potential investors within the Greater
Toronto Area as part of providing a prospectus or offering memorandum (and
associated materials) to such potential investors. In consideration of the
foregoing, Vista acknowledges that it shall not open or operate or be involved
with or affiliated with or otherwise related to a laser vision correction
center or any center that provides laser vision correction services under or
using the name "Vista" in any manner within the Greater Toronto Area for a
period of at least two years following execution of this agreement.
Notwithstanding the foregoing, such requirement that Vista not use the "Vista
" name within the Greater Toronto Area shall cease immediately upon:
(a) a direct or indirect change in control of Northeast;
(b) the bankruptcy or commercial insolvency of Northeast;
(c) a material breach by Northeast, Dr. Sheldon Herzig, Cherry Sharrer
or Cherry Development Corporation of any of the terms of this
agreement;
(d) Dr. Sheldon Herzig opening, operating, becoming involved with,
affiliated with, lending his name to or becoming otherwise related
to or with any of the corporations or firms listed on Schedule "A"
attached or their successors save and except for Dr. Herzig
continuing any previously established patient referral
relationships with 20/20 (now owned by TLC Laser Centers) and
Clear Vision; or
(e) Dr. Herzig's soliciting any physician, who as of the date of such
solicitation has entered into a written agreement with Vista for
some form of association with Vista, to leave or break his or her
association with Vista.
Notwithstanding a material breach of this agreement, Vista shall
continue to have the right to use the "Vista" name outside the Greater Toronto
Area.
12. This agreement may be executed in one or more counterparts and by
facsimile transmission. Each counterpart shall be deemed an original and all
counterparts shall constitute one and the same instrument. It shall not be
necessary that any single counterpart be executed by all parties, as long as
at least one counterpart is executed by each party.
13. This agreement shall be governed by and interpreted in accordance
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Page 7
with the laws of the province of Ontario, Canada.
14. The parties hereto agree to execute such further documents and
assurances as may be necessary to implement the terms and provisions of this
agreement. Time shall be of the essence of this agreement and of every part
hereof. This agreement shall be binding upon the parties hereto and any
successors, assigns, affiliated or related parties, and any subsidiaries
thereof (as all of those terms are defined in the Income Tax Act of Canada).
15. Should any party to this agreement be entitled to certain rights
or to take certain actions upon a "material breach" by one of the other
parties to this agreement, the party alleging such material breach shall not
be entitled to such rights or to take such actions until the issue has been
arbitrated and the arbitrator has determined that there has been a material
breach. The parties acknowledge and agree that should one party allege that
there has been a material breach by one of the other parties to this
agreement, the issue shall be determined by arbitration pursuant to the
Arbitration Act, Ontario. The arbitrator shall be appointed by a court of
competent jurisdiction. The costs of such arbitration shall be as awarded by
the arbitrator. The decision of the arbitrator shall be final and shall not
be subject to appeal.
16. Each party hereto acknowledges that he, she, or it understands the
provisions hereof and has been advised to obtain independent legal advice.
DATED as of the 7 day of January, 1997.
VISTA TECHNOLOGIES INC.
Per: /s/ Thomas A. Schultz c/s
-------------------------
PHARMA PATCH plc
Per: /s/ Murray D. Watson c/s
-------------------------
RS-800, INC.
Per: /s/ Thomas A. Schultz c/s
-------------------------
VISTA LASER CENTRES OF THE NORTHEAST
INC.
Per: /s/ Cherry Tabb Sharrer c/s
-------------------------
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Page 8
/s/ Sheldon Herzig
------------------------------
DR. SHELDON HERZIG
/s/ Cherry Tabb Sharrer
------------------------------
CHERRY SHARRER
CHERRY DEVELOPMENT CORPORATION
Per: /s/ Cherry Tabb Sharrer c/s
-------------------------
<PAGE>
SCHEDULE "A"
1. TLC Laser Centers
2. Summit Technology
3. Laser Vision Centers inc.
4. Sight Resources
5. Global Vision
6. Clear Vision
7. Vision Sculpting
8. Shooting Star Inc.
9. Beacon Eye Centers Inc.
10. Sterling Vision
11. LCA Vision
ASSIGNMENT OF OFFICE LEASE
THIS ASSIGNMENT OF OFFICE LEASE (ASSIGNMENT) is entered into this January 31
day of 1996, by and between EVERGREEN TRUST D.B.A. EVERGREEN CORPORATE CENTER
(Landlord), NORTHERN ARIZONA EYE CLINIC, (Tenant) and VISTA LASER CENTERS OF
THE SOUTHWEST, INC. (Assignee).
RECITALS
A.) On or about December 28, 1992, Landlord and Tenant entered into
that certain lease agreement (Lease) pertaining to the lease of Suite 100
(Premises), Evergreen Corporate Center, 15100 N. 78th Way, Scottsdale, AZ.
85260
B.) The parties wish to amend the Lease as hereunder provided.
AGREEMENTS:
1) Landlord here!n consents to the Assignment of the above referenced lease
to VISTA LASER CENTERS OF THE SOUTHWEST, INC (Assignee). Tenant agrees that
this assignment shall not relieve Tenant of any responsibility for payment or
performance of the terms, covenants and conditions of the lease in the event
of Assignee's default on the lease agreement.
2) VISTA LASER CENTERS OF THE SOUTHWEST, INC agrees to be fully bound to
Lessor to perform all covenants, conditions and payments in regards to the
lease.
3) The assignment of this lease shall not be deemed a consent to any
subsequent assignment of the lease.
AGREED:
LANDLORD: /s/ C.N. Ray
----------------------------
Evergreen Trust, DBA;
Evergreen Corporate Center
TENANT: /s/ J. Charles Casebeer
----------------------------
Northern Arizona Eye Clinic, Inc.
ASSIGNEE: /s/ J. Charles Casebeer
----------------------------
VISTA LASER CENTERS OF THE SOUTHWEST, INC.
SCOTTSDALE MUNICIPAL AIRPARK NO. 7
OFFICE LEASE
BY THIS LEASE, made and entered into this 28th day of December, 1992,
parties hereto declare, covenant and agree as follows:
1. BASIC LEASE TERMS
1.1 The following terms shall have the meanings set forth below and in
Section 1.2 for purposes of this Lease and shall be given such meanings
wherever said terms appear in this Lease, unless the context requires
otherwise, subject to such adjustments, restrictions and qualifications as are
expressly set forth herein:
Landlord: Evergreen Corporate Center
15100 N. 78th Way, Suite #200
Scottsdale, Arizona 85260
Tenant: Northern Arizona Eye Clinic
15100 N. 78th Way, Suite #100
Scottsdale, Arizona 85260
Building: The improvement designated in Exhibit "A", commonly known as
Evergreen Corporate Center, and located at 15100 North 78th
Way, Scottsdale, Arizona, consisting of two story building
comprising approximately 17,390 square feet of gross
building area.
Premises: Suite #100, more particularly indicated on the floor plan
attached hereto as Exhibit "B".
Net Rentable
Area Premises: Approximately 3,254 square feet, consisting of approximately
2,916 square feet of floor space as indicated on the floor
plan of the Premises and approximately 338 square feet of
allocable common areas, calculated as described in Section
1.2.
Net Rentable
Area: Approximately 16,935 square feet (consisting of
approximately 15,175 square feet of tenant floor space and
approximately 1,760 square feet of common areas), calculated
as more particularly described in Section 1.2.
<PAGE>
Tenant's Proportionate
Share (Net Rentable
Area of Premises,
Divided by Net Rentable
Area of Building): = 19.22% for each calendar year. With any calendar
year of which the Lease Term constitutes only a part,
the Tenant's Proportionate Share shall equal the
product of the foregoing percentage amount times a
fraction, the numerator of which is the number of
months (rounded upwards to the next whole number if
the Lease Term begins or concludes in the middle of a
month) during such calendar year in which the Lease
Term was in existence & the denominator of which is
12.
Minimum Monthly Rent: Months 1 - 3 See Addendum
Months 4 - 12 @ $3,525 ($13.00/SF)
Months 13 - 24 @ $3,796 ($14.00/SF)
Months 25 - 36 @ $4,067 ($15.00/SF)
Months 37 - 48 @ $4,699 ($16.00/SF)
Months 49 - 60 @ $4,699 ($16.00/SF)
The minimum monthly rent shall be subject to adjustment as provided in
Paragraph 5.2 herein.
Commencement Date: January 1, 1993
Lease Term: 60 months
Security Deposit: $3,500
1.2 CALCULATION OF NET RENTABLE AREA
For purposes of this Lease, the following net rentable area shall be
determined as follows:
(i) Net rentable area on single tenancy floor shall be
determined by measuring from the inside surface of the glass on the
exterior walls to the inside surface of the glass on the opposite
exterior wall and shall include all areas within the outside walls
excluding vertical penetrations such as building stairs, fire towers,
elevator shafts, flues, vents, stacks, pipe shafts, and vertical ducts.
Vertical penetrations which are for the specific use of Tenant, such as
special stairs or elevator shall be included as Net Rentable Area. No
deductions from Net Rentable Area will be made for columns or
projections necessary to support the Building and/or other common areas
used to benefit Tenant;
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<PAGE>
(ii) Net Rentable Area for partial floors shall include all space
within the demised premises (measured from the midpoint of the demising
walls and, in the case of exterior walls, measured as set forth in (i)
above, excluding vertical penetrations such as building stairs, fire
towers, elevator shafts, flues, vents, stacks, pipe shafts, and vertical
ducts, plus Tenant's proportionate share (excluding single tenancy
floors) of the common areas within the Building such as lobbies,
corridors, toilet and mechanical rooms, telephone and electrical
closets, and service areas in the Building. Vertical penetrations
which are for the specific use of the Tenant such as special stairs or
elevators shall be included as Net Rentable Area.
(iii) In determining the Net Rentable Area of the Building, all
common areas within the Building and all areas devoted to Tenant storage
outside of the Building shall be included. In computing the Net
Rentable Area of the Premises, there shall be included a pro rate share
of all Common Areas within the Building and a pro rata share of any
storage areas available for Tenants.
2. PREMISES
For and in consideration of the agreement of the Tenant to pay the
rental and other sums provided for herein and to perform the terms, covenants
and conditions on its part required hereunder, Landlord hereby leases the
Premises to Tenant and Tenant hereby leases the Premises from Landlord.
Tenant's right to use the Premises shall include the non-exclusive right to
use such common areas within and appurtenant to the Building, including,
without limitation and as and if available, lobbies, hallways and washroom
facilities as Landlord shall designate, from time to time, subject to the
terms and conditions of this Lease. Tenant hereby affirmatively and expressly
waives any implied warranties in connection with the Premises and agrees to
rely solely upon those representations and warranties expressly set forth in
this Lease. Landlord reserves the right from time to time to change, reduce,
eliminate or relocate any of said common areas. Landlord expressly reserves
the use of the outside walls and roof of the Building and the air space above
the Building. Tenant has no right to light or air over any premises adjoining
the Building.
3. CONSTRUCTION OF LEASEHOLD IMPROVEMENTS
See addendum.
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<PAGE>
4. LEASE TERM
4.1 The date specified in Section 1 upon which the Lease Term shall
commence is the Commencement Date. In the event Landlord is, for any reason
other than delay principally caused by or attributable to Tenant,its agents
or contractors, unable to deliver possession of the premises to Tenant on the
Commencement Date, this Lease shall nevertheless continue in full force and
effect and Landlord shall have no liability as a consequence of any such
delay; provided, however, that rents otherwise payable hereunder shall abate
for the period between the Commencement Date an the date of substantial
completion of any improvements to the premises in accordance with Section 3
above and tender of the premises by Landlord for Tenant's occupancy
("Possession Date"). There shall be no abatement of rent if delivery of
possession of the premises by Landlord to Tenant is principally caused by or
attributable to Tenant, its agents or contractors, and in such event the
Commencement Date shall be deemed the Possession Date, and Landlord shall
deliver the Premises to Tenant as soon thereafter as is reasonably
practicable.
4.2 If the Possession Date occurs on a date subsequent to the
Commencement Date, the parties shall execute and initial the Memorandum of
Possession Date set forth above. In the event Landlord shall deliver and
Tenant shall accept possession of the Premises prior to the Commencement Date,
the provisions of this Lease shall be applicable, and all rents shall be
payable during such period prior to the Commencement Date, but the
Commencement Date shall not otherwise be affected by such prior possession.
All rents payable hereunder for a fractional calendar month shall be prorated
on a per diem basis, calculated on the basis of a thirty (30) day month.
5. RENTAL PAYMENTS
5.1 Throughout the Lease Term, Tenant agrees to pay Landlord at such
place as Landlord may designate, without prior demand therefore and without
any deduction or set-off whatsoever, in lawful money of the United States of
America:
(a) The Minimum Monthly Rent, in advance, on or before the first
day of each calendar month during the Lease Term. Upon execution of this
Lease, Tenant agrees to pay Landlord the Minimum Monthly Rent for the 1st full
calendar month of the Lease Term; and,
(b) All excise, sales, use, rental, and/or transaction privilege
taxes levied or imposed, or hereafter levied or imposed, against or on account
of any or all amounts payable hereunder by Tenant or the receipt thereof by
Landlord (except Landlord's income
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<PAGE>
if any), said taxes to be paid together with the Minimum Monthly Rent, or as
the Landlord may designate.
5.2 Tenant also agrees to pay, as additional rent, the amounts
required by Section 7 hereof.
6. SECURITY DEPOSIT
6.1 Upon occupancy of the Premises Tenant shall deposit with Landlord
the Security Deposit, which sum shall be held by Landlord, without obligation
for interest, as security for the performance of Tenant's covenants and
obligations under this Lease. The Security Deposit is not an advance rental
deposit nor a measure of Landlord's damages in the event of Tenant's default.
Upon the occurrence of any event of default by Tenant, Landlord may, from time
to time, without prejudice to any other remedy provided herein or by law or
equity, use and apply all or any portion of the Security Deposit to the extent
necessary to remedy any arrears of rent or other expense or liability caused
by such event of default. Tenant shall pay to Landlord on demand any amount
so applied by Landlord in order to restore the Security Deposit to its
original amount.
6.2 Prior to the time when Tenant is entitled to the return of the
Security Deposit, Landlord shall not be required to segregate such deposit
from other funds of Landlord, and may use the Security Deposit for such
purposes as Landlord may determine. The Security Deposit shall be returned to
Tenant (or, at Landlord's sole election without liability to or recourse by
Tenant, to the last approved assignee, if any, of Tenant's interest hereunder)
upon the expiration of the Lease Term and delivery of possession of the
Premises to Landlord, if at such time, Tenant has performed and complied with
all of the terms, covenants and conditions of this Lease. In the event of
the termination of Landlord's interest in this Lease, Landlord shall transfer
said deposit to Landlord's successor in interest, whereupon Tenant shall
release Landlord from all liability for the return of such deposit or the
accounting therefore.
7. BUILDING OPERATING COSTS
7.1 For purposes hereof:
(a) "Building Operating Costs" shall mean those costs and
expenses incurred or paid by Landlord or Landlord's agents with respect to the
operation and maintenance of the Building which, in accordance with the
accounting method used by Landlord on a consistent basis, as applied to the
operation and maintenance of the Building, are properly chargeable to the
operation and maintenance of the Building, including, without limitation:
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<PAGE>
(i) all real property taxes and special assessments levied
upon the Building and all appurtenant real property and improvements of
Landlord and all personal property taxes levied on equipment, fixtures, and
other property of Landlord located in the Building and used in connection with
the operation thereof;
(ii) all labor costs involved in the normal
operation and maintenance of the Building;
(iii) costs of utilities, telephone service to the building
and refuse removal;
(iv) costs of insurance maintained by Landlord with respect
to the Building and Landlord's personal property used in connection therewith;
(v) costs of janitorial, window cleaning and other
cleaning contracts and services;
(vi) costs relating to the operation and maintenance of
all parking areas, service areas, walkways and landscaping, and any common
areas within or appurtenant to the Building;
(vii) a management fee, not to exceed prevailing market
rates.
Building Operating Costs shall not include roof repairs or replacement, the
costs of major structural repairs or extraordinary maintenance, expenses for
which Landlord is reimbursed or indemnified (whether by an insurer, condemnor,
tenant or otherwise), interest or amortization payments on any encumbrance, or
overhead and administrative costs by Landlord not directly incurred in the
operation and maintenance of the Building, except as may be otherwise
specifically set forth herein.
(b) "Fixed Operating Costs" shall mean all Building Operating
Costs which would have been incurred by Landlord with respect to the Building
regardless of whether Tenant or any other tenants occupied the Building.
"Variable Operating Costs" shall mean all Building Operating Costs which are
not Fixed Operating Costs. Building Operating Costs shall be characterized
as Fixed Operating Costs or Variable Operating Costs by Landlord's accountant
in accordance with principles formulated by Landlord's accountant in
accordance with this provision and consistently applied. Such
characterization of Building Operating Costs shall be conclusive and binding
on Tenant.
(c) "Landlord's Contribution" shall mean that amount which shall
equal, with respect to each calendar year, the product
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<PAGE>
of (i) six dollars ($6.00), (ii) the Net Rentable Area of the Building.
Landlord shall, with respect to each calendar year, pay Building Operating
Costs in an amount not to exceed the Landlord's Contribution for such calendar
year. The Landlord's Contribution shall be allocated first to Fixed
Operating Costs and then to Variable Operating Costs.
(d) "Reimbursement Amount" shall mean that amount, if any, by
which the actual Building Operating Costs incurred by Landlord in any given
calendar year exceed the Landlord's contribution for such calendar year.
(e) "Tenant's Variable Share" shall mean that fraction, the
numerator of which is the Net Rentable Area of the Premises occupied by the
Tenant during each calendar year and the denominator of which is the Net
Rentable Area of the Building, as such fraction shall be determined by the
Landlord or its agents. For purposes of computing the fraction described in
the preceding sentence, the Landlord may compute the numerator and denominator
of such fraction by using a weighted average method selected by the Landlord
and consistently applied. Consistent with a weighted average method,
adjustments may be made to (i) the numerator of said fraction to reflect for
each calendar month in the relevant calendar year, the highest amount of Net
Rentable Area of the Premises occupied by the Tenant at any time during each
such calendar month; and to (ii) the denominator by taking the highest Net
Rentable Area of the Building.
7.2 Landlord and Tenant hereby acknowledge that the Minimum Monthly
Rent provided for hereunder has been determined based upon the assumption that
the actual Building Operating Costs received by Landlord will approximate the
Landlord's Contribution. Accordingly, Tenant hereby agrees to pay Landlord,
with respect to each calendar year, an amount equal to the sum of (i) Tenant's
proportionate Share of the amount, if any, by which the Fixed Operating
Expenses for such calendar year exceed Landlord's Contribution for such year,
plus (ii) Tenant's Variable Share of the amount, if any, by which the
Reimbursement Amount exceeds the amount of Variable Operating Costs described
in clause (i) above. In computing the amounts under this Section 7.2, the
Landlord's Contribution shall be allocated as described in Section 7.l(c).
7.3 The amount of payments to Landlord provided pursuant to Paragraph
5.2 above shall be computed annually on a calendar year basis, provided,
however, that Landlord may, prior to the beginning of any calendar year,
estimate the amount of such reimbursement to which the Landlord will be
entitled from Tenant for such calendar year and notify Tenant in writing of
such amount. If Landlord provides Tenant with such notification, Tenant shall
pay to Landlord on a monthly basis together with the Minimum Monthly Rent an
amount which shall equal the quotient obtained by dividing the amount
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<PAGE>
stated in such notice by the number of payments of Minimum Monthly Rent that
Tenant is obligated to make pursuant to this Lease during the calendar year to
which the written notification relates.
7.4 Unless delayed by causes beyond Landlord's control, not later than
March 31st of each year during the Lease Term (and the year immediately
following expiration of the Lease Term), Landlord shall provide Tenant with a
statement of: (a) the Reimbursement Amount, (b) the portion of the
Reimbursement Amount for which Tenant is obligated pursuant to Section 7.2,
and (c) a statement showing the difference between the amounts paid by Tenant,
if any, pursuant to Section 7.3, and the portion of the Reimbursement Amount
for which Tenant is obligated. Tenant shall pay to Landlord any deficiency
disclosed by such statement, and any overage shall be credited by Landlord to
any other amounts owed by Tenant under this Lease or refunded to Tenant. In
the event of the nonpayment of any amounts due hereunder, Landlord shall have
with respect thereto all rights and remedies herein provided in the event of
nonpayment of rent.
8. TAXES ON PERSONAL PROPERTY
Tenant shall pay prior to delinquency, all taxes levied upon
fixtures, furnishings, equipment, and all other personal property belonging to
Tenant and placed on the Premises by Tenant. In the event any of Tenant's
fixtures, furnishings, equipment and other personal property shall be assessed
and taxed with Landlord's real property, Tenant shall pay to Landlord its
share of such taxes within twenty (20) days after delivery to Tenant by
Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's property. When possible, Tenant shall cause said
fixtures, furnishings, equipment and other personal property to be assessed
and billed separately from the real property of Landlord.
9. ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.1 Following the completion of the initial improvements of the
Premises in accordance with the provisions of Section 3 hereof, Tenant shall
not make, or allow to be made, any alterations, additions or improvements to
the Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld.
9.2 (a) Any approved alterations, additions or improvements to the
Premises shall be surrendered by Tenant as part of the Premises, without
disturbance or injury, upon the expiration or earlier termination of this
Lease, unless Landlord designates in writing that such alterations, additions
or improvements shall be removed. If requested by Landlord, upon expiration
or earlier termination of this Lease, Tenant shall, at its sole cost and
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<PAGE>
expense, remove any such alterations, additions or improvements made by Tenant
and designated by Landlord for removal, and restore the Premises to their
original condition, normal wear and tear excepted.
(b) In the event of any injury or damage to the Premises
resulting from the removal by Tenant of any alterations, additions or
improvements, or fixtures, equipment and furnishings pursuant hereto, Tenant
shall promptly repair the same, at its sole cost and expense, in a good and
workmanlike manner, or at Landlord's election, shall pay to landlord an amount
sufficient for Landlord to repair same or to compensate Landlord for such
injury or damage to the Premises.
9.3 Tenant shall keep the Premises and the Building free from any
liens arising from work performed, materials furnished or obligations incurred
by Tenant and shall indemnify, hold harmless and defend Landlord from any
liens and encumbrances arising from any work performed or materials furnished
by or at the direction of Tenant.
10. USE
10.1 Tenant shall use the Premises for office purposes, eye examination
and surgery and other related uses, and for no other purpose.
10.2 Tenant shall not use, occupy, suffer or permit any use of the
Premises which would (i) violate any law, ordinance, or regulation; (ii)
constitute a nuisance; (iii) in any way increase the rate of fire insurance
or other insurance on the Building or limit any portion of the coverage
thereunder; or in any way obstruct or interfere with the rights of other
tenants. If any such increase or limitation of coverage is stated by any
insurance company or by the applicable insurance rating bureau to be due to
any use or occupancy of the Premises, such statement shall be conclusive upon
Tenant, subject to Paragraph 32, and Tenant shall be liable for any increase
and shall reimburse Landlord on demand therefor. No vending machines shall be
permitted or installed in the Premises without the prior written consent of
Landlord.
11. CARE OF PREMISES
Tenant shall: (i) maintain the Premises in clean and sanitary
condition; (ii) maintain the Premises in as good condition and repair as they
were in at the commencement of the term of this Lease, reasonable wear and
tear and damage from fire and other casualty for which insurance is normally
procured excepted; (iii) not commit waste on the Premises, throw foreign
substances in plumbing facilities, or waste any of the utilities furnished by
Landlord; and (iv) not obstruct entries, halls, elevators,
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stairways, lavatories or other common areas, and not use the same for anything
other than their intended purposes.
12. PARKING
12.1 Tenant shall be provided three (3) covered, reserved parking
spaces to be selected by Landlord.
12.2 Tenant shall be entitled to park in common with other tenants of
the Building in those areas designated for nonreserved tenant parking.
Tenant agrees to cooperate with Landlord and other tenants in the use of the
Parking facilities. Landlord reserves the right, in its absolute discretion,
to determine whether parking facilities are becoming crowded and, in such
event, to allocate parking spaces among Tenant and other tenants. No storage
of vehicles or parking for more than seventy-two (72) hours shall be allowed
without Landlord's prior written consent. Tenant and its employees will
refrain from parking in areas designated by Landlord from time to time as
visitor parking. Landlord reserves the right to remove or tow any vehicles
which are or appear to be illegally or improperly parked, or abandoned, and
Tenant agrees to indemnify Landlord from and against any and all claims as a
result of such removal or towing, said indemnification to be in Tenant's
Proportionate Share (as described herein) to the full indemnification
required.
13. INSURANCE
13.1 (a) During the entire Lease Term, Tenant shall, at its sole cost
and expense, procure and maintain: (i) comprehensive general public
liability insurance against claims for personal injury, death and property
damage occurring upon, in or about the Premises, with a combined single limit
of not less than $1,000,000; (ii) fire and extended coverage, vandalism,
malicious mischief, and special extended perils (all risk) insurance in an
amount not less than the full cost of replacement of improvements by Tenant on
the Premises and all of Tenant's personal property, inventory, decorations,
trade fixtures, furnishings, equipment and other contents in the Premises.
(b) All such policies of insurance shall name both Landlord and
Tenant as insureds (and/or such other party or parties as Landlord may
require) and shall be issued by insurance carriers acceptable to Landlord.
Tenant agrees to furnish Landlord, on or before the Commencement Date, with
certificates of insurance showing that insurance meeting the requirements
hereof has been obtained and fully paid for by Tenant, and Tenant shall obtain
a written commitment from each insurance carrier to notify Landlord in writing
least ten (10) days prior to any cancellation, expiration or modification
thereof.
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13.2 Notwithstanding the provisions of this Section 13, Tenant and
Landlord each hereby waive any and all rights of recovery against the other,
or against the officers, employees, agents and representatives of the other,
for loss of or damage to such waiving party or its property or the property of
others under its control to the extent that such loss or damage is insured
against under any insurance policy in force at the time of such loss or
damage, but only to the extent that such insurance policies permit such
waiver.
14. UTILITIES AND SERVICE
14.1 Landlord shall furnish to the Premises between the hours of 7:00
a.m. and 10:00 p.m. Monday through Friday and between the hours of 8:00 a.m.
and 5:00 p.m. on Saturday, except legal holidays, the following services:
(a) Air conditioning, heating and ventilation, subject to
prudent energy conservation practices and the availability of energy
resources;
(b) Electric current for normal lighting purposes and operation
of small business or medical machines such as typewriters, adding machines,
small copying machines, small copying machines and calculators;
(c) Usual janitorial and maintenance service, including
vacuuming and sweeping of floors, dusting, emptying of wastebaskets, and
replacement of fluorescent tubes in the standard lighting fixtures installed
in the Premises by Landlord. Landlord shall also maintain and keep lighted
the common entries and toilet rooms in the Building;
(d) Elevator service; and
(e) All water service to the Building, subject to the imposition
of mandatory use or quantity limitations by applicable governmental agencies
or authorities.
14.2 Tenant shall not, without the written consent of Landlord, use any
apparatus or device in the Premises other than those business machines
referred to above, that will in any way increase the amount of electricity or
water usually furnished or supplied for use of the Premises as general office
space, or that will materially affect the temperature otherwise maintained by
the air conditioning system. Landlord may cause an electric current or water
meter to be installed in the Premises to measure the amount of electric
current or water consumed for any such additional use, and shall have the
right to install any machinery and equipment which Landlord reasonably deems
necessary to restore temperature balance, including, without limitation,
modifications to the standard air
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conditioning equipment, with the costs of such installation and any additional
cost of operation and maintenance occasioned thereby to be paid by Tenant.
14.3 If Landlord provides electrical power in excess of normal office
usage levels in order for Tenant to operate any heat generating data
processing or other equipment requiring extra electrical power, and the
Premises are not separately metered, or if Landlord provides any other utility
or service which is in excess of that contemplated for routine office
purposes, including additional cooling necessitated by Tenant's equipment,
Landlord shall reasonably determine the cost of such additional power or
additional utility or service, and Tenant shall pay the cost thereof on a
monthly basis to Landlord within ten (10) days after invoice. Tenant, at its
cost and expense, shall provide telephone service to the Premises, and Tenant
shall pay all charges for said telephone service.
14.4 Landlord shall in no event be liable for any interruption or
failure of utility services on the Premises, nor for any reduction of energy
consumption within the Premises as required by any mandatory or voluntary fuel
or energy allocation or conservation statute, regulation, order or program,
nor shall this lease be affected thereby.
15. MAINTENANCE AND REPAIR
15.1 Subject to the provisions of Section 14 and Section 17 hereof,
Landlord shall repair and maintain the Building structures and public areas,
and all Building systems and equipment such as plumbing, electrical, heating,
air conditioning and ventilating.
15.2 Tenant agrees to make all repairs to the Premises not required to
be made by Landlord and perform all redecorating, remodeling, alterations, and
painting required by Tenant and permitted by Landlord during the Lease Term.
Tenant shall pay for any repairs to the Premises or the Building resulting
from any misuse or neglect of Tenant, or its employees or invitees (as, by way
of example and not as a limitation, excessive wear to carpeted areas resulting
from Tenant's failure to use appropriate carpet, casters or floor mats).
Tenant shall maintain the Premises in a safe, clean, neat and sanitary
condition.
16. LIABILITY
16.1 Tenant shall indemnify and hold Landlord harmless from any and all
claims arising from Tenant's use of the Premises or the conduct of its
business or from any activity engaged in or permitted by Tenant on or about
the Premises, and shall further indemnify and hold Landlord harmless from any
and all claims arising from any
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breach or default in the performance of any obligation of Tenant under this
Lease, or arising from any act or negligence of Tenant, or of its agents or
employees, and from all costs, attorneys' fees, expenses and liabilities
incurred by Landlord as a result of any such claim or action or proceeding
brought thereon. The foregoing shall not be deemed to release or waive any of
Tenant's rights or remedies against Landlord for damage or injuries caused to
persons or property resulting from Landlord's negligence or willful
misconduct.
16.2 Landlord shall not be liable for injury to Tenant's loss of income
therefrom or for damage that may be by the person or property of Tenant, its
employees, invitees, customers, agents or contractors or any other tenant of
the Building or other person in or about the Premises, caused by or resulting
from fire, steam, electricity, gas, water or rain, which may leak or flow from
or into any part of the Premises, or from the breakage, leakage, obstruction
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, whether said damage or injury results from
conditions arising upon the Premises or upon other portions of the Building,
except to the extent such damage or injury is caused by Landlord's failure to
make necessary repairs for which it is responsible within a reasonable time
from the receipt of notice from Tenant of the necessity therefor. Tenant
shall give immediate notice to Landlord in the event of fire or accident to or
defect in the Premises or the Building or any of its fixtures, appurtenances
or equipment, and shall cooperate with Landlord and the insurance carrier in
processing any insurance claim.
16.3 Landlord's liability for loss resulting from its failure, by
negligence or otherwise, to comply with any federal, state or local laws,
ordinances or regulations shall be and hereby is expressly limited to the
costs of remedying, repairing, replacing or removing any objects, hazards or
structures deemed to be in violation of any such laws, ordinances or
regulations, and Landlord shall not be liable for any other incidental or
consequential damages suffered or incurred by Tenant, its agents or employees
as a result thereof. Landlord shall have a reasonable time, after receiving
written notice of any such violation from Tenant or any other party, to remedy
such violation. The existence of any such violation and the necessary time to
correct same shall not constitute grounds for constructive eviction or breach
of any implied or express warranty, except to the extent such damage or injury
is caused by Landlord's failure to make necessary repairs for which it is
responsible within a reasonable time from the receipt of notice from Tenant of
the necessity therefor.
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17. DAMAGE OR DESTRUCTION
17.1 In the event all or substantially all of the premises or the
Building are destroyed by fire or any other casualty so as become
untenantable, Landlord may elect to terminate this Lease as of the date of
such damage or destruction, by notice to Tenant within thirty (30) days
thereafter. In the alternative, Landlord in its sole discretion may elect to
repair or rebuild the Premises or the Building as promptly as possible at the
expense of Landlord. In the event Landlord elects to so repair or rebuild but
fails to substantially complete such repair or rebuilding within one hundred
eighty (180) days after such damage or destruction occurs (extended for delays
due to causes beyond the control of Landlord), then either party may
thereupon terminate this Lease by notice to the other party no later than ten
(10) days after expiration of said one hundred eighty (180) day period or
extension thereof. If the Premises or the Building shall be partially damaged
or injured by fire or other casualty, Landlord shall promptly repair or
rebuild the same. In connection with any repair or rebuilding by Landlord
hereunder, should there be a substantial interference with Tenant's use of the
Premises, Tenant shall be entitled to a proportionate reduction of Minimum
Monthly Rent while such repairs are being made, be based upon the extent other
effects resulting from the casualty shall interfere with the business
conducted by Tenant in the Premises; provided, however, that rent shall not
abate if such damage was caused by Tenant, its agents, employees and invitees,
and further provided that Tenant shall not be permitted to terminate this
Lease except as set forth herein.
17.2 Notwithstanding anything contained herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or deed of trust
covering the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant, whereupon all rights and
obligations hereunder shall cease and terminate. No damages, compensation or
claim shall be payable by Landlord to Tenant for inconvenience, loss of
business or annoyance from any repair or rebuilding of any portion of the
Premises or the Building or from the termination of this Lease pursuant to
this Section 17.
18. CONDEMNATION
If all or any part of the Premises or the Building shall be taken
for public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or consent sale in lieu thereof,
and such taking renders the Premises untenantable for Tenant's business, this
Lease shall terminate as of the date of transfer of possession of the Premises
or the Building,
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as the case may be, is transferred to the condemning authority. In the event
of any condemnation, Tenant shall have no claim against Landlord or the
condemning authority for the value of any unexpired term of this Lease. All
compensation or damages awarded for such taking or transfer shall belong to
and be the property of Landlord, except for any specific award to Tenant for
fixtures and improvements installed by Tenant at its expense.
19. SALE BY LANDLORD
Landlord may sell, transfer, assign or otherwise dispose of the
Premises, the Building, and any and all real or personal property appurtenant
thereto, or this Lease, or any part thereof or interest therein at any time
without the consent of Tenant. Upon such sale, transfer, assignment or
disposal of all its interest in the Premises, the Building or this Lease,
Landlord shall be relieved of all obligations hereunder on the condition that
Landlord's successor-in-interest shall expressly assume such obligations.
This Lease shall not be affected by any such sale, transfer, assignment or
disposal of Landlord's interest and Tenant agrees to attorn to Landlord's
purchaser or assignee.
20. ASSIGNMENT AND SUBLETTING
20.1 Tenant shall not assign, transfer, mortgage, pledge, hypothecate
or encumber this Lease, or any interest therein, and shall not sublet the
leased premises or any part thereof, or any right or privilege appurtenant
thereto, or suffer any person (except the agents and servants of Tenant) to
occupy or use the leased premises, or any portion thereof, without first
obtaining the written consent of Landlord, which consent may not be
unreasonably withheld.
20.2 Any consent obtained hereunder to one such assignment, subletting,
occupation, or use by any other person shall not be deemed to be a consent to
any subsequent assignment, subletting, occupation or use by another person,
nor shall such consent be deemed a waiver by Landlord of Landlord's right to
withhold its consent as provided hereunder as to any subsequent assignment,
subletting, occupation or use by another person.
20.3 Any assignment or subletting permitted hereunder shall expressly
provide, and shall be permitted solely upon the condition that, the assignee
or sublessee, as the case may be, shall be fully bound to Landlord, its
successors or assigns, by full privity of contract, as well as by privity of
estate; and that each such assignee or sublessee shall be fully bound to
perform all covenants of this Lease; and that no subsequent assignment,
subletting, occupation or use shall relieve Tenant or any prior or earlier
assignee or sublessee of its contractual obligations as described herein to
Landlord.
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20.4 Any assignment, transfer, mortgage, pledge, hypothecation or
encumbrance of this Lease, without the consent required and described herein,
shall be void, and not voidable, and shall at the sole option of Landlord
terminate this Lease.
20.5 This Lease shall not, nor shall any interest therein, be
assignable as to any interest of Landlord by operation of any law, without the
written consent of Landlord, which consent may be withheld for any reason in
Landlord's sole discretion.
20.6 Tenant shall pay Landlord's reasonable attorneys' fees in
connection with giving the consent required and described herein.
20.7 If Tenant or any assignee or sublessee assigns this Lease sublets
the Premises or any portion thereof for a rental (or pro rata rental if only a
portion of the Premises is sublet) greater than that paid to Landlord
hereunder, such excess shall be paid to Landlord as received.
21. ESTOPPEL CERTIFICATE
21.1 Tenant shall within twenty (20) days following any written request
from Landlord, execute, acknowledge and deliver to Landlord a written
statement certifying: (a) that this Lease is in full force and effect and
stating the nature of any modification hereto; (b) the dates to which the
rentals and other charges are paid in advance, if any; (c) there are not, to
Tenant's knowledge, any defaults on the part of Landlord hereunder, or
specifying such defaults if they are claimed; and (d) such other matters as
may reasonably be requested by Landlord. Any such statement may be relied
upon by any prospective purchaser or encumbrancer of all or any portion of the
Building or the Premises. Tenant's failure to deliver such statement within
such time shall be conclusive upon Tenant (a) that this Lease is in full force
and effect, without modification except as may be represented by Landlord, (b)
that there are no uncured defaults in Landlord's performance, and (c) that not
more than one month's rent has been paid in advance.
21.2 Prior to execution of this Lease, or if Landlord desires to
finance or refinance the Building or any part thereof, Tenant, hereby agrees
to deliver to Landlord or to any lender designated by Landlord, such financial
statements of Tenant as may be reasonably required by landlord or such lender,
to be received by Landlord in confidence and used only for the purpose of
evaluating Tenant's financial condition. In addition, Tenant will not
unreasonably withhold its consent to any modifications to this Lease required
as a condition to such financing; provided, however, that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created.
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22. DEFAULT OF TENANT
22.1 If Tenant should fail to pay any part of the rentals herein
provided, or any other sum required by this Lease to be paid to Landlord at
the time or in the manner provided herein, for a period of twenty (20) days
after receipt by Tenant of written notice from Landlord, or if default should
be made in any of the other covenants, terms or provisions to be performed by
Tenant hereunder and such default should continue for a period of forty-five
(45) days following receipt of written notice thereof from Landlord to Tenant,
or should Tenant's interest herein be terminated or assigned by operation of
law or otherwise, including, without limitation, the filing of a petition by
or against Tenant (or any member of Tenant if Tenant is a partnership or joint
venture) under any insolvency or bankruptcy act, or should Tenant make a
general assignment for the benefit of creditors, or if Tenant should become
insolvent, or if Tenant should vacate or abandon the Premises, Landlord shall
have all rights and remedies it may have hereunder or at law or in equity.
22.2 In the event Landlord shall fail to receive any installment of
rent or any other sum due hereunder within ten (10) days after such payment is
due, Tenant shall pay to Landlord a late charge in an amount equal to twenty
percent (20%) of such payment; and the failure to pay such sums due and the
late charge as described herein, within twenty (20) days after written demand
therefor shall be an event of default hereunder. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law, and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
22.3 No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Landlord prior to
the expiration of the term hereof, and such acceptance by Landlord of
surrender by Tenant shall only be effected, and must be evidenced, by written
acknowledgment of acceptance of surrender signed by Landlord. In the event
the Premises are relet at a rental which exceeds that owing from Tenant
herein, Tenant expressly agrees that Tenant, its successors, assigns and
representatives have no claim to or interest in the said profit, and that the
said profit is properly owing solely to Landlord as Landlord's agreed, stated
and liquidated fees, costs, expenses and compensation incurred or owing as a
result of Landlord's efforts in connection with the reletting of the leased
premises to mitigate Tenant's damages as a result of Tenant's default, but do
not constitute Landlord's liquidated damages of Tenant's whole default.
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23. DEFAULT BY LANDLORD
23.1 Landlord shall not be deemed to be in default under this Lease
until Tenant has given Landlord written notice specifying the nature of the
default which Landlord is obligated to cure, and Landlord has failed to cure
such default within thirty (30) days after receipt of such notice, provided
however, in the case of a default which cannot be cured with due diligence
within a period of thirty (30) days, Landlord shall have such additional time
to cure such default as may be reasonably necessary, provided Landlord
proceeds promptly and with due diligence to cure such default after receipt of
said notice.
23.2 Upon written request by Landlord, Tenant shall serve notice of any
alleged default or breach by Landlord under this Lease upon any mortgagee or
trust deed beneficiary of any realty mortgage or deed of trust of record
encumbering the Building or any part thereof. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for
in this Lease, then any lender or mortgagee shall have an additional thirty
(30) days within which to cure such default, or if such default cannot be
cured within that time, then such additional time as may be necessary if
within said thirty (30) days, such mortgagee has commenced and is diligently
pursuing the action necessary to cure such default (including, but not limited
to, commencement of foreclosure proceedings, if necessary to effect such
cure), in which event this Lease shall not be terminated while such remedies
are being so diligently pursued.
24. ACCESS BY LANDLORD
Landlord and Landlord's agents and representatives shall have the
right to enter into and upon the Premises at all reasonable time, including
before or after usual business hours, for the purpose of inspecting the
Premises, making repairs thereto, maintaining or adding any services to be
provided by Landlord or Tenant hereunder, performing any of the foregoing
functions with respect tenant space of common areas adjacent to the Premises,
or for any other lawful purpose. In addition, Landlord reserves the right,
during the final six (6) months of the Lease Term, to enter the Premises
during reasonable business hours and in a reasonable manner for the purpose of
showing the Premises to prospective tenants or purchasers, and to place on or
about the Premises appropriate signs indicating that the Premises are
available for sale or lease.
25. SUBORDINATION AND ATTORNMENT
Upon written request of the Landlord, and any Mortgagee or Deed of
Trust beneficiary of the Landlord, Tenant will, in writing,
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subordinate its rights hereunder to the lien of any Mortgage or Deed of Trust,
now or hereafter in force against the land or building of which the Premises
are a part and upon any building hereafter placed upon the land of which the
premises are a part, and to all advances made or hereafter to be made upon the
security thereof, so long as the document to be executed by Tenant provides
that if it is not in default hereunder, this lease shall remain in full force
and effect for the full term hereof.
In the event any proceedings are brought for foreclosure or in the
event exercise of the power of sale under any Mortgage or Deed of Trust made
by the Landlord covering the Premises, the Tenant shall attorn to the
purchaser upon any such foreclosure or Deed in lieu of the foreclosure or sale
and recognize such purchaser as the Landlord under this lease.
26. SURRENDER OF PREMISES AND HOLDING OVER
Except as provided hereinafter, upon the expiration or earlier
termination of this Lease, Tenant shall quit and surrender the Premises, in
good condition and repair (reasonable wear and tear excepted). If the
Premises are not surrendered at the end of the Lease Term, Tenant shall
indemnify Landlord against any loss or liability resulting from delay by
Tenant in so surrendering the Premises, including without limitation, any
claims made by any succeeding tenant based on such delay. If Tenant or any
successor-in-interest of Tenant, should remain in possession of the Premises
after the expiration of the Lease Term without executing a
If either party hereto shall be delayed or prevented from the
performance of any act required hereunder by reason of acts of God, strikes,
lockouts, labor disputes, civil disorder, inability to procure materials,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial inability excepted),
performance of such act shall be excused for the period of delay; provided,
however, nothing in this Section 29 shall excuse Tenant from the prompt
payment of any rental or other charge required of Tenant hereunder except as
may be expressly provided elsewhere in this Lease.
30. BROKER'S COMMISSIONS
Tenant represents and warrants that there are no claims for
brokerage commissions or finder's fees in connection with this Lease
(excepting commissions or fees approved or authorized in writing by Landlord)
and agrees to indemnify Landlord against and hold it harmless from all
liabilities arising from such claims, including any attorneys' fees connected
therewith.
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31. RULES AND REGULATIONS
Tenant agrees to observe and comply with all Rules and Regulations
of the Building, reasonably imposed by Landlord from time to time for the
proper enjoyment, cleanliness, appearance, maintenance and reasonable use of
the Premises and the Building by all tenants and their agents, customers,
clients and employees. The existing Rules and Regulations are attached
hereto as Exhibit "G" and incorporated herein by this reference, and may be
supplemented, reasonably modified and amended from time to time, by Landlord
on reasonable notice to Tenant. Breach of such Rules and Regulations shall
constitute a default by Tenant entitling Landlord, upon written notice in
accordance with the provisions of Section 22 hereof, to exercise the remedies
contained therein for such default. Landlord shall use its best efforts to
secure compliance by all tenants and other persons with Rules and Regulations
from time to time in effect, but shall not be responsible to Tenant for
failure of any person to comply with such Rules and Regulations.
32. RIGHT TO CONTEST
32.1 After written notice to Landlord, Tenant may at its expense
contest by appropriate legal proceedings conducted in good faith the amount,
validity or application, in whole or in part, of any legal requirement, lien
or other adverse claim of a third party, provided: (a) Tenant shall not be
in default under this Lease; (b) Landlord shall not be subject to civil or
criminal liability for failure to comply with the legal requirement or adverse
claim in question; (c) Tenant shall have furnished security in the amount
required in such proceedings, if any, or in the amount reasonably requested by
Landlord, whichever is greater, it being understood that in the case of
claimed or potential liens the amount of the security shall be one hundred
percent (100%) of the amount of the claim or potential lien; and (d) Tenant
conducts the contest with due diligence. Upon the termination of any legal
proceeding hereunder, Tenant shall immediately comply with any decision, order
or judgment issued herein.
32.2 During the period Tenant conducts any contest in accordance with
this paragraph 32.1, Tenant shall be relieved from its obligations under this
Lease with respect to the legal requirement, lien or adverse claim in
question. Tenant agrees to indemnify, defend and save Landlord harmless from
and against any claim, liability or expense, including reasonable attorneys'
fees, resulting from any contest by Tenant.
33. MISCELLANEOUS
33.1 All notices and communications of any kind which either party to
this Lease may be required or desires to serve upon the
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other shall be in writing and served to Landlord and to Tenant by personal
service or by leaving a copy of such notice, demand or communication at the
appropriate address indicated in Section 1 hereof, whereupon such service
shall be deemed complete, or by mailing a copy thereof by certified or
registered mail, such services shall be deemed complete on the day of actual
delivery as shown by the addressee's receipt or at the expiration of the third
day of mailing, whichever first occurs. Either party may change its address
from time to time by giving written notice to the other.
33.2 This Lease shall be construed in accordance with and governed by
the laws of the State of Arizona. Any term or provision of this Lease which
now or hereafter is declared contrary to any law, order, ordinance or
requirement of any governmental authority, whether now in force or enacted or
promulgated in the future, or which is otherwise invalid, shall be deemed
stricken from this Lease without impairing the validity of the remainder of
this Lease.
33.3 Time is of the essence of this Lease. The terms and provisions
hereof shall be binding upon and inure to he benefit of the heirs, executors,
administrators, personal representatives, successors and assigns hereto. If
Tenant shall be more than one party, then the obligations imposed upon Tenant
hereunder shall be joint and several.
33.4 All rights and remedies of Landlord under this Lease shall be
cumulative and none shall exclude any other rights and remedies allowed by
law. No delay or omission of either party to exercise any right or power
arising from any default or an acquiescence therein. No waiver by either
party of the breach of any covenant of this Lease by the other party shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Lease, nor shall the acceptance of rent
during any period in which Tenant is in default in any respect, other than the
payment of rent, be deemed to be a waiver of such default by Landlord.
33.5 The captions appearing herein are for convenience only and are not
a part of this Lease nor do they limit or amplify any term or provision
herein. The terms and provisions hereof shall. apply without regard to the
number or gender of words and expressions used herein.
33.6 This Lease contains the entire understanding and agreement of the
parties hereto with respect to all matters referred to herein, and all prior
negotiations and understandings are superseded hereby and merged into this
Lease. No party hereto shall be liable or bound to any other party in any
manner or by any agreement, warranty, representation or guarantee except as
specifically set forth herein. This Lease may be amended or
-21-
<PAGE>
modified only by a written instrument signed by the parties hereto.
33.7 The relationship of the parties created by this agreement shall be
solely that of landlord and tenant and under no circumstances shall one party
be considered as partner, joint venturer, or agent of the other, provided that
this provision shall not affect the relationship of the parties pursuant to
any other agreement, including without limitation, Landlord's partnership
agreement.
33.8 Except as otherwise provided herein, any monies due from Tenant to
Landlord hereunder which are not paid when due shall bear interest at the
maximum rate permitted by law from the due date until paid, or eighteen
percent (18%) per annum if no such maximum rate is stated, but the payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
The acceptance or endorsement by Landlord of any payment or check from Tenant
shall not be deemed an accord and satisfaction and shall not prejudice
Landlord's right to recover the balance of any amounts due under the terms of
this Lease, unless otherwise expressly agreed by Landlord in writing.
33.9 In the event of any legal action or proceeding brought by either
party hereto against the other arising out of this Lease, the prevailing party
shall be entitled to recover its actual attorneys' fees incurred in such legal
action or proceeding and such attorneys' fees shall be included in any
judgment rendered, as determined by the Court and not the jury, together
with such party's taxable costs and other chargeable expenses. In addition,
if any person shall institute an action against Tenant in which Landlord is
involuntarily and without cause made a party defendant, Tenant shall
indemnify, defend and save Landlord harmless from all liability by reason
thereof, including actual attorneys' fees and all costs incurred by Landlord
in such action.
33.10 Tenant shall not record this Lease without Landlord's prior
written consent, and such recordation shall, at the option of Landlord,
constitute a non-curable default of Tenant hereunder. The parties hereto
agree to executed, acknowledge and deliver such further documents as may be
necessary or proper to carry out the purpose and intent of this Lease and, in
this regard, either party shall, upon request of the other, execute,
acknowledge and deliver to the other a "short form" memorandum of this Lease
for recording purposes.
33.11 If Tenant is a corporation, each individual executing this Lease
on behalf of said corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of
-22-
<PAGE>
said corporation in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the bylaws of said.
34. ADDENDUM
An Addendum is attached and a part of this agreement.
The parties hereto have duly executed this Lease effective as of the day
and year first above written.
LANDLORD: TENANT:
/s/ Steve Welker /s/ Greg Hansen
- --------------------------- ---------------------------
Evergreen Corporate Center Northern Arizona Eye Clinic
Its Controller Its Admin NAEC
---------------------- -----------------------
-23-
<PAGE>
ADDENDUM
To Lease Agreement dated ____________, 1992 by and between Evergreen Corporate
Center and Northern Arizona Eye Center.
The following are included and a part of the lease agreement:
1) TENANT IMPROVEMENTS: Landlord shall provide for construction of
Tenant Improvements, with exact scope of improvements to be mutually agreed
between Landlord and Tenant. Landlord's total cost of Tenant improvements
shall not exceed $5,000 without further agreement between Landlord and Tenant.
Tenant may elect to proceed with Tenant Improvements with reimbursement upon
completion by Landlord. Said reimbursement shall not exceed $5,000. and all
of the Landlords contribution shall be utilized for actual improvements to the
leased premises (i.e. carpet, paint, lighting or modifications or
improvements). Improvements shall be provided by Licensed contractors and
subject to the written approval of the Landlord.
2) FINANCIAL REVIEW BY LANDLORD: Landlord reserves the right to review
suitable financial statements and corporation documents of the Tenant prior to
final execution of the lease agreement and construction of the Tenant
improvements.
3) RENT ABATEMENT: Monthly Rent shall be abated for months 1-3.
4) LEASE TERMINATION: In the event that City of Scottsdale Zoning
regulations should be changed and the Tenant's use not allowed under a
grandfathered use provision, Tenant may void this lease by providing
documentation of the Tenants use being non-conforming. Tenant shall extend
reasonable efforts to make the use conforming (i.e. - special use permits or
variance). Tenant shall reimburse landlord for all expenses incurred by
Landlord in regards to the lease including Landlords cost of Tenant
improvements, Real Estate commissions and rent abatements. These cost shall
be prorated by the length of tenants occupancy at the time of termination.
Tenant shall provide 60 days notice prior to exercising this right of
termination.
-24-
<PAGE>
5) SECOND RIGHT OF REFUSAL: Tenant shall have a Second Right of
refusal, subordinate to an existing First right by USA Communications, Inc.
for contiguous space in the building. Tenant shall have the right to match
any bona fide offer to lease which is deemed acceptable to Landlord. Tenant
shall have 15 Days from receipt of said offer to exercise this right of
refusal.
6) EXISTING LEASE ON SUITE 207: Landlord and Tenant have previously
executed a lease on Suite 207 of the Evergreen Corporate Center. Landlord and
Tenant agree that upon full and binding execution of this lease agreement and
the depositing of any additional security deposit or rents, the previous
agreement shall be Null and Void. Furthermore, upon mutual execution and
depositing of funds, Landlord and Tenant shall execute a lease memorandum
which shall evidence the voiding of the previous lease agreement.
7) PRIOR LEASE ON SUITE 100: Tenant herein acknowledges that the
premises (Suite 100) is currently under lease and this lease agreement shall
be subject to Landlords obtaining a full release of the current Suite 100
lease obligation from the current Tenant (USA Print Cause Share Marketing) and
USA Print Cause Share Marketing execution of written agreement voiding the
existing lease. Said release to be obtained within 5 working days of
execution of this lease agreement.
LANDLORD: TENANT:
/s/ Steve Welker /s/ Greg Hansen
- --------------------------- ---------------------------
Evergreen Corporate Center Northern Arizona Eye Clinic
LANDLORD: TENANT:
/s/ C. N. Ray /s/ J. Charles Casebeer
- --------------------------- ---------------------------
Evergreen Corporate Center Northern Arizona Eye Clinic
-25-
<PAGE>
EXHIBIT C
Rules And Regulations
Attached to and forming a part of the AGREEMENT OF LEASE
1. SECURITY. Landlord may from time to time adopt appropriate
systems and procedures for the security or safety of the Project or Building,
any persons occupying, using or entering the same, or any equipment,
furnishings or contents thereof, and Tenant shall comply with Landlord's
reasonable requirements relative thereto. Landlord may refuse admission to
the Project or the Building outside or ordinary business hours to any person
not having a pass issued by Landlord or not properly authorized and may
require all persons admitted to or leaving the Project or Building outside of
ordinary business hours to register. All entrance doors in the Demised
Premises shall be left locked when the Demised Premises are not in use.
2. LOCKS. Landlord may from time to time install and change
locking mechanisms on entrances to the Building, common areas thereof, and the
Premises, and (unless 24-hour security is provided by the Building) shall
provide to Tenant a reasonable number of keys and replacements (at Tenant's
cost) therefor to meet the bonafide requirements of Tenant. In these rules
"keys" include any device serving the same purpose. Tenant shall not add to
or change existing locking mechanisms on any door in or to the Premises
-26-
<PAGE>
without Landlord's prior written consent. If, with Landlord's consent, Tenant
installs lock(s) incompatible with the Building master locking system:
(a) Landlord, without abatement of rent, shall be relieved of any
obligation under the Lease to provide any service to the affected
areas which require access thereto,
(b) Tenant shall indemnify Landlord against any expense as a result of
forced entry thereto which may be required in an emergency, and
(c) Tenant shall at the end of the term and at Landlord's request
remove such lock(s) at Tenant's expense.
3. RETURN OF KEYS. At the end of the Term, Tenant shall promptly
return to Landlord all keys for the Building and Premises which are in
possession of Tenant.
4. WINDOWS. Tenant shall observe Landlord's rules with respect to
maintaining window coverings at all windows in the Premises so that the
Building presents a uniform exterior appearance, and shall not install any
window shades, screens, drapes, covers or other materials on or at any window
in the Premises without Landlord's prior written consent. Tenant shall ensure
that window coverings are closed on all windows in the Premises while they are
exposed to the direct rays of the sun. No awnings or other projections over
or around the windows or entrances of the Demised Premises shall be installed
by any Tenant.
5. REPAIR, MAINTENANCE ALTERATIONS AND IMPROVEMENTS. Tenant shall
carry out Tenant's repair, maintenance, alterations and improvements in the
Premises only during times agreed to in advance by Landlord and in a manner
which will not interfere with the right of other tenants in the Building.
6. WATER FIXTURES. Tenant shall not use water fixtures for any
purpose for which they are not intended, nor shall water be wasted by
tampering with such fixtures. Any cost or damage resulting from such misuse
by Tenant shall be paid for by Tenant.
7. PERSONAL USE OF PREMISES. The Premises shall not be used or
permitted to be used for residential, lodging or sleeping purposes or for the
storage of personal effects or property not required for business purposes.
-27-
<PAGE>
8. HEAVY ARTICLES. Tenant shall not place in or move about the
Premises without Landlord's prior written consent any safe or other heavy
article which in Landlord's reasonable opinion may damage the Building, and
Landlord may designate the location of any heavy articles in the Premises.
9. CARPET PADS. In those portions of the Premises where carpet
has been provided directly or indirectly by Landlord, Tenant shall, at its own
expense, install and maintain pads to protect the carpet under all furniture
having casters other than carpet casters.
10. BICYCLES, ANIMALS. Tenant shall not bring any animals or
birds into the Building, and shall not permit bicycles or other vehicles
inside or on the sidewalks outside the Building except in areas designated
from time to time by Landlord for such purposes.
11. DELIVERIES. Tenant shall ensure that deliveries of materials and
supplies to the Premises are made through such entrance, elevators and
corridors and at such times as may from time to time be designated by
Landlord, and shall promptly pay or cause to be paid to Landlord the cost of
repairing any damage in the Building caused by any person making such
deliveries.
12. FURNITURE AND EQUIPMENT. Tenant shall insure that furniture
and equipment being moved into or out of the Premises is moved through such
entrances, elevators and corridors and at such times as may from time to time
be designated by Landlord, and by movers or a moving company approved by
Landlord, and shall promptly pay or cause to be paid to Landlord the cost of
repairing any damage in the Building caused thereby.
13. SOLICITATIONS. Landlord reserves the right to restrict or
prohibit canvassing, soliciting or peddling in the Building.
14. FOOD AND BEVERAGES. Only persons approved from time to time by
Landlord may prepare, solicit orders for, sell, serve or distribute foods or
beverages in the Building, or use the elevators, corridors or common areas for
any such purpose. Except with Landlord's prior written consent, which shall
not be unreasonably withheld, and, in accordance with arrangements approved by
Landlord, Tenant shall not permit on the Premises the use of equipment for
dispensing food or beverages or for the preparation, solicitation of orders
for, sale, serving or distribution of food or beverages.
15. REFUSE. Tenant shall place all refuse in proper receptacles
provided by Tenant at its expense in the Premises or in receptacles (if any)
provided by Landlord for the Building and shall keep sidewalks and driveways
outside the Building and lobbies, corridors, stairwells, ducts and shafts of
the Building free of all refuse.
-28-
<PAGE>
16. OBSTRUCTIONS. Tenant shall not obstruct or place anything in or
on the sidewalks or driveways outside the Building or in the lobbies,
corridors, stairwells or other common areas of the Building, or use such
locations for any purpose except access to and exit from the premises without
Landlord's prior written consent. Landlord may remove at Tenant's expense
any such obstruction or thing (unauthorized by Landlord) without notice or
obligation to Tenant.
17. DANGEROUS OR IMMORAL ACTIVITIES. Tenant shall not make any use
of the Premises which involves the danger of injury to any person, nor shall
the same be used for any immoral purpose.
18. PROPER CONDUCT. Tenant shall not conduct itself in any manner
which is inconsistent with the character of the Building as a first quality
building or which will impair the comfort and convenience of other tenants in
the Building.
19. EMPLOYEES, AGENTS AND INVITEES. Landlord shall have the right
to control and operate the public portions of the Building and the public
facilities, as well as facilities furnished for the common use of the
tenants, in such manner as it deems best for the benefit of the tenants
generally. No Tenant shall invite to the Demised Premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere
with the use and enjoyment of the entrances, corridors, elevators and
facilities of the Building by other tenants. In these Rules and
Regulations, Tenant includes the employees, agents, invitees and licensees of
Tenant and others permitted by Tenant to use or occupy the Premises.
20. RESTRICTIONS. Tenant shall not violate any of the Rules or
Restrictions and shall use its best efforts to prevent its employees or
invitees from committing any such violations.
LANDLORD: TENANT:
/s/ Steve Welker /s/ Greg Hansen
- --------------------------- ---------------------------
Evergreen Corporate Center Northern Arizona Eye Clinic
-29-
<PAGE>
EXHIBIT A
Legal
Attached to and forming part of the AGREEMENT OF LEASE
Lease to: Northern Arizona Eye Center
Dated: ______________________________
Evergreen Corporate Center
Lot 12 Scottsdale Industrial Airpark Unit 7
as recorded in book 234 of maps, page 27 MCR.
EXCHANGE AGREEMENT
This Exchange Agreement ("Agreement") is made as of October 1, 1996 by
and between Vista Laser Centers Of The Southwest, Inc., a Nevada corporation
(the "Company"), and Vista Technologies, Inc., a Nevada corporation ("Vista
Tech").
RECITALS
WHEREAS, Vista Tech has received an assignment from Pharma Patch PLC of
the Company's 12% Secured Convertible Promissory Note in the principal amount
of $100,000 (the "Note");
WHEREAS, the Company desires to exchange with Vista Tech an aggregate of
100,000 shares of the Company's Common Stock ("Common Stock") in consideration
for the Note and the release of the Company's obligations under, and the
cancellation of the indebtedness evidenced by, the Note.
NOW, THEREFORE, the Company and Vista Tech hereby agree as
follows:
1. EXCHANGE. On this date and subject to the terms and conditions
of this Agreement, the Company hereby exchanges an aggregate of 100,000 shares
of Common Stock (the "Shares") in consideration for the Note and Vista hereby
irrevocably and forever releases the Company from the Company's obligations
under, and cancels the indebtedness evidenced by the Note. The term
"Securities" refers to the Shares purchased under this Agreement and includes
all securities received (a) in replacement of the Shares, (b) as a result of
stock dividends or stock splits in respect of the Shares, and (c) all
securities or property received in replacement of the Shares in a
recapitalization, merger, reorganization or the like.
2. REPRESENTATIONS OF VISTA TECH. Vista Tech represents and
warrants to the Company that:
(a) Vista Tech is acquiring the Securities for Vista
Tech's own account for investment purposes only and not with a view to, or for
sale in connection with, a distribution of the Securities within the meaning
of the Securities Act of 1933, as amended (the "1933 Act").
(b) Vista Tech has no present intention of selling or otherwise
disposing of all or any portion of the Securities.
(c) Vista Tech has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and
financial condition that Vista Tech reasonably considers important in making
the decision to acquire
- 1 -
<PAGE>
the Securities, and Vista Tech has had ample opportunity to ask questions of
the Company's representatives concerning such matters and this investment.
(d) Vista Tech is fully aware of (i) the highly speculative
nature of the investment in the Securities; (ii) the financial hazards
involved; (iii) the lack of liquidity of the securities and the restrictions
on transferability of the Securities; and (iv) the qualifications and
backgrounds of the principals of the Company.
(e) Vista Tech is capable of evaluating the merits and risks of
this investment, has the ability to protect Vista Tech's own interests in this
transaction and is financially capable of bearing a total loss of this
investment.
(f) At no time was Vista Tech presented with or solicited by any
publicly issued or circulated newspaper, mail, radio or television, or any
other form of general advertising in connection with its acquisition of the
Securities.
(g) Vista Tech has been advised that the acquisition of the
Securities hereunder may have adverse tax effects upon Vista Tech. Vista Tech
is not relying upon the Company or its Legal counsel and has consulted with
Vista Tech's own tax advisors in this regard.
3. COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS. Vista Tech
understands and acknowledges that, in reliance upon the representations and
warranties made by Vista Tech herein, the Securities have not been registered
with the Securities and Exchange Commission ("SEC") under the 1933 Act or the
laws of any state, but have been issued under an exemption or exemptions from
registration requirements of the 1933 Act and applicable state law which
impose certain restrictions on Vista Tech's ability to transfer the
Securities.
(a) RESTRICTIONS ON TRANSFER. Vista Tech understands that
Vista Tech may not transfer any Securities unless such Securities are
registered under the 1933 Act and any applicable state securities laws or
unless, in the opinion of counsel to the Company, an exemption from such
registration is available. Vista Tech understands that only the Company may
file a registration statement with the SEC or any state and that the Company
is under no obligation to do so with respect to the Securities. Vista Tech
has also been advised that an exemption from registration may not be available
or may not permit Vista Tech to transfer all or any of the Securities in the
amounts or at the times proposed by Vista Tech.
(b) RULE 144. In addition, Vista Tech has been advised that
SEC Rule 144 promulgated under the 1933 Act, which permits
- 2 -
<PAGE>
certain limited sales of unregistered securities, is not presently available
to Vista Tech.
4. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Agreement, Vista Tech will have all of the rights of a shareholder of the
Company with respect to the Securities from and after the date hereof until
such time as Vista Tech disposes of the Securities.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Vista Tech understands and agrees that the
Company will cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Securities, together with any other legends that may be required by
state or federal securities laws, or by the Bylaws of the Company, or by any
other agreement between Vista Tech and the Company or between Vista Tech and
any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),OR UNDER THE SECURITIES
LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO BE ISSUED TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
(b) STOP-TRANSFER INSTRUCTIONS. Vista Tech agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required
(i} to transfer on its books any Securities that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Securities or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Securities have
been so transferred.
(d) MARKET STANDOFF AGREEMENT. Vista Tech agrees in connection
with any registration of the Company's securities that, upon the request of
the Company or the underwriters managing any public offering of the Company's
securities, Vista Tech will not
- 3 -
<PAGE>
sell or otherwise dispose of any Securities without the prior written consent
of the Company or such underwriters, as the case may be, for such period of
time after the effective date of such registration and subject to all
restrictions as the Company or the underwriters may specify for
employee-shareholders generally.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer
of the Securities hereunder will be subject to and conditioned upon compliance
by the Company and Vista Tech with all applicable state and federal laws and
regulations and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance
and transfer.
7. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement will be binding
upon Vista Tech and Vista Tech's successors and assigns.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement will be submitted by Vista Tech or by the Company forthwith to the
Company's Board of Directors, which will review such dispute at its next
regular meeting. The resolution of such a dispute by the Board will be final
and binding on the Company and on Vista Tech.
9. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by
and construed in accordance with the laws of the State of Arizona, excluding
that body of laws pertaining to conflict of laws. If any provision of this
Agreement is determined by a court of law to be illegal or unenforceable, such
provision will be enforced to the maximum extent possible and the other
provisions will remain effective and enforceable.
10. NOTICES. Any notice required or permitted hereunder will be
given in writing and will be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified or registered mail,
return receipt requested, with postage and fees prepaid, addressed to the
other party at its address as shown at the time on the Company's records, or
to such other address as such party may designate in writing from time to time
to the other party.
11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersedes all prior understandings and
agreements between the parties hereto with respect to the
- 4 -
<PAGE>
specific subject matter hereof.,
COMPANY:
VISTA LASER CENTERS OF THE SOUTHWEST, INC.
a Nevada corporation
By: /s/ Larry F. Lang
-----------------------------
Larry F. Lang, President
VISTA TECH:
VISTA TECHNOLOGIES, INC.
a Nevada corporation
By: /s/ Thomas A. Schultz
------------------------------
Thomas A. Schultz, President
- 5 -
PROMISSORY NOTE
$361,860.00 Scottsdale, Arizona
July 1, 1997
FOR VALUE RECEIVED, the undersigned, Vista Laser Centers Of The
Southwest, Inc., a Nevada corporation, ("Maker"), promises to pay to the order
of Casebeer Eye Centers, LTD., an Arizona corporation ("Holder"), at 15100
North 78th Way, Suite 201, Scottsdale, Arizona 85260, or at such other place
as the Holder hereof may designate, in lawful money of the United States of
America, the principal sum of Three Hundred Sixty-One Thousand Eight Hundred
Sixty and O0/100 Dollars ($361,860.00), together with interest accrued thereon
as provided below.
This Note shall bear interest on the unpaid principal balance at the
rate of eight percent (8%) per annum, simple interest. The principal amount
of this Note and accrued interest thereon shall be payable on the first to
occur of (i) June 30, 1999 or (ii) thirty (30) days following the date of
closing of an offering of the securities of Maker or Vista Technologies, Inc.
the net proceeds of which are not less than $2,000,000 (the "Due Date" ).
If the payment of principal or interest on this Note shall become due on
a Saturday, Sunday, or a public holiday under the laws of the State of
Arizona, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment. This Note may be prepaid at any time prior to its maturity
without penalty or premium.
The failure by Maker make any installment payment when due under this
Note, and any such failure remains unremedied for a period of ten (10) days
after written notice thereof is given to Maker by the Bolder of this Note,
shall be an "Event of Default" under this Note. Upon the occurrence of any
Event of Default, the Holder of this Note, at Holder's option, may declare all
sums of principal and interest outstanding hereunder to be immediately due and
payable without further presentment, demand, protest or notice of dishonor,
all of which are expressly waived by Maker. No delay on the part of Holder in
exercising amy right hereunder shall operate as a waiver of such right under
this Note. Maker agrees to pay all costs and expenses, including reasonable
attorneys' fees, expended or incurred by the Holder in connection with the
enforcement of this Note, the collection of any sums due hereunder, any action
for declaratory relief in any way related to this Note, or the protection or
preservation of any rights of the Holder hereunder.
1
<PAGE>
Notwithstanding anything to the contrary in this Note, no rate of
interest required under this Note shall exceed the maximum legal rate
permitted under applicable law, and, if any such rate is found to exceed the
maximum legal rate, the Maker shall be required to pay only the maximum legal
rate.
This Note shall be construed in accordance with the substantive laws of
the State of Arizona.
Vista Laser Centers Of The Southwest, Inc.
By: /s/ Larry F. Lang
----------------------------------
Title: President
----------------------------------
Vista Technologies, Inc.
By: /s/ Murray D. Watson
----------------------------------
Murray D. Watson, President
2
<TABLE>
<CAPTION>
Jurisdiction of Percentage Interest
Name of Subsidiary Organization Owned by Registrant
- ---------------------- --------------- -------------------
<S> <C> <C>
SUBSIDIARIES OF ATLANTIC
CENTRAL ENTERPRISES LIMITED
- ----------------------------
Vista Technologies Inc. Nevada 54.1% (Note A)
First American AMO Inc. Delaware 80.02% (Note B)
ICON Vision Centers Inc. Ontario 100% (Note B)
SUBSIDIARIES OF VISTA
TECHNOLOGIES INC.
- ----------------------------
Vista Vision S.p.A. Italy 74.73%
Vista Vision Scandinavia A.B. Sweden 100%
Vista Laser Centers of the
Southwest, Inc. Nevada 94%
Vista Laser Centers of
Michigan, Inc. Nevada 100% (Note B)
Vista Laser Centers of
the Northwest, Inc. Nevada 100% (Note B)
Vista Laser Centers, Inc. Nevada 100% (Note B)
Refractive Services 800 Corp. Nevada 100% (Note B)
</TABLE>
____________________________________________________
(A) Based on 6,324,912 shares of Vista's common stock outstanding, of which
3,423,800 shares are owned by Atlantic Central Enterprises Limited.
(B) Not engaged in active business operations as of February 28, 1997.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from
the Consolidated Statements of Operations and Consolidated
Balance Sheets of Atlantic Central Enterprises Limited and
Subsidiaries and is qualified in its entirety by reference
to such consolidated financial statements.
</LEGEND>
<CIK> 0001020827
<NAME> ATLANTIC CENTRAL ENTERPRISES LIMITED
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-START> Mar-01-1996
<PERIOD-END> Feb-28-1997
<PERIOD-TYPE> 12-MOS
<CASH> 1,807
<SECURITIES> 2,373
<RECEIVABLES> 161
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,623
<PP&E> 3,250
<DEPRECIATION> 1,155
<TOTAL-ASSETS> 8,119
<CURRENT-LIABILITIES> 5,497
<BONDS> 1,044
0
0
<COMMON> 16
<OTHER-SE> 290
<TOTAL-LIABILITY-AND-EQUITY> 8,119
<SALES> 3,486
<TOTAL-REVENUES> 3,486
<CGS> 0
<TOTAL-COSTS> 13,801
<OTHER-EXPENSES> 2,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> (12,546)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,546)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,546)
<EPS-PRIMARY> (7.54)
<EPS-DILUTED> (7.54)
</TABLE>
