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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 March 31, 1996.
-----------------------------------------
[ ] 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. 0-23142
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VISTA TECHNOLOGIES INC.
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(Name of small business issuer in its charter)
NEVADA 13-3687830
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 OAKMEAD PARKWAY, SUITE 210, SUNNYVALE, CALIFORNIA 92088-3599
- ------------------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (800) 249-3819
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 $.005
-----------------------------
(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: $2,130,000 for the
Fiscal Year ended March 31, 1996.
The aggregate market value of 1,721,112 shares of registrant's voting common
stock held by non-affiliates of the Registrant was $5,163,337 as of July 15,
1996, based upon the closing sale price of $3.00 per share for the Common
Stock in the over-the-counter market on such date.
Number of shares of common stock outstanding as of July 15, 1996:
7,006,112 shares of common stock.
Documents Incorporated By Reference: None.
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VISTA TECHNOLOGIES INC.
FORM 10-KSB ANNUAL REPORT
Table of Contents
<TABLE>
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Item No. Page
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PART I:
1. Description of Business ......................................... 3
2. Description of Property ......................................... 22
3. Legal Proceedings ............................................... 23
4. Submission of Matters to a Vote of Security Holders ............. 24
PART II:
5. Market for Common Equity and Related Stockholder Matters ........ 24
6. Management's Discussion and Analysis or Plan of Operation ....... 25
7. Financial Statements ............................................ 28
8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 29
PART III:
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ............ 30
10. Executive Compensation .......................................... 33
11. Security Ownership of Certain Beneficial Owners and Management .. 40
12. Certain Relationships and Related Transactions .................. 42
13. Exhibits and Reports on Form 8-K ................................ 49
Consolidated Financial Statements ..................................... F-1
SIGNATURE PAGE
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PART I
UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE DATA IN THIS REPORT
HAVE BEEN ADJUSTED RETROACTIVELY TO REFLECT A 1-FOR-5 REVERSE STOCK SPLIT AS
TO THE COMPANY'S COMMON STOCK EFFECTIVE AS OF MARCH 15, 1996.
Certain information in this Report includes forward-looking statements
within the meaning of applicable securities laws that involve risks and
uncertainties including, but not limited to, market acceptance of new
technologies, the sufficiency of financial resources available to the Company
and its corporate affiliates, 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.
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Vista Technologies Inc. (the "Company" or "Vista"), through its European
operating subsidiaries and joint venture interests in other affiliated
companies in the United States and Canada, is primarily engaged in providing
access to advanced laser vision correction ("LVC") equipment and support
services (collectively "LVC Services") for use by licensed ophthalmologists in
the treatment of refractive vision disorders. Computer-controlled excimer
lasers can be used to treat refractive vision disorders such as
nearsightedness and astigmatism to eliminate or reduce the need for corrective
lenses. The Company's subsidiaries and affiliates provide 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 the
Company's subsidiaries and affiliates also include various support services,
such as physician and staff training, technical support services, equipment
maintenance, billing and accounting and other administrative services.
Vista's European operating subsidiaries have owned and operated excimer
laser facilities in Italy and Sweden since 1992 and 1994, respectively, and
currently maintain five excimer lasers in use at outpatient surgical centers,
three in Italy and two in Sweden. Another laser owned by a third party is
shared by the Company at a recently established fourth center in Italy. See
"European Operating Subsidiaries" below.
In anticipation of recent approvals by the United States Food and Drug
Administration ("FDA") of excimer laser technology and equipment supplied by
two manufacturers to treat certain refractive vision disorders, the Company
developed a strategic plan commencing 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. A key part of Vista's strategy for expansion in the United
States and Canada is to develop, invest in, and act as a consultant to,
regional joint venture companies ("Regional Joint Ventures") that are to be
independently financed and offer advantages of equity incentives and
management control to skilled and prominent ophthalmologists experienced in a
variety of LVC treatments, procedures and post-operative care. To date, the
Company has organized and sponsored six Regional Joint Ventures in various
stages of development including one in Northern California that recently
commenced operations in June 1996 with an excimer laser at each of three
locations. See "North American Regional Joint Venture Investments and
Affiliations".
During March 1996, the Company completed equity financing transactions
with Pharma Patch PLC that resulted in a change in control of Vista. See
"Agreements with Pharma Patch for Equity Financing and Change in Control" in
Item 12 of this Report.
<PAGE> 4
In July 1995, the Company abandoned efforts to acquire control of
Medical Development Resources, Inc. ("MDRI") and wrote off $5,643,000 of prior
investments in MDRI and its subsidiaries at the end of its prior fiscal year
on March 31, 1995. The joint venture operations of an excimer laser clinic in
London, England were discontinued in June 1995 in response to unfavorable
local pricing for PRK procedures due to overcrowding of the market, a history
of unprofitable operations and a change in business strategy of the joint
venture partner. See Items 6 and 12 of this Report.
The Company was incorporated under the laws of Nevada on June 15, 1992
and its principal office is located at 1250 Oakmead Parkway, Suite 210,
Sunnyvale, California 92086-3599, telephone number (800) 249-3819. Commencing
in mid-August 1996, the Company will relocate its principal office to 167 S.
San Antonio Road, Suite 9, Los Altos, California 94022.
BACKGROUND AS TO LASER VISION CORRECTION SYSTEMS
Advanced LVC equipment supplied by various manufacturers has been
commercially available in recent years for use in foreign countries, including
Canada and various countries in Europe, among others. Two U.S. manufacturers,
Summit Technology, Inc. ("Summit") and VISX, Incorporated ("VISX"), recently
received FDA pre-market approval in October 1995 and March 1996, respectively,
for use of the Summit SVS Apex excimer laser system and VISX's excimer laser
systems Models "B" and "C" 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 employed in Canada and other foreign countries
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, the FDA cautioned
that it expects excimer laser equipment manufacturers and health care
practitioners will advertise and promote the use of FDA approved lasers in the
United States only within the scope of their currently FDA approved use, i.e.
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. The Company's existing European
subsidiaries and planned Regional Joint Ventures in the United States focus
primarily on PRK treatment to correct low and mild myopia. Regional Joint
Venture operations planned for at least two locations in Canada adjacent to
the U.S. border are expected to offer a wider variety of LVC services,
including LASIK, bilateral treatment and an advanced proprietary method of PRK
developed by Dr. Donald G. Johnson called the Johnson transepilthelial
multi-zone, multi-pass PRK procedure ("TMM PRK"). TMM PRK provides for a
smoother ablation zone than standard PRK procedures, thus reducing glare and
central islands side effects sometimes encountered in PRK procedures. The
epithelium (a layer of cells comprising the outer surface of the cornea) is
removed in the TMM PRK procedure by use of the laser, thus avoiding direct
<PAGE> 5
contact with the eye by the physician or instruments. The Company believes
that the TMM PRK method promotes faster post-operative regrowth during the
period when risk of pain and infection risk is highest.
Vision care professionals engaged by the Company and/or its Regional
Joint Ventures establish medical and operational standards relating to LVC
Services, train ophthalmologists and optometrists in advanced LVC procedures,
and establish advisory boards consisting of credentialed and prominent
ophthalmologists and optometrists with similar skills and experience. The
Company believes that its Regional Joint Ventures planned for targeted market
segments of North America will be capable of supporting a full range of LVC
procedures because of access to physicians skilled in advanced methods and the
ability to make appropriate referrals to medical professionals in Canada
offering certain LVC procedures not currently available in the U.S.
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
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 ("LVC") SYSTEMS
Lasers have been used routinely for a variety of medical purposes since
the 1960s. Lasers emit photons of light into a highly intense beam of energy
that is delivered to targeted tissue by means of optical mirrors or fiber
optics. The degree of absorption by the tissue varies with the choice of
wavelength and is an important variable in the application of laser technology
in treating various tissues. Surgical lasers emit light in a continuous
stream or in a series of very short duration "pulses", thus interacting with
tissue through heat or shock waves. Several factors, including the wavelength
<PAGE> 6
of the laser and the frequency and duration of the exposure or pulse,
determine the amount of energy which interacts with the targeted tissue.
Laser technology has been accepted in the ophthalmic community for the
treatment of certain eye disorders. In general, ophthalmic lasers are used to
coagulate, cut or ablate (remove) targeted tissue.
EXCIMER LVC SYSTEMS AND PROCEDURES
Excimer lasers were first developed in the late 1980s, and 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.
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. The
Company anticipates, however, that a significant percentage of patients at
Vista's Regional Joint Ventures planned for Canada may be eligible for
bilateral treatment in which both eyes are treated simultaneously.
Although a patient usually experiences a substantial
improvement in clarity of vision within a few days following the PRK
procedure, it generally takes from two to six months for the full benefit of
the procedure to occur. The PRK procedure is used today primarily to correct
the vision of patients with myopia (or nearsightedness) ranging from -1.5 to
up to -7.00 diopters, although the PRK procedure has also been performed in
foreign countries on higher diopter nearsighted and, occasionally, farsighted
and astigmatic patients. Approximately 90% of all myopic patients are
nearsighted up to -6.00 diopters and use of the PRK procedure to correct the
vision of nearsighted patients of up to -6.00 diopters therefore has received
the greatest degree of testing.
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
<PAGE> 7
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. The FDA has advised physicians that discussions with
patients and decisions to conduct LASIK or bilateral surgery (treatment of
both eyes at the same time) are considered the practice of medicine, and the
Company believes that certain surgeons 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 currently FDA approved use, i.e. for PRK and PTK.
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 has 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. The Company 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 infrared
light to an eye by means of a fiber optic cable and a single-use, hand-held
probe that directly contacts the eye at the exact spots chosen by the
ophthalmologist. The Company is aware of two manufacturers that have
developed holmium laser systems. The Company 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 laser
thermal 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 LVC SYSTEMS
The Company is aware of three companies that have reportedly developed
solid state lasers, ophthalmic laser surgical systems that apply a beam of
high intensity light to remove tissue from the inside, as opposed to the
surface of, the cornea. These solid state lasers are designed to ablate
tissue inside the cornea without violating the cornea's surface by computer
guiding the laser beam to the inner corneal tissue and vaporizing the targeted
tissue.
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EUROPEAN OPERATING SUBSIDIARIES
From February to May 1994, the Company negotiated and completed the
acquisition of controlling interests in certain foreign subsidiaries offering
access to excimer lasers at outpatient surgical centers in Italy, Sweden and
the United Kingdom. At the time of those acquisitions in 1994, these European
operating subsidiaries had four excimer lasers at refractive surgical centers,
two in Italy, one in Sweden and one in England. The center in England was
subsequently closed in June 1995 and three new centers, two in Italy and one
in Sweden, have been opened since these acquisitions were accomplished. Due
primarily to the limited operating history of these surgical centers including
charges for depreciation and amortization, the Company's operations in Europe
have not yet been profitable. However, the Company's Italian subsidiary,
representing approximately 57% of Vista's consolidated revenues for its fiscal
year ended March 31, 1996, produced positive cash flow from operations during
its last fiscal year ended December 31, 1995.
The Company's European LVC Services are operated under the trade name
"Vista Vision"(TM). As of March 31, 1996, the Company owned approximately
73.57% of Vista Vision S.p.A. ("Vista-Italy") and 100% of Vista Vision
Scandinavia AB ("Vista-Sweden"). Vista's interest in Vista-Sweden is held
through a wholly-owned Dutch company organized to facilitate administration of
the Company's European operations. A United Kingdom subsidiary of the
Company, Vista Vision International Ltd. ("Vista-UK"), owned a 50% joint
venture interest in a surgical center in London, England and was liquidated in
mid-1995 when Vista and its joint venture partner determined to close the
London clinic.
Vista-Italy's locations include a Milan center originally opened in
February 1992 and relocated during 1995, a Pisa clinic established in March
1993 and relocated in January 1996 to Viareggio, a Rome center started in
January 1995 and a Palermo center established in July 1996. The Vista-Sweden
centers include a center in Stockholm purchased from a third party in June
1994 and a center in Malmo opened in August 1995.
The Company's European operating subsidiaries typically receive a fee or
a percentage of the surgeon's fee for each LVC surgical procedure performed,
which to date have consisted primarily of PRK procedures. The gross
professional fee for PRK procedures in Italy and Sweden currently ranges from
approximately $1,500 to $2,500 per procedure, with a single eye constituting
one procedure, and fees payable to Vista-Italy and Vista-Sweden generally
range from $800 to $1,800 per procedure. Certain operating expenses of Vista-
Italy and Vista-Sweden under cooperative agreements for their facilities and
equipment use are in turn based upon the number of procedures performed.
Vista-Italy and Vista-Sweden maintain a total of five VISX excimer
lasers. Another laser owned by a third party is shared by Vista-Italy at a
center recently opened in Palermo, Italy. The following chart summarizes
certain information as to the number of LVC surgical procedures performed at
Vista's European centers for the periods indicated (excluding the center at
Palermo, Italy opened in July, 1996 after the periods covered by the table):
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Fiscal Year ended March 31,
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1996 1995 1994
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Milan, Italy (opened February 1992) ...... 595 466 239
Viareggio, Italy (opened March 1993) ..... 504 404 213
Rome, Italy (opened January 1995) ........ 268 41 --
Stockholm, Sweden (see Note a)............ 581 524 420
Malmo, Sweden (opened August 1995) ....... 77 -- --
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Totals ....................... 2,025 1,435 972
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</TABLE>
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_________________________________
(a) Includes procedures performed at this center for periods prior to the
June 1994 purchase of assets by Vista-Sweden.
NORTH AMERICAN REGIONAL JOINT VENTURE INVESTMENTS AND AFFILIATES
Having anticipated recent FDA pre-market approval of PRK equipment
supplied by Summit and VISX, the Company's business strategy developed in June
1995 is to expand in North America by organizing and sponsoring independently
financed regional enterprises (the "Regional Joint Ventures") in which Vista
will obtain a significant equity interest and long-term fee-based consulting
arrangements. The Company has obtained and will continue to seek affiliations
for its each of its Regional Joint Venture subsidiaries with experienced LVC
eye care professionals; these regional enterprises will 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".
In the typical Regional Joint Venture enterprise, the Company has
subscribed to a 5% Series B convertible preferred stock issue of the Regional
Joint Venture enterprise in exchange for shares of Vista common stock.
From July 1995 through June 1996, an 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.
The Company recently 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 ("RS-800") for
$50,000 from Refractive Services-800, Inc. Refractive Services-800, Inc.
organized RS-800 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.
After initial organization of a Regional Joint Venture, negotiations
with one or more local prominent ophthalmologists have been instituted and
these physicians are offered the opportunity of providing additional seed
capital investments in common stock and/or common stock purchase warrants
issuable by the Regional Joint Venture. Agreements with professionals are
negotiated for use of the Regional Joint Venture's equipment and other LVC
Services and for management to be provided to the Regional Joint Venture by
local vision care professionals or management personnel designated by them;
these agreements are in certain cases conditioned upon receipt of additional
financing in the form of a subsequent private placement and/or initial public
offering of securities by the Regional Joint Venture, Based upon its
experience in LVC Services and affiliations with prominent LVC specialists,
Vista also enters into a long-term consulting service agreement to provide
certain administrative and consulting services to the Regional Joint Venture
in exchange for a percentage of revenues realized by the Regional Joint
Venture, which is also contingent upon receipt of additional financing.
<PAGE> 10
The Regional Joint Venture is licensed by the Company on a non-exclusive
basis for no additional charge to operate under the name and style of "Vista
Laser Centers" of the particular region during the term of Vista's consulting
services agreement. The Company has adopted use of, and has filed trademark
applications in the United States and Canada to register, the service mark
"Vista Laser Centers"(TM). To date, the Company has organized and sponsored
six Regional Joint Ventures discussed below, all of which are incorporated
under the laws of Nevada.
Upon commencing business, each Regional Joint Venture plans to enter
into nonexclusive LVC Service agreements with additional ophthalmologists and
optometrists who desire to contract for access to equipment and LVC Services.
Regional Joint Ventures will earn fees for the fair market value of their LVC
Services by billing health care professionals at the time of use, with such
fees typically based upon a negotiated percentage of the gross procedure fees
charged to patients by the professional; payment normally will be received
when the professional collects its gross procedure fee from the patient. The
gross procedure fee is established by the professional, except that consent of
the Regional Joint Ventures will be required for gross procedures fees at less
than a specified minimum per eye. Generally speaking, gross procedure fees
charged by professionals for LVC treatment in most markets in the United
States and Canada currently ranges from approximately $1,500 to $2,000 per
eye, although there can be no assurance these levels will be maintained for
the long term. Support services offered by the Regional Joint Ventures will
include, among others, access to equipment, supplies and support personnel;
administration of accounting, billing, collection and other information
processing functions; training and education in advanced LVC procedures; and
marketing support. There can be no assurance that ophthalmologists and
optometrists will require and contract for LVC Services of these Regional
Joint Ventures, and independent professionals and groups that do contract for
such services cannot be required under applicable laws and regulation to agree
that they will use the services of any single provider for their LVC practice
on an exclusive basis.
VISTA LASER CENTERS OF MICHIGAN, INC.
The first Regional Joint Venture sponsored by the Company is Vista Laser
Centers of Michigan, Inc. ("VLC-Michigan"). To date, the activities of VLC-
Michigan have consisted primarily of market research, seeking affiliations and
negotiating agreements with experienced vision care professionals in the
United States and Canada, and negotiating to acquire equipment for
establishing a laser vision correction center in Windsor, Ontario after an
initial public offering of its securities has been completed. VLC-Michigan is
also negotiating to enter into a joint venture arrangement with a group of
physicians in Michigan following completion of an pending initial public
offering by VLC-Michigan.
The Company issued 200,000 shares of Vista common stock in November 1995
to VLC-Michigan in exchange for 200,000 shares of VLC-Michigan Series B
preferred stock, which have been recorded for financial statement purposes at
an appraised value of $217,597. VLC-Michigan also received $157,000 in cash
subscriptions to 100,000 shares of its Series A preferred stock ($100,000),
30,000 shares of its common stock ($30,000) and 270,000 Class A warrants
($27,000) exercisable at $1 per share. As noted above, Vista has agreed to
purchase the 100,000 shares of Series A preferred stock previously issued by
VLC-Michigan.
VLC-Michigan has filed a registration statement with the Securities and
Exchange Commission for a proposed initial public offering of 800,000 shares
of its 10% Series A cumulative convertible preferred stock at $5.00 per share
($4,000,000 total). There can be no assurance that VLC-Michigan will
successfully complete an initial public offering of its securities, failing
which it may not have sufficient capital to engage in business operations.
<PAGE> 11
Vista entered into a Consulting Services Agreement to provide certain
consulting services to VLC-Michigan in exchange for 5% of VLC-Michigan's
revenues attributable to its charges to health care professionals for the use
of equipment and LVC Services, less a credit to VLC-Michigan of $5,000 per
month. The Consulting Services Agreement is for a term of ten years from the
date of an initial public offering by VLC-Michigan, and is automatically
renewed thereafter for periods of five years unless either party provides six
months' prior notice of an intent not to extend the term.
RS-800, currently a wholly-owned subsidiary of the Company, has granted
VLC-Michigan the right to use certain 800 and 900 area code telephone numbers,
including among others 800-WE-DO-PRK, for its marketing and public education
programs. If VLC-Michigan elects to use the telephone numbers, RS-800 will
receive 2 1/2% of the revenues generated only as a direct result of responses
to telemarketing activities of VLC-Michigan by use of the licensed 800 and 900
telephone numbers.
VLC-Michigan's LVC services are planned to be offered at locations in
southern Ontario and Michigan. Dr. Fouad Tayfour, an Ontario ophthalmologist,
has agreed to act as a consultant and to enter into a facilities use agreement
with VLC-Michigan effective upon the completion of its initial public
offering. Dr. Tayfour has performed approximately 2,000 LASIK procedures
through 1995 in Ontario. Under the terms of a Facilities Agreement between
VLC-Michigan and Dr. Tayfour, upon completion of a public offering, VLC-
Michigan will receive approximately 50% of the gross procedure fee (as defined
in the agreement) charged to patients by Dr. Tayfour as compensation for his
use of VLC-Michigan's facilities and support services. The Facilities
Agreement between VLC-Michigan and Dr. Tayfour will be for a term of five
years effective upon successful completion of a public offering and will be
renewed thereafter on a year-to-year basis unless either party has provided
the other with at least three months' notice not to renew the agreement.
Equipment for the first location of VLC-Michigan in Windsor, Ontario
will be purchased by VLC-Michigan under an Agreement of Purchase of Assets
with Windsor Excimer Corporation, an affiliate of Dr. Tayfour, and its
operations will be located in a portion of facilities to be subleased from
Windsor Excimer Corporation upon completion of VLC-Michigan's initial public
offering. The equipment includes a Summit OmniMed UV 200 excimer laser, a
Sunrise Technologies LTK holmium laser and related equipment for a price of
$1,000,000, payable $500,000 at completion of VLC-Michigan's initial public
offering and $500,000 payable in a 10% promissory note due two years
thereafter and collateralized by the equipment.
VLC-Michigan has also assumed lease obligations from another physician
in Michigan as to a Summit holmium laser with rental payments of $10,850 per
month until December 1999, at which point VLC-Michigan has the right to
purchase the equipment for a nominal payment of $1, plus an obligation in the
aggregate amount of $230,000, payable at the rate of $250 each time the
equipment is used by a physician.
VLC-Michigan has entered into a consulting agreement with Dr. Tayfour
effective upon the completion of its public offering. Under that agreement,
Dr. Tayfour will act as a professional consultant to VLC-Michigan concerning
the establishment of ethical standards and procedures for LVC Services and
care, and will periodically conduct training and education seminars sponsored
by VLC-Michigan. Compensation payable to Dr. Tayfour under this consulting
agreement will include a percentage of VLC-Michigan's fees, after deduction of
certain operating expenses, attributable to the first 20 LVC procedures
performed in each month at its Windsor location by credentialed physicians
other than Dr. Tayfour. The consulting agreement with Dr. Tayfour is for a
term of five years effective upon successful completion of a public offering
and will be renewed thereafter on a year-to-year basis unless either party has
provided the other with at least three months' notice not to renew the
agreement.
<PAGE> 12
Under the agreements with Dr. Tayfour, VLC-Michigan elected Ghassan
Barazi as its President and Chief Executive Officer. Mr. Barazi acted as the
Administrative Director and Business Manager for the Windsor Laser Eye
Institute founded by Dr. Tayfour in 1991. The Company has agreed that its
preferred shares in VLC-Michigan will be voted to cause Mr. Barazi and two
vision care professionals to be designated by Dr. Tayfour to be elected
directors of VLC-Michigan. Dr. J. Charles Casebeer and Dr. Donald G. Johnson,
directors of Vista, have been elected to serve as directors of VLC-Michigan
and Dr. Casebeer also serves as VLC-Michigan's Chairman of the Board.
OTHER VISTA LASER CENTERS REGIONAL JOINT VENTURES
Other Regional Joint Ventures sponsored by the Company are in the
process of seeking affiliations and negotiating agreements with experienced
vision care professionals in their primarily geographic markets and are at
various stages in implementing plans to raise additional capital and acquire
excimer laser equipment and related facilities. As noted below, three of
these Regional Joint Ventures commenced business operations during 1996.
From November 1995 to May 1996, Vista issued 1,900,000 shares of its
common stock in exchange for the purchase of 5% Series B cumulative
convertible preferred shares in five of these Regional Joint Ventures as
summarized in the table below. In each instance, it is anticipated that
Vista's investment in Series B preferred shares of the Regional Joint Venture
has or will be valued by independent appraisals for the purpose of determining
the value of the shares exchanged for financial statement purposes. The
Company also recently agreed to issue 50,000 shares of Vista common stock and
50,000 Vista Class D warrants exercisable at $3.00 per share in exchange for
the purchase by Vista from Refractive Services-800, Inc. of 100,000 shares of
Series A convertible preferred shares in VLC-Michigan that were originally
issued by VLC-Michigan for a cash investment of $100,000.
Vista Laser Centers of the Southwest, Inc. ("VLC-Southwest") commenced
business operations at a location in Scottsdale, Arizona in February 1996.
VLC-Southwest has leased a newly acquired VISX excimer laser. As of June 30,
1996, VLC-Southwest had received cash subscriptions of $291,500 to 100,000
shares of its Series A preferred stock ($100,000), 35,000 shares of its common
stock ($35,000), 315,000 Class A warrants ($31,500) exercisable at $1 per
share and a private placement ($125,000) of units aggregating $125,000 in
principal amount of 11% convertible notes and 12,500 Class B warrants
exercisable at $4 per share. One of the investors in common stock and Class A
warrants of VLC-Southwest is Dr. J. Charles Casebeer. If VLC-Southwest
successfully completes additional financing activities, as to which there can
be no assurance, it is expected that VLC-Southwest will negotiate the purchase
of certain assets from an affiliate of Dr. Casebeer, who is Chairman of the
Board and a director of VLC-Southwest and also a director of Vista.
Vista Laser Centers of the Pacific, Inc. ("VLC-Pacific") commenced
business operations in June 1996 following receipt of $1,295,000 in cash
subscriptions to 100,000 shares of its Series A preferred stock ($100,000),
50,000 shares of its common stock ($50,000), 450,000 Class B warrants
($45,000) exercisable at $1 per share and a private placement ($950,000) of
units aggregating $950,000 in principal amount of 11% convertible notes and
95,000 Class A warrants exercisable at $4 per share. VLC-Pacific has assumed
equipment lease obligations from physicians affiliated with VLC-Pacific for
two VISX excimer lasers in Sacramento and San Jose, California and for a
Summit excimer laser in San Leandro, California, and is currently operating at
leased facilities in those three locations.
Vista Laser Centers Metro, Inc., to be renamed Vista Laser Centers of
the Northeast, Inc. ("VLC-Northeast") commenced business operations at a
center in Toronto, Ontario and received $100,000 in cash subscriptions to
100,000 shares of Series A preferred stock. Additional cash subscriptions to
common stock and warrants from local physicians and from a private placement
of 11% convertible note and warrants are pending. VLC-Northeast owns a newly
acquired VISX excimer laser and is engaged in negotiations to establish its
next location in the New York City metropolitan area.
<PAGE> 13
Vista Laser Centers of the Northwest, Inc. ("VLC-Northwest") has not yet
commenced business operations and has received $191,250 in cash subscriptions
for 100,000 shares of Series A preferred stock ($120,000), 37,500 shares of
its common stock ($37,500) and 337,500 Class A warrants ($33,750) exercisable
at $1 per share. The investor in common stock and Class A warrants of VLC-
Northwest is Dr. Donald G. Johnson. VLC-Northwest is currently engaged in
negotiating agreements for its plan of operations and to raise additional
capital, failing which it may not have sufficient capital to engage in
business operations. If VLC-Northwest successfully completes an initial
public offering or private placement of its securities, as to which there can
be no assurance, it is expected that VLC-Northwest will negotiate the purchase
of capital stock for an existing LVC services business from an affiliate of
Dr. Johnson, who is Chairman of the Board and a director of VLC-Northwest and
also Chairman of the Board and a director of Vista.
Vista Laser Centers of the South, Inc. ("VLC-South") has established an
office at Baton Rouge, Louisiana and is in the preliminary stages of
organization and negotiating agreements.
The Company does not exercise control over the Regional Joint Ventures
and Vista has granted irrevocable proxies to vote all shares in the Regional
Joint Ventures owned by Vista to one or more local affiliates of each Regional
Joint Venture. Although there can be no assurance one or more Regional Joint
Ventures will be successful in plans for an initial public offering or
additional private placement financing, each Regional Joint Venture plans to
ultimately effect a public offering of its securities that would reduce
Vista's beneficial ownership in the Regional Joint Venture to significantly
less than 50%. After giving effect to Vista's recent agreement to purchase
Series A preferred shares in five Regional Joint Ventures in exchange for
520,000 shares of Vista Common Stock, the Company's investments in the
Regional Joint Ventures described above as of July 30, 1996 are summarized in
the following table:
<TABLE>
<CAPTION>
Vista Technologies
common stock issued to
to acquire Series B
Preferred shares in Convertible Preferred Stock
Regional Joint Venture in Regional Joint Venture Owned by Vista
----------------------- -----------------------------------------------------
Number of Number of Preferred Shares % of Equity Interest (1)
Vista Common Date -------------------------- ------------------------
Regional Joint Venture Shares(1) Issued Series B(1) Series A(1) Primary (2) Diluted (3)
- -------------------------- ------------ -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Vista Laser Centers of
Michigan, Inc. ......... 200,000 11-16-95 200,000 (4) 100,000 (4) 90.9 % 46.2 %
Vista Laser Centers of
the Southwest, Inc. .... 250,000 3-18-96 350,000 (5) 100,000 (5) 87.2 % 47.7 %
Vista Laser Centers of
the Pacific, Inc. ...... 500,000 5-08-96 500,000 (6) 100,000 (6) 67.6 % 38.5 %
Vista Laser Centers of
the Northeast, Inc. .... 450,000 5-08-96 675,000 (7) 100,000 (7) 100.0 % 100.0 %
Vista Laser Centers of
the Northwest, Inc. .... 500,000 5-08-96 500,000 (8) 100,000 (8) 94.1 % 51.1 %
Vista Laser Centers of
the South, Inc. ........ 0 -- (9) -- -- --
</TABLE>
- -----------------------------------
(1) In each case, Vista has granted or is committed to grant to one or more
persons associated with the Regional Joint Venture an irrevocable proxy
granting such person or persons the right to vote shares acquired by
Vista in the Regional Joint Venture for a five year term. Conversely,
the Board of Directors of Vista has received for the same period an
irrevocable proxy from the Regional Joint Venture to vote shares of
Vista common stock issued to the Regional Joint Venture. All of such
proxies will terminate as to any shares which are sold to a bona fide
third party prior to expiration of the proxy.
<PAGE> 14
(2) Represents percentage of common and common equivalent shares of the
Regional Joint Venture that would be outstanding if all its convertible
securities issued as of July 30, 1996 were converted into common stock.
Does not give effect to the exercise of warrants and/or stock options
issued by the Regional Joint Venture or to the possibility of additional
offerings of securities planned by the Regional Joint Venture.
(3) Calculated on a fully-diluted basis to give effect to the assumed
conversion or exercise into common stock of all convertible securities,
warrants and/or stock options issued by the Regional Joint Venture as of
July 30, 1996. Does not give effect to the possibility of additional
offerings of securities planned by the Regional Joint Venture. Based
upon current proposals, if planned initial public offerings for VLC-
Michigan and VLC-Pacific are successfully completed, as to which there
can be no assurance, the beneficial ownership of shares held by the
Company in VLC-Michigan and VLC-Pacific on a fully-diluted basis would
decrease to approximately 20.7% and 20.3% respectively.
(4) Shares of 5% Series B preferred stock issued by VLC-Michigan have a
preference in liquidation of $2.50 per share and are convertible into
common stock of VLC-Michigan on a one-for-one basis. The appraised
value of the Series B preferred shares in VLC-Michigan as of the date of
original issuance for financial reporting purposes is $217,597. Shares
of 10% Series A preferred stock acquired by Vista for 100,000 shares of
Vista Common Stock on July 18, 1996 were originally issued by VLC-
Michigan for $1.00 per share in cash, have a preference in liquidation
of $5.00 per share and are convertible into common stock of VLC-Michigan
on a one-for-one basis.
(5) Shares of 5% Series B preferred stock issued by VLC-Southwest have a
preference in liquidation of $2.50 per share and are convertible into
VLC-Southwest common stock on a one-for-one basis. The value of the
Series B preferred shares in VLC-Southwest has not yet been appraised.
Shares of 10% Series A preferred stock acquired by Vista for 100,000
shares of Vista Common Stock on July 18, 1996 were originally issued by
VLC-Southwest for $1.00 per share in cash, have a preference in
liquidation of $5.00 per share and are convertible into common stock of
VLC-Southwest on a one-for-one basis.
(6) Shares of 5% Series B preferred stock issued by VLC-Pacific have a
preference in liquidation of $2.50 per share and are convertible into
common stock of VLC-Pacific on a one-for-one basis. The appraised value
of the Series B preferred shares in VLC-Pacific as of the date of
original issuance for financial reporting purposes is $487,855. Shares
of 10% Series A preferred stock acquired by Vista for 100,000 shares of
Vista Common Stock on July 18, 1996 were originally issued by VLC-
Pacific for $1.00 per share in cash, have a preference in liquidation of
$5.00 per share and are convertible into common stock of VLC-Pacific on
a one-for-one basis.
(7) Shares of 5% Series B preferred stock issued by VLC-Northeast have a
preference in liquidation of $2.50 per share and are convertible into
common stock of VLC-Northeast on a one-for-one basis. The value of the
Series B preferred shares in VLC-Northeast has not yet been appraised.
Shares of 10% Series A preferred stock acquired by Vista for 100,000
shares of Vista Common Stock on July 18, 1996 were originally issued by
VLC-Northeast for $1.00 per share in cash, have a preference in
liquidation of $6.00 per share and are convertible into common stock of
VLC-Michigan on a one-for-one basis.
(8) Shares of 5% Series B preferred stock issued by VLC-Northwest have a
preference in liquidation of $3.00 per share and are convertible into
common stock of VLC-Northwest on a one-for-one basis. The value of the
Series B preferred shares in VLC-Northwest not yet been appraised.
Shares of 10% Series A preferred stock acquired by Vista for 120,000
shares of Vista Common Stock on July 18, 1996 were originally issued by
VLC-Northwest for $1.20 per share in cash, have a preference in
liquidation of $6.00 per share and are convertible into common stock of
VLC-Michigan on a one-for-one basis.
(9) VLC-South is still in the organization stages. It is anticipated the
Company will acquire Series B preferred shares of VLC-South in exchange
for shares of Vista common stock.
<PAGE> 15
OTHER RELATIONSHIPS WITH PROFESSIONALS
Dr. Donald G. Johnson is Chairman of the Board and a director of Vista
and has agreed to render part-time consulting services to certain of the
Company's Regional Joint Ventures. The TMM PRK procedure was developed by Dr.
Johnson, who is one of the world's most experienced PRK surgeons. Dr. Johnson
developed TMM PRK procedures with VISX equipment and, as of December 31, 1995,
has successfully treated approximately 7,400 eyes with excimer laser
procedures.
Dr. J. Charles Casebeer is an educator and trainer in the LASIK
procedure and has previously served other companies as a consultant in the
LASIK field. Dr. Casebeer is a director of Vista and has entered into a
Consulting Agreement with VLC-Michigan contingent upon completion of its
pending public offering. He is expected to continue his efforts in LASIK
procedures and to assist in managing programs for training vision care
professionals in the use and performance of LVC procedures and in recommending
standards to establish a program of credentialing and training health care
professionals in various aspects relating to LVC procedures and patient
treatment. If an initial public offering of securities by VLC-Michigan is
successfully completed, Dr. Casebeer's professional corporation will receive
from VLC-Michigan compensation at the rate of $60,000 per annum plus
additional compensation for each vision care professional that enters a
credentialing program to be established by VLC-Michigan.
Dr. Casebeer and Dr. Johnson are expected to promote advanced LVC
methods for both the Company and for various Regional Joint Ventures that have
been formed, or may be formed in the future, by the Company to service various
North American geographic markets.
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
<PAGE> 16
eyewear, while the remaining 9% experienced improved vision without corrective
eyewear, but still required corrective eyewear to achieve 20/40 vision or
better.
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.
The Company believes that the market potential for alternative refractive
care utilizing excimer laser systems is commercially significant. Many
eyeglass or contact lens wearers are potential candidates for laser refractive
surgery. Generally speaking, the Company believes that younger persons are
more apt to elect refractive surgery than older people who have become
accustomed to eyeglasses or contact lenses over an extended period. However,
the degree to which the Company'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 the Company nor is any predictable at this time.
The Company's growth strategy includes: (a) increasing market
penetration into Canada and the United States through the Company's
sponsorship, investment and affiliation with Regional Joint Ventures; (b)
continuing to promote alliances with prominent ophthalmologists and other
vision care professionals with a goal of maximizing excimer laser usage for
both its European operating subsidiaries and North American Regional Joint
Ventures; (c) targeting Regional Joint Venture efforts toward specific
markets and key demographic groups within their regional markets; (d)
expanding market acceptance of LVC procedures by both vision care
professionals and the general public through Company participation in seminars
and training programs and dissemination of public information and advertising;
and (e) on a longer-term basis, the possible acquisition of other companies
engaged in providing LVC Services.
LVC EQUIPMENT AND SUPPLIERS
The Company 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 to Regional Joint Venture companies
and for possible expansion in Europe. The Company 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. As discussed earlier,
Summit and VISX have received 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.
<PAGE> 17
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.
Equipment currently maintained or expected to be acquired by the
Company's European operating subsidiaries and Regional Joint Ventures are
described above under the captions "European Operating Subsidiaries", "Vista
Laser Centers of Michigan, Inc." and "Other Vista Laser Centers Regional Joint
Ventures". Reference is also made to Note 12 of the Notes to the Consolidated
Financial Statements. Regional Joint Ventures in which the Company has
acquired an interest plan to enter into additional commitments to purchase and
lease LVC equipment which may be contingent in certain instances upon the
respective Regional Joint Venture obtaining additional financing.
In June 1996, the Company entered into two rental agreements with Summit
for the lease of two Summit Apex excimer lasers. The term of each rental
agreement commences upon equipment installation and will continue for a 27
month period. After the first three months of operation, each equipment lease
provides for a minimum monthly rental fee of $6,500. The Company anticipates
installing these lasers at one or more of its Regional Joint Ventures under a
sublease arrangement.
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
more information, including additional clinical trials for clarification of
<PAGE> 18
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.
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 hyperopia
(farsightedness) or that other LVC procedures, such as LASIK or TMM PRK, 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,
although the Company's plan in such event is that vision care professionals
affiliated with its Regional Joint Ventures will have an option of referring
patients desiring these alternative procedures to physicians in Canada
associated with one or more Regional Joint Ventures.
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 Canada and
Europe. These range from comprehensive device approval requirements to
requests for product data or certifications. The number and scope of these
requirements are increasing. Medical device laws and regulations are also in
effect in some states in which the Company may plan to sponsor Regional Joint
Ventures. The failure of the Company's European operating subsidiaries or
Regional Joint Ventures to comply with applicable foreign or state 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. The Company cannot predict what impact, if any, such
changes might have on its business.
<PAGE> 19
The operations of Vista's European subsidiaries and the Regional Joint
Ventures 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.
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. The Company
believes that its European operating subsidiaries and Regional Joint Ventures
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 provincial regulatory attention
may continue to be directed to the practice of medicine, and any changes in
applicable law or regulations, or in governmental agency and judicial
interpretations of such laws and regulations, could cause one 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. There can be no assurance that the
Company's European operating subsidiaries and one or more Regional Joint
Ventures will not be required to incur significant costs to comply with such
laws and regulations in the future.
INSURANCE AND INDEMNIFICATION
Health insurance providers in North America 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 European locations at which the
Company'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 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.
Vista 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
<PAGE> 20
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 are to require that ophthalmologists who perform
laser procedures by use of LVC equipment maintain their own professional
liability insurance.
At a future date, the Company intends to explore the availability and
cost of obtaining umbrella coverage with respect to any malpractice claims
relating to procedures performed by use of LVC Services and of obtaining
errors and omissions coverage with respect to the Company's staff. There can
be no assurance that the Company will be able to retain adequate liability
insurance at reasonable rates, or that insurance or indemnification provided
by health care providers will be adequate to cover claims asserted against the
Company, in which event the Company's business may be materially adversely
affected.
PROPRIETARY RIGHTS
The Company has no licenses, patents, registered trademarks or
registered copyrights except that it has filed trademark applications in the
United States and Canada for the service mark "Vista Laser Centers"(TM) and
its European operating subsidiaries conduct business under the name of "Vista
Vision"(TM).
COMPETITION
The vision care industry is extremely competitive and includes numerous
companies that are substantially larger than the Company and have greater
financial, marketing and technical resources. The Company 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 the Company's control.
The Company 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. Notwithstanding certain limitations and disadvantages compared to
LVC procedures, RK surgery is generally less expensive than are LVC
procedures, and RK may remain a competitive surgical treatment due to cost
considerations or the skills of particular physicians.
The market for access to excimer lasers is highly competitive and Vista
and its Regional Joint Ventures compete, or will compete, in 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.
Summit, a supplier of laser equipment operating through a subsidiary
named Refractive Centers International, Inc., plans to open various laser
centers in the United States. Other companies which do not manufacture laser
equipment currently provide, or have indicated they intend to provide, access
to laser equipment in the United States, including: Beacon Eye Institute Inc.
(a subsidiary of Hawker Siddley Canada Inc.); Vision International, Inc.,
which operates PRK clinics in Mexico, Finland and Argentina; Laser Vision
Centers, Inc. ("LVCI"), which has operated centers in Canada since 1991 and in
Europe since 1993; Global Vision, Inc.; LCA Vision, Inc.; Sight Resources,
Inc.; Sterling Vision, Inc.; The Laser Centre; and 20/20 Laser Centers, Inc.
<PAGE> 21
Additional competition also exists or may develop from hospital affiliated
groups, physician group practices and private ophthalmologists electing to
purchase refractive laser systems in certain markets, some of whom are
believed to operate equipment for which royalties are not payable to a laser
manufacturer. LVCI reportedly operates 12 sites in the U.S., and plans to
open additional U.S. locations, in conjunction with Columbia Healthcare
Corporation, formerly named Columbia/HCA, which operates ambulatory surgery
centers in approximately 27 states. LVCI has also announced plans to develop
self-contained mobile laser surgery centers and to apply for pre-market
approval of its mobile system with the FDA.
The ability of the Company 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 the Company and its affiliates will not become
obsolete, and if this occurs, there can be no assurance that the Company will
be able to secure new equipment to allow Vista and its affiliates to compete
effectively.
INVESTMENT IN TECHNICAL CHEMICALS AND PRODUCTS, INC.
As part of an agreement between the Company and Pharma Patch PLC
generating additional financing for the Company in March 1996 (see Item 12 of
this Report), the Company received 200,000 restricted shares of Technical
Chemicals and Products, Inc. ("TCPI") common stock from Pharma Patch at a
value of $2,662,500, or $13.31 per TCPI share. At the time this transaction
was completed and at March 31, 1996, shares of TCPI acquired by the Company
were restricted as to resale under federal securities laws and have been
valued at both dates for financial statement purposes at a 25% discount from
the public market price. On March 21, 1996, the date Pharma Patch and Vista
closed the agreement, the closing price for TCPI common stock was $17.75 per
share. Subsequent closing prices for TCPI common stock were $16.50 on March
31, 1996 and $10.25 on July 29, 1996.
TCPI is principally engaged in the design, development, manufacture and
marketing of a wide range of medical diagnostic products for use in physician
offices, at home and at other point-of-care locations. TCPI's medical
diagnostic products employ patented and proprietary membrane-based technology,
and include approximately 25 different tests to detect conditions such as
pregnancy, ovulation timing, cholesterol levels, blood glucose levels,
infectious diseases and drugs of abuse. TCPI markets diagnostic products
through a marketing and distribution alliance between TCPI and Boehringer
Mannheim and also markets products under its proprietary brand name and under
private label arrangements to drug, discount and supermarket chains. In
addition to its diagnostics business, TCPI is also involved, through its
Pharmetrix Division acquired from Pharma Patch PLC in November 1995, in
research, development and commercialization of transdermal and mucosal drug
delivery systems and skin permeation enhancers. For its fiscal year ended
December 31, 1995, TCPI reported net sales of $4,188,000 and a net loss of
$1,494,000.
TCPI's common stock is publicly-traded in the over-the-counter market
and quoted on the Nasdaq SmallCap Market under the symbol "TCPI". TCPI is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission
("Commission") which may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office in Washington
D.C. and at its regional offices in Chicago and New York.
As the assignee of Pharma Patch with respect to its investment in TCPI,
the Company is entitled to certain benefits and subject to certain obligations
arising under prior agreements between Pharma Patch and TCPI. Vista has been
advised that TCPI filed a registration statement on Form S-3 to register
<PAGE> 22
certain shares of TCPI common stock acquired by Pharma Patch from TCPI,
including the 200,000 shares assigned to Vista, which became effective on
approximately June 20, 1996. The resale of these shares pursuant to such
registration is subject to a lock-up agreement executed by Vista. Under that
lock-up, Vista has agreed it will 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 a 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.
EMPLOYEES
Vista's corporate operations employ the services of eight employees and
consultants, including three on a full time basis and five on a part-time
basis, all of which are involved in management or administrative functions.
Vista's European subsidiaries employ six persons at Vista-Italy and five
persons at Vista-Sweden. Management believes that the Company's relationship
with its employees is satisfactory. As the Company expands, it expects to add
additional employees, primarily in marketing, administrative and management
positions. The Company does not anticipate difficulty in hiring such
personnel when needed.
ITEM 2. DESCRIPTION OF PROPERTY
Vista's principal office is located at 1250 Oakmead Parkway, Suite 210,
Sunnyvale, California 92088-3599. Commencing in mid-August 1996, the Company
will relocate its principal office to 167 S. San Antonio Road, Suite 9, Los
Altos, California 94022.
The Company and its subsidiaries do not own any real property. The
following table summarizes information as to facilities utilized by the
Company and its European operating subsidiaries:
<TABLE>
<CAPTION>
Size and Lease
Location Use Expiration Date
- -------------------------- ------------- -------------------------
<S> <C> <C>
UNITED STATES FACILITIES:
Vista Technologies Inc.
1250 Oakmead Parkway, Suite 210 Corporate 404 square feet;
Sunnyvale, California office expires 8/31/96
167 S. San Antonio Road, Suite 9 Corporate 1,042 square feet;
Los Altos, California office expires 7/31/01
EUROPEAN FACILITIES:
Vista Vision SpA:
Milan Center ................ LVC center 430 square feet;
Milan, Italy expires January 1997 (renewed every 3 years
unless notice given six months in advance)
Viareggio Center ............ LVC center shared use of facilities under operating
Viareggio, Italy agreement on month-to-month basis
Rome Center ................. LVC center 1,600 square feet;
Rome, Italy expires November 2000
Palermo Center .............. LVC center shared use of facilities under operating
Palermo, Italy agreement on month-to-month basis
Vista Vision Scandinavia AB:
Klara Clinic ................ LVC center shared use of facilities under operating
Stockholm, Sweden agreement on month-to-month basis
Malmo Center ................ LVC center shared use of facilities under operating
Malmo, Sweden agreement with Gustav Adolf Clinic expiring
on May 15, 1998 renewed every 3 years
unless notice given 12 months in advance)
</TABLE>
<PAGE> 23
The Company 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. The lease for the
Company's new corporate offices in Los Altos, California provides for a base
rental of $2,084 per month adjusted at the end of each year during the five-
year term for changes in the consumer price index and in any event not less
than a 3% nor more than a 7% increase per year.
ITEM 3. LEGAL PROCEEDINGS
PENDING LEGAL PROCEEDINGS AS TO VISTA-ITALY
Vista-Italy is a party to pending litigation proceedings arising as a
result of prior transactions between Vista-Italy and Laser Vision Centers,
Inc. ("LVCI") of St. Louis, Missouri. An unfavorable determination in these
proceedings would not adversely affect the business operations of the Company
or Vista-Italy as presently conducted.
On October 8, 1993, LVCI filed civil litigation in the Circuit Court of
St. Louis County, Missouri against Vista-Italy alleging fraud and breach of
contract on the part of Vista-Italy arising from agreements made and partly
performed between the parties from May 1991 to March 1993. Vista-Italy did
not file responsive pleadings in this proceeding based upon its counsel's
advice, among other things, that the Missouri court did not have jurisdiction.
On December 17, 1993, a default judgment was entered in this action against
Vista-Italy (a) terminating and rescinding all agreements and proposed
agreements between LVCI and Vista-Italy, (b) awarding damages of $175,000
against Vista-Italy, and (c) ordering a return to LVCI of 275,000 shares of
its common stock previously issued or issuable to Vista-Italy (of which only
200,000 shares were delivered to Vista-Italy). Vista-Italy filed a motion to
vacate this judgment which was denied by the trial court; the trial court's
decision recently was affirmed on appeal. Vista-Italy intends to apply for a
rehearing by the appellate court or, in the alternative, to petition for an
appeal to the Missouri Supreme Court. The ultimate outcome of these
proceedings cannot presently be determined.
In view of the default judgment and uncertainty as to the ability of
Vista-Italy to set aside that judgment, Vista recorded the following
transactions on its consolidated financial statements as of September 30,
1994: (i) the cancellation of 287,500 shares of Vista-Italy previously issued
to LVCI under the agreements that would be rescinded by the default judgment;
(ii) cancellation of 200,000 shares of LVCI stock previously delivered to
Vista-Italy; and (iii) an accrued liability of approximately $175,000 for
damages awarded by the default judgment. Vista-Italy does not believe that
the money damage portion of the default judgment would be enforced by a court
of competent jurisdiction in Italy.
SEC SUBPOENA RELATING TO TRADING IN U.S. SHOE CORP. SECURITIES
In June 1996, the Company received a subpoena duces tecum from the
Securities and Exchange Commission ("Commission") in connection with an
investigation by the Commission into trading in the securities of U.S. Shoe
Corp., Commission File Number HO-3018. Based on the subpoena, this
investigation is apparently focused on trading in U.S. Shoe Corp. securities
during the period from October 1, 1994 through March 3, 1995. The subpoena
requires the Company to furnish the Commission with various documents
relating, among other things, to the Company's bank accounts, brokerage
accounts, telephone records and documents referring or relating to 28 named
individuals and entities. As of July 29, 1996, Vista had transmitted to the
Commission copies of all documents then in its possession required by the
subpoena. (Additional documents received from storage files of a former
executive officer were delivered to Vista on July 29, 1996 and will be
produced for the Commission after review by the Company's counsel.) The
Company has never directly or indirectly traded in the securities of U.S. Shoe
Corp. and management therefore believes that Vista is not a target of the
<PAGE> 24
Commission's investigation. Counsel for Jac. J. Lam, a former director of
Vista, has advised the Company that Mr. Lam purchased call options covering
securities of U.S. Shoe Corp. during 1994 based solely on then publicly-
available information. To avoid any possible complications arising as a
result of these proceedings, Mr. Lam resigned as a director of the Company on
July 2, 1996.
OTHER
In two separate instances, a physician planning to associate with a
Regional Joint Venture sponsored by the Company has been advised by a third
party that it contends the physician breached commitments or obligations to
the third party by the physician's decision to associate with one of Vista's
Regional Joint Ventures. In one of these matters, the third party contends
that its plan of operations to enter the business of providing access to LVC
equipment in association with the physician has been damaged. In the other,
the third party contends that the physician breached fiduciary duties to the
third party and misappropriated client lists and data, and the claimant also
has threatened to hold Vista and certain other parties responsible as well as
the physician. To date, neither dispute has resulted in the filing of legal
proceedings although legal proceedings have been threatened. Based on
information currently known to Vista, the Company believes these claims are
without merit and will not result in material liability to either of the
Regional Joint Ventures involved or to Vista.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Shares of Vista common stock were initially offered and sold to the
public in an initial public offering completed in December 1993. However, an
active trading market did not develop until March 18, 1996 following a one-
for-five reverse stock split as to the Company's common stock effective as of
March 15, 1996. The Company's common stock is traded in the over-the-counter
market and quoted on the NASD's Electronic Bulletin Board under the trading
symbol "VIII". The following table sets forth, for the periods indicated, the
high and low closing bid and asked prices for the Company's common stock as
reported by the National Quotation Bureau, Inc. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down, or commission, and may
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Closing Bid Prices Closing Asked Prices
---------------------- ----------------------
High Bid Low Bid High Asked Low Asked
Period
- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996:
Quarter ended March 31
(from March 18)......... $ 2.50 $ 0.875 $ 2.625 $ 2.50
Quarter ended June 30 .... $ 4.50 $ 2.50 $ 6.00 $ 2.625
July 1, 1996 to
July 22, 1996 ......... $ 3.00 $ 2.50 $ 3.75 $ 3.00
</TABLE>
On July 15, 1996, the closing sale price for the Company's common stock
as reported in the over-the-counter market was $3.00 and the closing bid and
asked prices were $2.875 bid and $3.50 asked. As of July 8, 1996, there were
approximately 135 holders of record of the Company's Common Stock. Additional
beneficial owners of the Common Stock hold shares in street name or other
nominee accounts.
<PAGE> 25
No cash dividends have been declared or paid by the Company since its
inception. Vista 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
the Company from payment of dividends on its common stock.
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.
INTRODUCTION AND PLAN OF OPERATION
Vista commenced business operations in February 1994. The Company
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, and developed a strategic plan in mid-
1995 to sponsor and invest in Regional Joint Ventures to conduct additional
LVC Services businesses in regional markets of North America.
Since commencing operations, the Company has financed its business
operations, acquisition and expansion activities primarily from the issuance
or sale of equity securities. From February 1994 through March 31, 1996, the
Company had received approximately $7,437,500 from the sale of 1,197,500
shares of common stock and 1,225,000 warrants, approximately $278,000 from the
sale of convertible debt instruments, and had issued an additional 3,692,756
shares of common stock and 259,000 warrants in connection with the acquisition
of other assets and investments.
Vista made significant investments in MDRI and its subsidiaries from May
1994 through March 1995. In July 1995, Vista terminated and rescinded all of
its executory agreements with MDRI and certain of its stockholders and
noteholders. The Company'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.
At March 31, 1996, the Company had an accumulated deficit of $15,247,000
incurred as a result of the $5,643,000 write-off of its investment in MDRI in
fiscal 1995, a $3,826,000 impairment of goodwill during fiscal 1995 and
otherwise primarily as a result of losses from operations in the fiscal years
ended March 31, 1995 and 1996. The Company's net loss for the most recent
fiscal year ended March 31, 1996 was $3,815,000. Vista's European
subsidiaries have not operated profitably since their inception; although its
Italian subsidiary generated positive cash flow from operations in fiscal 1996
and Vista-Sweden's cash flow from operations was approximately cash neutral,
there can be no assurance that European operations will be profitable in the
future.
Management's strategy developed in mid-1995 has been to expand its
participation in a developing market for LVC Services in the United States,
anticipated as a result of recent FDA approval of excimer laser equipment for
certain PRK and PTK procedures, while at the same time minimizing Vista's
short-term cash requirements for such expansion. Since insurance
reimbursement is not available, the Company's management believes the skills
and reputation of health care professionals involved in recommending and
performing refractive eye procedures are an important and often critical
element in the patient's decision to elect an LVC refractive procedure. Vista
has therefore designed and is implementing a program to organize and sponsor
U.S. and Canadian Regional Joint Ventures in alliance with prominent
physicians that are to be largely independently financed and will offer
advantages of equity incentives and management control to skilled and
prominent ophthalmologists experienced in a variety of LVC treatments,
procedures and post-operative care. See Item 1 of this Report.
<PAGE> 26
Vista plans to continue to seek additional capital through the private
placement and/or public sale of its equity securities, use of equipment lease
financing, and sale of marketable securities in TCPI when possible to finance
the Company's operations and expansion plans in North America.
The Company'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 the frequency
with which newly developed businesses encounter unforeseen expenses,
difficulties, complications and delays, and other factors such as the
Company's losses from its continuing operations.
RESULTS OF OPERATIONS:
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
REVENUES: During the fiscal year ended March 31, 1996 (the "1996
Year"), Vista's consolidated revenues from operations were $2,130,000, an
increase of 76% compared to $1,210,000 in consolidated revenues for the prior
fiscal year ended March 31, 1995 (the "1995 Year"). Consolidated revenues in
the 1996 Year principally included $1,216,000 attributable to the operations
of Vista-Italy, approximately a 100% increase compared to the 1995 Year, and
$929,000 from the operations of Vista-Sweden, an increase of approximately 60%
over the 1995 Year. These increases were in part attributable to new LVC
Services centers opened in January 1995 and August 1995 in Rome, Italy and
Malmo, Sweden, respectively, and in part to increases in the number of LVC
procedures performed at other locations of Vista-Italy and Vista-Sweden.
OPERATING EXPENSES: Costs and expenses of operations for the 1996 Year
were $5,092,000, an increase of 51.8% compared to costs and expenses of
operations of $3,354,000 in the 1995 Year. The Company believes that
increases in costs and expenses of operation were generally commensurate with
the 76% increase in consolidated revenues. Costs and expenses in the 1996
Year consisted of $4,625,000 in general and administrative expenses, a 66.8%
increase compared to the 1995 Year, and $468,000 in depreciation and
amortization, a $113,000 decrease compared to the 1995 Year. General and
administrative expenses for the 1996 Year included $1,173,000 for Vista-Italy,
a 40% increase compared to the 1995 Year, and $1,198,000 for Vista-Sweden, a
127% increase compared to the 1995 Year due primarily to start-up operations
in Malmo. Costs and expenses for operations in England which were closed in
June 1995 were $152,000 for the 1996 Year compared to $199,000 in the prior
1995 Year. The Company's European subsidiaries accordingly sustained losses
from operations in the 1996 Year that were significantly reduced compared to
the 1995 Year and will not be impacted in future years by the England
operation closed in June 1995. Vista-Italy generated positive cash flow from
operations in fiscal 1996 and Vista-Sweden's cash flow from operations was
approximately cash neutral as a result of the start-up at Malmo. Profitable
operations from European operating subsidiaries in the future will be
dependent upon increasing revenues, as to which there can be no assurance.
Other major components of the Company's consolidated general and
administrative expenses in the 1996 Year included approximately $2,552,000 of
general and administrative expenses at the Vista parent corporation level.
OTHER EXPENSE AND INCOME: Other net expense in the 1996 year totalled
$843,000, a reduction of $3,012,000 compared to $3,855,000 in other net
expenses in the prior 1995 Year. The primary portion of such expenses in the
prior 1995 Year was nonrecurring charges of $3,826,000 for impairment of
goodwill relating to the Company's investments in its European subsidiaries
($2,762,000 relating to Vista-Italy, $633,000 as to Vista-UK and $431,000
relating to Vista-Sweden and Convista Vision B.V.). Approximately 53% of
other net expenses in the 1996 Year was a charge of $447,000 for the
impairment of idle equipment consisting of a laser acquired by the Company
from a corporate affiliate. Other major components of income and expense
items in the 1996 Year included a reserve of $135,000 for losses incurred in
closing operations in England, a $152,000 loss on trading securities and
<PAGE> 27
$64,000 of interest expense. Interest expense increased by $54,000 compared
to the prior 1995 Year due to an increase in outstanding debt obligations.
NET LOSS: Net loss for the 1996 Year was $3,815,000, equal to a net
loss of $1.92 per common share, compared to a net loss in the 1995 Year of
$11,420,000, or $9.64 per common share.
FISCAL YEAR ENDED MARCH 31, 1995
REVENUES: During the fiscal year ended March 31, 1995 (the "1995
Year"), Vista's consolidated revenues from operations were $1,210,000.
Consolidated revenues principally included $607,000 attributable to the
operations of Vista-Italy and $580,000 to the operations of Vista-Sweden. No
revenues were recognized in the comparable prior year's twelve month period
ended March 31, 1994 because Vista had not acquired interests in operating
subsidiaries prior to March 31, 1994.
OPERATING EXPENSES: Costs and expenses of operations for the 1995 Year
were $3,354,000, consisting of $2,773,000 in general and administrative
expenses and $581,000 in depreciation and amortization. General and
administrative expenses for the 1995 Year included $836,000 for Vista-Italy,
$526,000 for Vista-Sweden and $199,000 for operations in England which were
closed in June 1995. The Company's European subsidiaries accordingly
sustained losses from operations in the 1995 Year, which increased as a result
of the start-up of a clinic in Rome and the relocation of the Milan clinic.
Other major components of general and administrative expenses in the 1995 Year
included approximately $463,000 in legal and accounting fees, a majority of
which were attributable to transactions with Medical Development Resources,
Inc. that were ultimately abandoned in July 1995, $226,000 in officers'
salaries, $208,000 in travel expenses and $131,000 in consulting fees.
OTHER EXPENSE AND INCOME: Other net expense in the 1995 year totalled
$3,855,000. The primary portion of such expenses was a $3,826,000 impairment
of goodwill charge relating to the Company's investments in its European
subsidiaries ($2,762,000 relating to Vista-Italy, $633,000 as to Vista-UK and
$431,000 relating to Vista-Sweden and Convista Vision B.V.). Other income and
expense items included an expense reserve of $186,000 for litigation, a write-
off of $125,000 in advances to a stockholder and $29,000 in foreign currency
exchange losses; these expenses were partially offset by $129,000 of realized
gains and $117,000 of unrealized gains on trading securities.
EXTRAORDINARY LOSS: During the 1995 Year, Vista recognized an
extraordinary loss of $5,643,000 attributable to the write-off of its
investment in, and advances to, Medical Development Resources, Inc. and its
subsidiaries. See Item 12 of this Report and the Notes to Consolidated
Financial Statements included elsewhere herein.
NET LOSS: Net loss for the 1995 Year was $11,420,000, equal to a net
loss of $9.64 per common share. The 1995 Year includes results of operations
of consolidated subsidiaries only from their respective dates of acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Vista's principal capital requirements include working capital for
management and administration, cash resources to finance programs to acquire
additional LVC equipment and support activities of Regional Joint Ventures
sponsored by the Company since June 1995, and in the future, anticipated
requirement to finance sales and marketing and other working capital
requirements. Subject to the availability of adequate capital, as to which
there can be no assurance, expenditures for additional excimer laser equipment
may be significant during the foreseeable future to support the Company's
program of expanding LVC Services and supporting the activities of Regional
Joint Ventures. Due to a lack of capital and in order to sustain the Vista
parent corporation's operations from June 1995 through December 1995,
corporate activities during the 1996 Year were financed in part by the
issuance of 925,000 shares of common stock in December 1995 at a negotiated
<PAGE> 28
cost of $1,470,000. See "Issuance of Shares for Expenses From June Through
December 1995" in Item 12 of this Report.
As of March 31, 1996, the Company had $288,000 in cash and consolidated
working capital of $107,000. An additional $1,675,000 in cash was generated
subsequent to March 31, 1996 by the collection of a $750,000 short-term note
from Pharma Patch and collection of a stock subscription receivable for
$212,500, both of which were included as current assets on the Company's
consolidated financial statements at March 31, 1996, the sale of common stock
in June 1996 for an additional $212,500 and the exercise of a stock option by
Pharma Patch in July 1996 for $500,000. The Company's long-term assets
include 200,000 restricted shares of TCPI common stock which were registered
under the Securities Act of 1933 on June 20, 1996 for resale by the Company
after approximately September 30, 1996. See "Investment in Technical
Chemicals and Products, Inc." in Item 1 of this Report. Vista plans to
continue to seek additional capital through the private placement and/or
public sale of its equity securities, use of equipment lease financing, and
sale of marketable securities in TCPI when possible to finance the Company's
operations and expansion plans in North America.
Although the Company's European operating subsidiaries appear to have
achieved positive or neutral cash flow levels of operations, Vista's
management anticipates that its consolidated operations will incur negative
cash flows for the immediate future, primarily due to fixed expenses for
corporate general and administrative overhead. There can be no assurance that
the Company's consolidated revenues will increase to the point that operating
expenses will be fully absorbed by revenues from operations.
U.S. DOLLAR PRESENTATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company publishes its consolidated financial statements in U.S.
dollars after translating transactions in foreign currencies to U.S. dollars.
A significant portion of the Company's consolidated revenues and expenses are
collected and paid in local currency of its European operating subsidiaries,
i.e. Italian lira and Swedish krona. Income and expense items in foreign
currencies are translated at the weighted average exchange rate prevailing
during the period, except that expenses related to nonmonetary assets and
liabilities are translated at historical rates. In periods when the U.S.
dollar depreciates against 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 relevant foreign currencies and the U.S. dollar may also affect the
book value of the Company's consolidated assets and the amount of its
stockholders' equity. Except as otherwise stated in this Report, all monetary
amounts have been presented in U.S. dollars.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included later in this Report:
<TABLE>
<CAPTION>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 1996
<S> <C> <C>
Index to Consolidated Financial Statements ............................. F-1
Independent Auditors' Report ........................................... F-2
Independent Auditors' Report ........................................... F-3
Consolidated Financial Statements as of March 31, 1996:
Consolidated Balance Sheet at March 31, 1996 ...................... F-4
Consolidated Statements of Operations for the Years
ended March 31, 1996 and March 31, 1995 ......................... F-5
Consolidated Statements of Changes in Stockholders' Equity
for the Years ended March 31, 1996 and March 31, 1995 ........... F-6
Consolidated Statements of Cash Flows for the Years
ended March, 31, 1996 and March 31, 1995 ........................ F-7
Notes to Consolidated Financial Statements ........................ F-8
</TABLE>
<PAGE> 29
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As reported in the Company's Current Report on From 8-K dated May 13,
1996, the Company changed its independent accountants in May 1996. The
accounting firm of A J. Robbins, PC acted as principal independent public
accountants to audit the consolidated financial statements of the Company for
its fiscal year ended March 31, 1995, the transition period of three months
ended March 31, 1994, the fiscal year ended December 31, 1993 and the fiscal
period from the Company's inception on June 15, 1992 to December 31, 1992. On
May 8, the Company's Board of Directors elected to change its independent
accountants and dismissed A J. Robbins, PC as the Company's independent
certifying public accountant. The Company's Board of Directors participated
in and approved the decision to change independent accountants.
The reports of A J. Robbins, PC on the consolidated financial statements
of the Company for the fiscal year ended March 31, 1995, the transition
period of three months ended March 31, 1994 and the fiscal year ended December
31, 1993 did not contain an adverse opinion or a disclaimer of opinion, and
was not qualified as to uncertainty, audit scope, or accounting principles,
except as follows: The report of A J. Robbins, PC dated May 24, 1995 on the
Company's consolidated financial statements for its fiscal year ended March
31, 1995 contained a paragraph expressing certain doubts about the Company's
ability to continue as a going concern.
In connection with its audit for the fiscal year ended December 31,
1993, the transition period of three months ended March 31, 1994, the fiscal
year ended March 31, 1995 and thereafter through May 8, 1996, there have been
no disagreements of the Company with A J. Robbins, PC 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 A J. Robbins, PC would have caused them to make reference
thereto in their report on the financial statements for such year. During the
periods described above and through May 8, 1996, there have been no reportable
events as that term is defined in Regulation S-K, Item 304(a)(1)(v)
promulgated by the Securities and Exchange Commission.
The Company requested that A J. Robbins, PC furnish the Company with a
letter addressed to the Securities and Exchange Commission stating whether or
not A J. Robbins, PC agrees with the above statements. A copy of such letter
was filed as Exhibit 16 to the Company Current Report on Form 8-K dated as of
May 13, 1996.
On May 9, 1996, the Company engaged the services of the independent
public accounting firm of KPMG Peat Marwick LLP to act as the principal
independent accountants as to the Company's consolidated financial statements
for its most recent fiscal year ended March 31, 1996. Prior to engaging KPMG
Peat Marwick LLP, the Company 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 the Company's financial statements.
<PAGE> 30
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 executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Positions
- -------------------------- --- -----------------------------------------
<S> <C> <C>
Donald G. Johnson, M.D. 57 Chairman of the Board; Director
Thomas A. Schultz 45 President and Chief Executive Officer;
Director
Murray D. Watson 52 Vice Chairman of the Board; Director
J. Charles Casebeer, M.D. 57 Director
Kenneth G. Howling 39 Vice President of Finance, Treasurer and
Chief Financial Officer
William M. Curtis 55 Secretary
</TABLE>
DR. DONALD G. JOHNSON was elected Chairman of the Board and a director
of the Company on February 16, 1996. Dr. Johnson, an ophthalmologist actively
practicing in Canada, has successfully treated approximately 7,400 eyes with
excimer laser procedures as of December 31, 1995. He also developed the
proprietary Johnson transepilthelial multi-zone, multi-pass PRK procedure
("TMM PRK"), which provides for a smoother ablation zone and substantially
reduces glare and central islands side effects sometimes encountered in
standard PRK procedures. Dr. Johnson has practiced in New Westminster,
British Columbia continuously since 1969, first participating in a group
practice for general ophthalmology from 1969 to 1981, then as a solo
practitioner from 1981 to 1985. He established the London Place Eye Centre in
New Westminster as an outpatient medical and surgical eye center in November
1985 where he still practices. Dr. Johnson has published 16 articles and
conducted 11 clinical investigation studies in the field of ophthalmology,
including clinical investigations of the VISX 20/20 and Nidek EC-5000 excimer
lasers and the Sunrise holmium laser. He has appeared as a guest speaker on
radio and television and at numerous hospital and professional seminars since
1991 on subjects relating to excimer lasers. Dr. Johnson has been affiliated
with St. Mary's Hospital, Royal Columbian Hospital and Surrey Memorial
Hospital since 1969 and Whitehorse General Hospital since 1970. He received
his M.D. degree from the University of Western Ontario, served his internship
at Toronto Western Hospital, his general surgery residency at Shaughnessy
Hospital, Vancouver, British Columbia, and his ophthalmology residency at the
University of British Columbia. His post graduate accomplishments include
certifications in the United States for radial keratotomy (1984),
epikeratophakia (1986), advanced corneal transplantation (1987), small
incision cataract and advanced phacoemulsification (1990) and excimer laser
PRK and PTK (1990) and certification in Germany for non freeze B.S.K. method
of lamellar keratoplasty (1988).
THOMAS A. SCHULTZ was elected a director, President and Chief Executive
Officer of the Company on February 16, 1996. Mr. Schultz was a director and
employee of Chrystallume, Inc., from 1986 to January 16, 1996 and served as
its Chairman of the Board and Chief Executive Officer from April 15, 1993
until October 15, 1995. Chrystallume, a publicly-held company, produced
diamond film for electronic and industrial applications. From 1983 to 1986,
Mr. Schultz served as Corporate Vice President of Dole Food Co., formerly
named Castle and Cooke, Inc., a consumer foods company. From 1979 to 1983, he
was a staff member of Booz, Allen & Hamilton, an international business
consulting firm. Mr. Schultz holds a B.E.S. degree in Operations Research
from John Hopkins University and an M.B.A. from Harvard Business School.
<PAGE> 31
MURRAY D. WATSON was elected a director of the Company on January 31,
1994 and Vice Chairman of the Board on February 16, 1996. He has served as
Chairman of the Board, Chief Executive Officer and a director of Pharma Patch
Plc, a publicly-traded company, since July 1993 and as a director of Technical
& Chemical Products, Inc., a publicly-traded company, from January 1996 to May
1996. Pharma Patch is an Irish public company and was engaged in the 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. 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 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.
DR. J. CHARLES CASEBEER was elected a director of the Company and its
Chairman of the Board on February 16, 1996. Dr. Casebeer is an
ophthalmologist actively practicing in the United States and his experience
since 1983 includes over 10,000 refractive procedures and the education of
more than 3,000 physicians worldwide in various refractive procedures ranging
from radial keratotomy ( RK ) to PRK and laser assisted in situ keratomileusis
("LASIK"). He has been engaged in private practice from 1971 to the present
time, including associations with the Northern Arizona Eye Clinic, Ltd.
Outpatient Surgery Center, Flagstaff, Arizona from 1971 to July 1994, where he
served as President and Medical Director; Northern Arizona Eye Clinic, Ltd.,
Scottsdale, Arizona from 1992 to May 1994; the J. Charles Casebeer
Laser/Refractive Surgery Center Ltd., Scottsdale, Arizona from May 1994 to
August 1994; and Casebeer Eye Centers, Ltd., Scottsdale, Arizona from August
1994 to the present. Dr. Casebeer's experience in keratorefractive surgery
dates from 1983 to the present, and includes more than 6,000 cases. From 1987
to the present, Dr. Casebeer has served as a Course Director in RK technique
and practice development and in automated lamellar keratoplasty ("ALK") at
numerous courses and symposiums worldwide. Since 1992, he has been a Clinical
Professor for the University of Utah Department of Ophthalmology. Dr.
Casebeer has lectured extensively since 1989 at over 150 seminars, courses and
symposiums on various refractive surgery topics including, among others, RK,
ALK and LASIK procedures. He has authored four books or book chapters on
refractive surgery, has 16 articles published in peer-reviewed medical
journals, and since July 1993 has authored a monthly ocular surgery news
column entitled "The Comprehensive Refractive Surgeon" in Ocular Surgery News.
He received his B.A. degree from Harvard University, his Doctor of Medicine
degree from the University of Southern California School of Medicine, served
his internship at the Medical College of Virginia, his residency in
ophthalmology at Stanford University Medical Center and currently holds
professional licenses in the States of Arizona, California and Utah.
KENNETH G. HOWLING was elected Vice President of Finance, Treasurer and
Chief Financial Officer of the Company on February 16, 1996. He has served
from November 8, 1993 until the present time as Vice President of Finance and
Chief Financial Officer of 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.
<PAGE> 32
WILLIAM M. CURTIS was elected corporate Secretary of Vista in October
1994. Mr. Curtis has been principally engaged in a private law practice in
Southern California since 1976 specializing in corporate, merger and
acquisition, finance and securities matters. Mr. Curtis holds a law degree
from Duke University.
There is no family relationship between any of the Company's directors
and executive officers. All directors hold office until the next annual
meeting of stockholders and until their successors are elected. 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 a Compensation Committee and a
Stock Option Committee.
The Compensation Committee is responsible for reviewing and reporting to
the Board on the recommended annual compensation for the Company's executive
officers and for reviewing management recommendations concerning compensation
programs for other members of management. The Compensation Committee met once
during the fiscal year ended March 31, 1996 at a meeting of the full Board.
The Compensation Committee currently consists of Mr. Watson and a vacancy to
be filled by the Board.
The Stock Option Committee is responsible for granting options under the
Company's employee stock option plans, establishing the terms and conditions
of options granted under those plans, and administering employee stock
options. Actions by the Stock Option Committee during the fiscal year ended
March 31, 1996 were by unanimous written consent and at one meeting of the
full Board of Directors. The Stock Option Committee currently consists of Mr.
Watson and a vacancy to be filled by the Board.
The Company intends to establish an Audit Committee during 1996
responsible for meeting independently with representatives of Vista's
independent accountants and with representatives of senior management. The
Audit Committee will also be responsible for reviewing the general scope of
the audit and matters relating to internal control systems.
During the fiscal year ended March 31, 1996 the Board of Directors held
eight meetings and took certain actions by unanimous written consent of the
Board. No incumbent director attended fewer than 75% of all meetings of the
Board of Directors.
No director received compensation for his services as a director during
the fiscal year ended March 31, 1996, except that an award of 25,000 shares of
common stock was granted by Vista to each of its three then directors in
December 1995, including Murray D. Watson and two former directors. Although
the Company has no current compensation plan for directors other than stock
options, the Company's By-Laws permits compensation of directors and the Board
reserves the right of changing compensation policies for directors from time
to time. The salaries of all officers are subject to review and adjustment
from time to time by the Board of Directors.
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 the Company's executive officers and directors, and persons who
beneficially own more than 10% of the Company'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 the Company, responses from the Company's executive officers and
directors in reply to monthly questionnaires, and other information available
to the Company, the Company believes that as of March 31, 1996, all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with.
<PAGE> 33
Certain foreign corporate shareholders hold of record Vista common stock
and warrants and are believed in certain cases to share common management.
Beneficial ownership of Vista securities held by such foreign corporate
shareholders has not been disclosed to the Company. Based on information
available to the Company and a review of its list of shareholders of record at
July 8, 1996, Vista 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 the Company does not necessarily have access to all information
that may be relevant, Vista 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
The following Summary Compensation Table indicates the cash compensation
paid by the Company as well as certain other compensation, paid or accrued for
its fiscal years ended March 31, 1996 and 1995 to each of its Chief Executive
Officer and other executive officers whose salary and bonus exceeded $100,000
for such periods.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------- -------------------------------
Awards Payouts
-------------------- ---------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Fiscal Salary Bonus Compen- Awards Options/ Payouts Compen-
Principal Position Year(1) ($) ($) sation($) ($) SARs(#) ($) sation($)
- ------------------ ------- --------- --------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas A. Schultz 1996 $ 12,000 -0- -0- -0- 300,000 -0- (6)
President and
Chief Executive
Officer (2)
Jac. J. Lam 1996 $225,000 -0- -0- $18,750(7) -0- -0- -0-
President and
Chief Executive
Officer (3)
Drago A. Cerchiari 1996 $20,000 -0- $20,260(8) $25,000(8) -0- -0- -0-
President & 1995 $33,100 -0- $84,000(9) -0- 190,000 -0- -0-
Chief Executive
Officer (4)
G. Lennart Perlhagen 1995 $130,000 -0- -0- -0- -0- -0- -0-
Chairman or
President and
Chief Executive
Officer (5)
</TABLE>
________________________________________
(1) Information set forth in the table represents data for the fiscal years
ended March 31, 1996 ("1996") and March 31, 1995 ("1995").
(2) Mr. Schultz was elected President and Chief Executive Officer of the
Company on February 16, 1996.
(3) Mr. Lam was elected acting President and Chief Executive Officer of the
Company on June 9, 1995 and resigned from that position when he was
replaced on February 16, 1996.
(4) Mr. Cerchiari was elected President and Chief Executive Officer of the
Company on February 1, 1995 and resigned as an executive officer of the
Company on June 1, 1995.
(5) Mr. Perlhagen was elected Chairman, President and Chief Executive
Officer of the Company on February 1, 1994. On January 15, 1995, he
relinquished the titles of President and Chief Executive Officer. Mr.
Perlhagen resigned as an executive officer of the Company on June 1,
1995.
<PAGE> 34
(6) Mr. Schultz's employment agreement provides he will be entitled to a
cash bonus of $75,000 upon the filing of the second of two registration
statements for an initial public offering by Regional Joint Ventures
sponsored by the Company.
(7) Represents the value of 25,000 shares of common stock awarded in
December 1995 to Mr. Lam for services as a director in the fiscal year
ended March 31, 1996 valued at $.75 per share.
(8) Includes 4,000 shares of in common stock valued at $20,260 paid in
settlement of claims for expenses and subject to a put option
subsequently exercised by Mr. Cerchiari and $25,000 in common stock
(5,000 shares valued at $5.00 per share) paid in settlement of a hiring
bonus claim under the terms of a Termination Agreement between the
Company and Mr. Cerchiari effective June 1, 1995.
(9) Includes $84,000 in consulting payments for the 1995 period paid prior
to Mr. Cerchiari's election as an officer and director.
STOCK OPTIONS
The following tables summarize stock option activity during the fiscal
year ended March 31, 1996 for each of the named officers shown in the table
"Summary Executive Compensation":
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year Ended March 31, 1996
----------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options/SARs Price Appreciation
Underlying Granted to Exercise or for Option Term
Options/SARs Employees in Base Price Expiration ------------------------
Name Granted (#) Fiscal Year ($/sh) Date 5%($) (3) 10%($) (3)
- --------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Schultz 150,000 (1) 9.8 % $2.50 2/15/01 $103,606 $228,941
Thomas A. Schultz 150,000 (2) 9.8 % $2.50 2/15/01 $103,606 $228,941
Jac. J. Lam 150,000 (1) 9.8 % $2.50 2/15/01 $103,606 $228,941
Jac. J. Lam 150,000 (2) 9.8 % $2.50 2/15/01 $103,606 $228,941
Drago A. Cerchiari -0- -- n/a n/a n/a n/a
G. Lennart Perlhagen 50,000 (1) 3.3 % $2.50 2/15/01 $ 34,535 $ 76,314
</TABLE>
_________________________________________________
(1) Options granted under the Company's 1994 Stock Option Plan at an
exercise price of not less than fair market value on date of grant,
exercisable in 12 equal quarter-annual installments commencing May 15,
1996.
(2) Options granted under the Company's 1994 Stock Option Plan at an
exercise price of not less than fair market value on date of grant,
exercisable during the last 30 days of the five-year option term or
earlier if the Company's common stock has traded at $10.00 or more for
30 days which need not be consecutive.
(3) The 5% and 10% assumed annualized rates of compound stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent the Company's estimate or a projection
by the Company of future common stock prices.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
-----------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
at Fiscal Year-End (#) at Fiscal Year-End ($)(A)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------- --------------- ------------ ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Schultz -0- n/a -0- 300,000 -0- $37,500
Jac. J. Lam -0- n/a -0- 300,000 -0- $37,500
Drago A. Cerchiari -0- n/a -0- -0- -0- -0-
G. Lennart Perlhagen -0- n/a -0- 50,000 -0- $ 6,250
</TABLE>
<PAGE> 35
________________________________________________________________
(A) The value of unexercised in-the-money options is based upon an estimated
fair market value for the common stock on March 29, 1996 of $2.625 per
share, based on the last reported closing price for the common stock as
of that date.
<TABLE>
<CAPTION>
Long-Term Incentive Plans -- Awards in Last Fiscal Year (1)
------------------------------------------------------------------
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation
Name Rights or Payout Threshold Target Maximum
- ---------------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Thomas A. Schultz -0- n/a n/a n/a n/a
Jac. J. Lam -0- n/a n/a n/a n/a
Drago A. Cerchiari -0- n/a n/a n/a n/a
G. Lennart Perlhagen -0- n/a n/a n/a n/a
</TABLE>
_____________________________________________
(1) The Company does not have any compensation plans involving stock
appreciation rights or long-term incentive or deferred pension or
profit-sharing plans.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
The Company has entered into a written employment agreement dated as of
January 31, 1996 with Thomas A. Schultz, who was elected President and Chief
Executive Officer on February 16, 1996. The employment agreement with Mr.
Schultz is for a term of 36 months from January 15, 1996 and is renewable
thereafter on a year-to-year basis unless either party provides at least 60
days prior notice of termination before the expiration of its original term or
any renewal term. The agreement provides for an annual base salary of
$150,000, participation in group benefit programs, payment of Mr. Schultz's
existing insurance premiums for long-term disability and life insurance for
the initial 12 months of the agreement, and an amount not exceeding 7 1/2% of
his base salary for personal benefit expenses relating to Mr. Schultz and his
family members as he shall determine. Mr. Schultz is eligible to receive an
annual performance bonus of up to 100% of his annual base salary based upon
achievement of Company goals to be determined by the Board of Directors. In
addition, he is entitled to a cash bonus of $75,000 upon the filing of the
second of two registration statements for an initial public offering by
Regional Joint Ventures sponsored by the Company.
Mr. Schultz's employment agreement further provides he is entitled to
severance benefits if his employment is involuntarily terminated, other than
for cause (as defined in the agreement), death or disability, equal to (i) a
lump-sum payment equal to his annual base salary, (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. Mr. Schultz is required to devote his full business time to the
affairs of the Company except for such investment, business, professional and
continuing education activities that do not interfere with the performance of
his duties as the Company's President and Chief Executive Officer. The
employment agreement contains confidentiality and non-competition provisions
in favor of the Company. Mr. Schultz's employment agreement was approved by
the Board of Directors on February 6, 1996.
OTHER RECENT COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
On February 6, 1996, the Company approved compensation for certain
executive officers and directors. A corporate affiliate of Murray D. Watson,
effective upon his election as the Company's Vice Chairman on February 16,
1996, receives base compensation of $100,000 per year plus a bonus to be
reviewed by the Board at the end of each fiscal year up to 100% of the base
compensation. A corporate affiliate of Kenneth G. Howling, effective upon his
election as Vista's Vice President of Finance, Treasurer and Chief Financial
Officer on February 16, 1996, receives base compensation of $60,000 per year
<PAGE> 36
plus a bonus to be reviewed by the Board at the end of each year up to 100% of
the base compensation. A corporate affiliate of Dr. J. Charles Casebeer,
effective upon his election as a director of Vista on February 16, 1996 and in
further consideration of his agreement to provide certain consulting services
to be defined by the Board, receives base compensation of $60,000 per year.
Dr. Casebeer also serves as a director of certain Regional Joint Ventures and
is Chairman of the Board and Chief Executive Officer of Vista Laser Centers of
the Southwest, Inc. Upon successful completion of an initial public offering
by three of those Regional Joint Ventures, Dr. Casebeer's corporate affiliate
will become entitled to annual compensation of $60,000 per year from each of
three Regional Joint Ventures. Dr. Donald G. Johnson, effective upon his
election as Chairman of the Board and a director of the Company on February
16, 1996 and in further consideration of his agreement to provide certain
consulting services to be defined by the Board, receives a base salary of
$60,000 per year. Dr. Johnson is also Chairman of the Board and Chief
Executive Officer of Vista Laser Centers of the Northwest, Inc. and is
expected to enter into an employment agreement providing compensation for such
services effective upon completion of an initial public offering by VLC-
Northwest at an annual compensation rate of $180,000 plus an annual bonus
based upon a formula to be determined relating to pre-tax earnings of VLC-
Northwest.
In December 1995, the Company's Board of Directors authorized the
issuance of 25,000 shares of the Company's common stock to each of its then
three directors, Messrs. Jac. J. Lam, Malcolm J. Rowe and Murray D. Watson, or
their nominees, as compensation for their services as directors during the
fiscal year ending March 31, 1996. Due to the absence of an active trading
market for the common stock at the time of this award and other factors deemed
relevant by the Board, these shares were valued by the Company at $.75 per
share.
TERMINATION AGREEMENTS WITH FORMER EXECUTIVE OFFICERS
The Company previously had employment agreements with: Robert L.
Ferrera, who resigned as the Company's Chief Financial Officer on April 14,
1995; Drago A. Cerchiari, who resigned as the Company's President and Chief
Executive Officer on June 1, 1995; and G. Lennart Perlhagen, who resigned as
the Company's Chairman on June 1, 1995.
Under an agreement dated as of July 5, 1995, the Company issued 16,000
shares of its common stock to Mr. Perlhagen in payment of $80,000 of
unreimbursed business expenses.
Under an agreement dated as of June 1, 1995, the Company paid Mr.
Cerchiari $8,740 in cash and issued 4,000 shares of common stock for
reimbursement of a total of $29,000 of unreimbursed business expenses. Vista
agreed that Mr. Cerchiari had the right to put the 4,000 shares of common
stock to the Company after January 31, 1996 at a price equal to $20,260 plus
interest from June 1, 1995 at the rate of 1% per month. Mr. Cerchiari
exercised that option on February 1, 1996. The Company also issued 5,000
shares of common stock to Mr. Cerchiari under the June 1, 1995 agreement as a
negotiated settlement for a one-time hiring bonus in his original employment
agreement of January 15, 1995.
STOCK OPTION PLANS
Vista's Board of Directors has adopted a policy of providing long-term
incentive to members of its Board and senior management tied to performance of
Vista's common stock through stock option plans. These plans are intended to
foster management incentive and positively align and reinforce management and
stockholder interests. The plans are structured to allow the Board of
Directors or its Stock Option Committee discretion in creating management and
key employee equity incentives which assist the Company in motivating and
retaining the appropriate talent needed to conduct its business successfully.
<PAGE> 37
The Company's Board of Directors and stockholders adopted two stock
option plans in 1994, the 1994 Stock Option Plan (the "1994 Plan") and the
Restricted Stock Option Plan (the "Restricted Plan"). The 1994 Plan covers
an aggregate of 150,000 shares of common stock and on February 6, 1996 the
Board increased the total number of shares subject to the 1994 Plan to a total
of 1,900,000 shares subject to ratification and approval of that increase by
stockholders of the Company with one year. The Restricted Plan covers a total
of 50,000 shares of common stock. Under both Plans, the number of shares
available for options and subject to option, and the option exercise price of
outstanding options, is to be adjusted upward or downward, as the case may be,
in the event of any stock dividend, recapitalization, merger, consolidation,
split up or similar transaction affecting shares of the Company's common
stock.
Both Plans are by the Board of Directors or by a Stock Option Committee
of two or more members of the Board of Directors of the Company. The Stock
Option Committee currently consists of Mr. Watson and a vacancy to be filled
by the Board. The Stock Option Committee, or the Board in the absence of a
Committee, determines the persons to receive options under the Plans, the
terms of options granted, including the exercise price, the number of shares
subject to the option and the terms and conditions of exercise.
Both Plans contains provisions which authorize the Stock Option
Committee, in the event of a sale or merger of all or substantially all of the
Company's assets, or a merger or consolidation in which the Company is not the
surviving corporation, to take certain action in its discretion. In the event
of such a transaction, the Committee may accelerate the exercisability of any
option to permit its exercise in full during such period as the Committee may
prescribe following the public announcement of a sale of assets or merger, or
may elect to earlier grant that right at the time an individual option is
granted. The Committee may also require in the event of such a transaction
that an optionee surrender an option in return for a substitute option issued
by a surviving corporation which is determined by the Committee to have a
value substantially equal to the value of the surrendered option.
Each of the Plans provides that shares of common stock acquired upon
exercise of options will be paid for in cash or, in the sole discretion of the
Committee, through the delivery of shares of the Company's common stock with a
market value equal to the option exercise price. The ability to pay the
option price in shares would, if permitted by the Committee, enable an
optionee to engage in a series of successive stock for stock exercises of an
option (sometimes referred to as "pyramiding") and thereby fully exercise an
option with little or no cash investment by the optionee. The Board of
Directors has not established any policy as to whether it will permit
exercises of options through payment with shares.
The maximum term for each option under both Plans is ten years; to date
no option has been granted for a term in excess of five years under either
Plan. If any option granted under either Plan expires or terminates without
having been exercised in full, the shares covered by the unexercised portion
of the option may be used again for new grants under that Plan. No option
granted under the Plans may be transferred by the optionee other than by will,
the laws of descent and distribution, or by a qualified domestic relations
order, and each option is exercisable during the lifetime of the optionee only
by such optionee or a corporate entity controlled by the optionee.
1994 STOCK OPTION PLAN
The 1994 Plan provides that options granted thereunder may be either
incentive stock options pursuant to Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), or, at the discretion of a Stock Option
Committee, non-qualified stock options which do not qualify as incentive stock
options under the Code. The 1994 Plan provides that incentive stock options
must be granted at an option price which is not less than the fair market
value of the Common Stock on the date of grant, and that any non-qualified
option granted must be at an option price which is not less than 50% of the
<PAGE> 38
fair market value of the date of grant. With respect to any participant who
owns stock possessing more than 10% of the voting rights of the Company's
outstanding capital stock, the exercise price of any incentive stock option
under the 1994 Plan must be not less than 110% of fair market value on the
date of grant. To date, all options granted under the 1994 Plan were granted
at fair market value on date of grant. Options under the 1994 Plan may be
granted to officers, directors, key employees of, and consultants to, the
Company and its subsidiaries.
In the event of termination of employment, the optionee's option will
terminate and may be exercised during a three month period after termination
to the extent the option was exercisable on the date of termination. In the
event termination of employment was caused by death or permanent disability,
the period of exercisability is extended under the 1994 Option Plan to one
year after the date of termination, but in no event after the date the option
would have expired in the absence of termination of employment. No shares
acquired on exercise of an option granted under the 1994 Plan may be sold or
otherwise disposed of by an optionee until the expiration of at least six
months following the date on which the exercised option was originally granted
by the Company.
At July 15, 1996, no options had been exercised under the 1994 Plan, and
unexercised options were outstanding to purchase 1,567,000 shares of common
stock at an average option exercise price of $2.73 per share, of which options
covering 1,520,000 shares at an option exercise price of $2.50 per share are
subject to stockholder ratification of an increase in the number of shares
covered by the 1994 Plan approved by the Board on February 6, 1996, and up to
333,000 shares were available for future grants of options under the 1994
Plan. Of the total options outstanding, options to purchase 383,000 shares
are exercisable in the fiscal year ending March 31, 1997 without regard to the
market price of the Company's common stock and 450,000 shares are exercisable
during the last 30 days of the five-year option term or earlier if the
Company's common stock has traded at $10.00 per share or more for at least 30
days, which need not be consecutive days. Of the unexercised options
outstanding, options covering 828,000 shares are held by five current officers
and directors (of which options covering 181,333 shares are exercisable in the
fiscal year ending March 31, 1997 without regard to the market price of the
Company's common stock and 300,000 shares are exercisable at such time as the
Company's common stock has traded at $10.00 per share or more for at least 30
days,) at an average exercise price of $2.57 per share.
RESTRICTED STOCK OPTION PLAN
The Restricted Plan provides that options granted thereunder must be
granted at an option price which is the lesser of $0.50 per share or 10% of
the fair market value of the Common Stock on the date of grant. No options
granted under the Restricted Plan may be exercised until the expiration of at
least two years following the date on which the option was originally granted
by the Company. Options under the Restricted Plan may be granted only to
directors and senior management of the Company, including its Chairman of the
Board, its President, and any other persons appointed to act as Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer of the
Company.
In the event of termination of an optionee's service as a director or
member of senior management, the optionee's option will terminate and may be
exercised during a 12 month period after termination to the extent the option
was exercisable on the date of termination. In the event termination of
employment was caused by death or permanent disability, the amount exercisable
is extended under the Restricted Plan to the extent the option would have
become exercisable during the 12 month period if not prevented by the
optionee's death or disability. In no event may any option be exercised after
the date the option would have expired in the absence of termination of
employment.
<PAGE> 39
At July 15, 1996, no options had been exercised under the Restricted
Plan, unexercised options were outstanding to purchase 8,000 shares of common
stock (all of which are exercisable in the fiscal year ending March 31, 1997)
at an average exercise price of $.50 per share, and up to 42,000 shares were
available for future grants of options under the Restricted Plan.
1996 STOCK COMPENSATION PLAN
On February 6, 1996, the Company's Board of Directors adopted a 1996
Stock Compensation Plan (the "Stock Plan") subject to approval of the Stock
Plan within one year thereafter by stockholders of the Company. The purpose
of the Stock Plan is to permit the Board or a Committee of the Board the
flexibility of issuing shares of Vista 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 Vista and its subsidiaries. A "subsidiary" of the Corporation for
purposes of the Stock Plan is any corporation in which Vista at the time of a
compensation award owns or controls, directly or indirectly, at least 50% or
more of the outstanding voting capital stock.
Shares may be issued under the Stock Plan solely in payment for the
value of services actually rendered to Vista. In no event may shares be
issued as compensation under the Stock Plan: (i) for services which are either
directly or indirectly related to the offer or sale of securities in a
capital-raising transaction by Vista or its corporate affiliates; or (ii) for
the sale of goods, merchandise, products or other tangible assets. Common
stock issued as compensation under the Stock Plan will be valued at their fair
market value on the date such shares are authorized to be issued to a
participant for designated services rendered in a specified dollar amount. In
determining the fair market value of any such payment, the Board or a
Committee of the Board will take into consideration the quoted prices in the
public market for common stock on the date shares are authorized for issuance
and, if deemed applicable by the Board or the Committee to its determination
of fair market value, a reasonable discount to quoted market prices not
exceeding 25% of the low bid price on the date of such authorization if such
discount is deemed appropriate to allow for price volatility and/or possible
lack of liquidity based on reported prices and trading volume in the public
market for the common stock when compared to the number of shares authorized
for issuance as compensation and any applicable forfeiture or restrictive
provisions relating to the award.
Shares of common stock authorized by the Stock Plan may be issued as
compensation only upon the execution of an agreement by the recipient to
accept the same in lieu of all or a designated portion of cash compensation
otherwise payable for his or her services. If the award of shares is subject
to contractual restrictions or performance conditions that may result in a
forfeiture, the recipient's interest in the shares may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which any
applicable restriction or performance condition and period shall lapse without
the requirement of forfeiture.
The Stock Plan will be administered by the Board or by a Committee of
not less than two directors. No member of the Committee will be eligible to
participate in the Stock Plan while serving on the Committee. The Committee
has the authority to (i) select the participants to whom common stock
compensation may be granted; (ii) determine the number of shares and the fair
market value thereof for each payment of common stock compensation; (iii)
determine any other terms and conditions of common stock compensation
payments, including but not limited to any restrictions or forfeiture
conditions relating to the performance of services by the participant; (iv)
determine whether, to what extent and under what circumstances a common stock
payment of compensation under the Stock Plan may be deferred either
automatically or at the election of the participant under a written agreement;
and (v) approve any agreement executed by participants under the Stock Plan.
<PAGE> 40
Subject to approval of the Stock Plan by Vista stockholders, 250,000
shares of common stock will be available for payment of compensation under the
Stock Plan. If any shares are issued under the Stock Plan and subsequently
cease to be outstanding as a result of any forfeiture or failure to satisfy
restrictive conditions, such shares will again be available for compensation
payments under the Stock Plan. No compensation awards under the Stock Plan
have been made as of July 30, 1996.
OTHER
The Company 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 July 30, 1996 as to Vista's common stock owned by
(i) each person known by management to beneficially own more than 5% of the
Company's outstanding Common Stock, (ii) each of the Company's directors, and
(iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
Common Stock (1)
----------------------------------------------------------------
Shares Beneficially Owned,
Disregarding Irrevocable Proxies
Granted to the Company's
Board of Directors (2)(8) Voting Rights (2)(8)
--------------------------------- -----------------------------
Name or Group (3) No. of Shares % of Class No. of Shares % of Class
- ------------------------------- -------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Directors:
Dr. J. Charles Casebeer (4) .... 260,000 # 3.7% 10,000 0.1%
Dr. Donald G. Johnson (5) ...... 510,000 # 7.3% 10,000 0.1%
Thomas A. Schultz (6) .......... 25,000 0.4% 25,000 0.4%
Murray D. Watson (7) ........... 3,472,000 # 49.0% 3,472,000 # 49.0%
Proxies grated to the
Board of Directors by
Regional Joint Ventures (8) .. -- -- 1,900,000 # 27.1%
All officers and directors
as a group [6 persons] (9) ... 4,283,667 # 59.9% 5,433,667 # 75.9%
Other 5% Shareholders:
Pharma Parch PLC (10) .......... 3,410,000 # 48.3% 3,410,000 # 48.3%
15/16 FitzWilliam Place
Dublin 2, Ireland
Vista Laser Centers of
the Northeast, Inc. (11) ....... 450,000 # 6.4% -- --
131 Bloor Street West, Suite 210
Toronto, Ontario M5S 1R1, Canada
Vista Laser Centers
of the Northwest, Inc. (12) .... 500,000 # 7.1% -- --
918 12th Street
New Westminster
British Columbia V3M 6B1, Canada
Vista Laser Centers
of the Pacific, Inc. (13) ...... 500,000 # 7.1% -- --
14895 East 14th Street, Ste 400
San Leandro, California 94578
</TABLE>
______________________________________________
<TABLE>
<S> <C>
# Includes certain securities listed elsewhere in the above table. See
Notes 4, 5, 7, 8, 10, 11, 12 and 13 below.
(1) Based on 7,006,112 shares of common stock outstanding at July 30, 1996
and includes common stock beneficially owned plus, where applicable,
common stock issuable upon exercise of outstanding stock options held
only by the person or group indicated that are fully exercisable or
exercisable within 60 days after July 30, 1996.
<PAGE> 41
(2) As described in Note 8 below, five Regional Joint Ventures holding an
aggregate of 1,900,000 shares of Vista common stock have agreed to grant
irrevocable proxies to Vista's Board of Director's expiring in each
instance approximately five years after the Regional Joint Venture has
completed an initial public offering of its securities. All other
rights of beneficial ownership are retained by the respective Regional
Joint Venture including the power to dispose of the shares in a bona
fide sale transaction free of the proxy restrictions.
(3) To the best knowledge of Vista's management, the persons named in the
table have sole voting and investment power with respect to all shares
shown to be beneficially owned by them, subject to the information
contained in the footnotes to the table and, where applicable, community
property laws.
(4) Includes 10,000 shares issuable upon exercise of stock options held
directly by Dr. Casebeer that were fully exercisable or exercisable
within 60 days after July 30, 1996 plus 250,000 shares owned by Vista
Laser Centers of the Southwest, Inc. in which Dr. Casebeer is Chairman
of the Board and Chief Executive Officer. Dr. Casebeer disclaims
beneficial ownership of shares owned by Vista Laser Centers of the
Southwest, Inc. Does not include other shares owned by Regional Joint
Ventures for which Vista's Board of Directors holds irrevocable voting
proxies (see Note 8 below). Dr. Casebeer's business address is 15100
North 78th Way, Suite 100, Scottsdale, Arizona 85260.
(5) Includes 10,000 shares issuable upon exercise of stock options held
directly by Dr. Johnson that were fully exercisable or exercisable
within 60 days after July 30, 1996 plus 500,000 shares owned by Vista
Laser Centers of the Northwest, Inc. in which Dr. Johnson is Chairman of
the Board and Chief Executive Officer. Dr. Johnson disclaims beneficial
ownership of shares owned by Vista Laser Centers of the Northwest, Inc.
Does not include other shares owned by Regional Joint Ventures for which
Vista's Board of Directors holds irrevocable voting proxies (see Note 8
below). Dr. Johnson's business address is 918 12th Street, New
Westminster, British Columbia V3M 6B1, Canada.
(6) Includes 25,000 shares issuable upon exercise of stock options held
directly by Mr. Schultz that were fully exercisable or exercisable
within 60 days after July 30, 1996. Does not include shares owned by
Regional Joint Ventures for which Vista's Board of Directors holds
irrevocable voting proxies (see Note 8 below). Mr. Schultz's business
address is 1250 Oakmead Parkway, Suite 210, Sunnyvale, California 94086.
(7) Includes (i) 25,000 shares of common stock and 37,000 shares issuable
upon exercise of stock options held directly by a corporate affiliate of
Mr. Watson that were fully exercisable or exercisable within 60 days
after July 30, 1996, plus (ii) shares of common stock and fully
exercisable stock options owned by Pharma Patch PLC (see Note 10 below)
in which Mr. Watson is Chairman of the Board and Chief Executive
Officer. Mr. Watson disclaims beneficial ownership of shares owned by
Pharma Patch PLC. Does not include shares owned by Regional Joint
Ventures for which Vista's Board of Directors holds irrevocable voting
proxies (see Note 8 below). Mr. Watson's business address is 15/16
FitzWilliam Place, Dublin 2, Ireland.
(8) The following Regional Joint Ventures, holding an aggregate of 1,900,000
shares of Vista common stock, have agreed to grant irrevocable proxies
to Vista's Board of Director's expiring in each instance approximately
five years after the Regional Joint Venture has completed an initial
public offering of its securities: Vista Laser Centers of Michigan,
Inc. as to 200,000 shares; Vista Laser Centers of the Northeast, Inc.
as to 450,000 shares; Vista Laser Centers of the Northwest, Inc. as to
500,000 shares; Vista Laser Centers of the Pacific, Inc. as to 500,000
shares; and Vista Laser Centers of the Southwest, Inc. as to 250,000
shares. All other rights of beneficial ownership are retained by the
respective Regional Joint Venture including the power to dispose of the
shares in a bona fide sale transaction free of the proxy restrictions.
(9) Includes shares described in Notes 4 through 8 above plus 16,667 shares
issuable upon exercise of stock options held directly by one other
officer that were fully exercisable or exercisable within 60 days after
July 30, 1996
<PAGE> 42
(10) Includes 3,360,000 shares of common stock and fully exercisable stock
options to purchase 50,000 shares expiring on September 30, 1996 owned
by Pharma Patch PLC. These securities are also included in the table
under beneficial ownership of Murray D. Watson (see Note 7 above). The
table does not include (i) 500,000 Class C Warrants owned by Pharma
Patch PLC which are exercisable during the month of February 1997 and/or
the month of February 1998, and expire thereafter to the extent not
exercised (see Item 12 of this Report), or (ii) shares owned by Regional
Joint Ventures for which Vista's Board of Directors holds irrevocable
voting proxies (see Note 8 below).
(11) Includes 450,000 shares beneficially owned by Vista Laser Centers of the
Northeast, Inc. which are subject to an irrevocable proxy in favor of
the Company's Board of Directors (see Note 8 above).
(12) Includes 500,000 shares beneficially owned by Vista Laser Centers of the
Northwest, Inc. which are subject to an irrevocable proxy in favor of
the Company's Board of Directors (see Notes 5 and 8 above).
(13) Includes 500,000 shares beneficially owned by Vista Laser Centers of the
Pacific, Inc. which are subject to an irrevocable proxy in favor of the
Company's Board of Directors (see Note 8 above).
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS WITH PHARMA PATCH PLC FOR EQUITY FINANCING AND CHANGE IN CONTROL
During February 1996, Vista negotiated agreements with Pharma Patch Plc
("Pharma Patch"), a publicly-traded company with its principal office in
Dublin, Ireland. Pharma Patch sold its operating assets and proprietary
transdermal patch and penetration enhancer business in November 1995 in
exchange for 786,214 shares of common stock in Technical & Chemical Products,
Inc. ("TCPI") and the satisfaction of approximately $5,000,000 of Pharma Patch
indebtedness by TCPI. TCPI is a publicly-traded company engaged primarily in
the design, development, manufacture and marketing of medical diagnostic
products for use in physician offices, at home and at other point-of-care
locations, and the research, development and commercialization of transdermal
and mucosal drug delivery systems and skin permeation enhancers. See
"Investment In Technical Chemicals and Products, Inc." in Item 1 of this
Report.
Vista's Board on February 6, 1996 authorized the negotiation of equity
financing agreements with Pharma Patch. On February 15, 1996, Pharma Patch
publicly announced its board of directors had approved the acquisition of a
controlling interest in Vista subject to negotiation of definitive agreements.
Definitive agreements negotiated between the Company and Pharma Patch were
executed on March 1 and March 4, 1996 and were closed on or prior to March 31,
1996. The Company's financing transactions and agreements with Pharma Patch
are summarized as follows:
STOCK PURCHASE AGREEMENT FOR $500,000 (200,000 VISTA COMMON SHARES)
On March 1, 1996, Vista and Pharma Patch executed a Stock Purchase
Agreement providing for the first stage of financing transactions. The Stock
Purchase Agreement provided for 200,000 newly issued shares of Vista common
stock to be sold to Pharma Patch for a cash price of $500,000, or $2.50 per
share. These funds were received by Vista in March 1996.
EXCHANGE OF NOTE AND TCPI SECURITIES FOR $5,150,000 (2,060,000 VISTA
COMMON SHARES) AND EXERCISE OF STOCK OPTION
On March 4, 1996, the Company and Pharma Patch executed an Agreement
(the "Exchange Agreement") that was closed on March 31, 1996. Under the
Exchange Agreement, the Company delivered to Pharma Patch 2,060,000 newly
issued shares of Vista common stock at a stated value of $5,150,000, or $2.50
per Vista share, plus 500,000 Vista Class C common stock purchase warrants
<PAGE> 43
("Class C Warrants"). In exchange, Vista received from Pharma Patch: (i) an
interest-free note due in six months from Pharma Patch in the principal amount
of $750,000, which was fully paid by Pharma Patch on May 3, 1996; and (ii)
200,000 restricted shares of Technical Chemicals and Products, Inc. ("TCPI")
common stock to be transferred from Pharma Patch to the Company at a value of
$2,662,500, or $13.31 per TCPI share. At the time this transaction was
completed and at March 31, 1996, shares of TCPI acquired by the Company were
restricted as to resale under federal securities laws and have been valued at
both dates for financial statement purposes at a 25% discount from the public
market price. On March 21, 1996, the date Pharma Patch and Vista closed
transactions provided by the Exchange Agreement, the closing price for TCPI
common stock was $17.75 per share. Subsequent closing prices for TCPI common
stock were $16.50 on March 31, 1996 and $10.25 on July 29, 1996.
As additional consideration for these transactions, the Exchange
Agreement granted Pharma Patch an option exercisable at any time on or before
September 30, 1996 to purchase up to an additional 250,000 newly issued shares
of the Company's common stock at an option exercise price of $2.50 per share
in cash (the "Six Month Option"). On July 18, 1996, Pharma Patch exercised
200,000 shares subject to the Six Month Option at an exercise price of
$500,000 paid to the Company in cash.
DESCRIPTION OF CLASS C WARRANTS
The 500,000 Class C Warrants issued to Pharma Patch under the Exchange
Agreement each represent the right to purchase one (1) share of the Company's
common stock during the month of February 1997 and/or the month of February
1998, and expire thereafter to the extent not exercised. In each instance,
the exercise price per share will be determined by the average of the quoted
closing prices for the Company's common stock in the over-the-counter market
during the month of January immediately preceding the date Class C Warrants or
any portion thereof are exercised, except that the Class C Warrant exercise
price per share in any event will not exceed $10.00 per share. The exercise
price and number of shares issuable on exercise of Class C Warrants are
subject to adjustment in certain events to prevent dilution in the event of
any subsequent stock split, stock dividend, reclassification or
recapitalization affecting the outstanding common stock as a class.
EXCHANGE OF 900,000 VISTA COMMON SHARES BY CERTAIN STOCKHOLDERS
At the time Vista negotiated and concluded its agreements with Pharma
Patch, Vista was advised that 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 newly issued securities of Pharma Patch in a
privately-negotiated transaction. Those securities 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. See "Issuance of Shares for
Expenses from June Through December 1995" below.
CHANGE IN CONTROL AND OTHER INFORMATION
As a result of the agreements described above, Pharma Patch acquired a
controlling interest in Vista during March 1996. At March 31, 1996, Vista
had 5,256,105 common shares outstanding, including the 2,260,000 Vista shares
issued to Pharma Patch under the Stock Purchase Agreement and the Exchange
Agreement, but excluding common stock reserved for outstanding stock options,
warrants, conversion or exchange of debt obligations or reserved for
investments in certain Regional Joint Ventures. Pharma Patch's total
ownership of 3,160,000 Vista common shares represented approximately 60.1% of
the total Vista common stock outstanding at March 31, 1996 and approximately
46.4% of 6,806,112 shares of Vista common stock outstanding at July 15, 1996.
Vista and Pharma Patch both recognized in March 1996 that Pharma Patch's
percentage ownership of the Company may fluctuate in the future as a result of
continuing changes in Vista's capitalization, the right of Pharma Patch to
exercise its Six Month Option for 250,000 Vista common shares expiring on
<PAGE> 44
September 30, 1996 and/or 500,000 Class C Warrants exercisable in February
1997 and February 1998, described above, or as a result of a future decision
by Pharma Patch to sell or otherwise dispose of all or a portion of its
investment in Vista.
Vista entered into a registration rights agreement with Pharma Patch
upon closing the Exchange Agreement. Subject to certain limitations, this
agreement grants Pharma Patch two "piggy-back" registration rights in the
event Vista files registration statements covering offerings of its securities
under the Securities Act of 1933. In addition, Pharma Patch will have the
right on three occasions after March 31, 1997 and until July 31, 2006 to
demand that all or a portion of the Company's common stock held by Pharma
Patch and issuable upon exercise of Class C Warrants and the Six Month Option
be registered under the Securities Act of 1933. Any such registrations of
Vista common stock for the account of Pharma Patch will be at Vista's expense.
Murray D. Watson, a director of Vista since January 31, 1994, has served
since July 1993 as Chairman of the Board, Chief Executive Officer and a
director of Pharma Patch. On February 16, 1996, Mr. Watson was elected
Vista's Vice Chairman of the Board and Kenneth G. Howling, Vice President and
Chief Financial Officer of Pharma Patch, was elected Vista's Treasurer and
Chief Financial Officer. In each case, their election as Vista officers was
subject to a condition that definitive agreements for the contemplated
transactions between Vista and Pharma Patch be executed; these agreements were
executed on March 1, 1996 and completed on March 21, 1996.
Transactions contemplated by the Stock Purchase Agreement and the
Exchange Agreement were authorized and approved by Vista's board of directors
("Board") at a Board meeting held on February 6, 1996 attended by all three of
Vista's then directors. Vista's Board approved the Stock Purchase Agreement
and Exchange Agreement transactions with knowledge and disclosure of the
proposed exchange by TPR, SRL and WPI of 900,000 shares of Vista common stock
with Pharma Patch. Mr. Watson, a Vista director, abstained from voting on the
proposed transactions due to his position as the Chief Executive Officer and a
director of Pharma Patch. Messrs. Jac. J. Lam and Malcolm J. Rowe, Vista's
other two directors at that time, voted in favor of approving the
transactions. Mr. Rowe also served at the time as a member of Pharma Patch's
board of directors.
PURCHASE OF CERTAIN ASSETS FROM REFRACTIVE SERVICES-800, INC.
From July 1995 through June 1996 date, a foreign corporate investor
named Refractive Services-800, Inc. invested $520,000 in cash in five Regional
Joint Ventures sponsored by the Company. See "North American Regional Joint
Venture Investments and Affiliates" in Item 1 of this Report. In exchange for
that investment, and in view of the high risks associated with making the
initial investment in start-up enterprises that had yet to negotiate any
agreements for proposed business operations, Refractive Services-800, Inc.
received shares of a 10% Series A convertible preferred issue of the five
Regional Joint Ventures with a liquidation preference equal to five times its
cash investment (six times its cash investment in the case of VLC-Northeast).
The Company has been advised that Refractive Services-800, Inc. is a Panama
corporation owned and controlled by Marcel Jouby, a Dutch citizen, Kerry Lynne
O'Rourke, a South African citizen residing in The Netherlands, and Sukumal
Chintagavongse, a Thailand citizen.
Vista negotiated an agreement on July 18, 1996 to acquire all Series A
Preferred shares in five Regional Joint Ventures originally purchased by
Refractive Services-800, Inc. for $520,000. In exchange, Vista has agreed to
issue to Refractive Services-800, Inc. a total of 520,000 shares of Vista
common stock. The Company also agreed to purchase for $50,000 in cash all of
the capital stock in Refractive Services 800 Corp., a Nevada corporation ("RS-
800") organized by Refractive Services-800, Inc. in 1995 to acquire rights to
certain 800 and 900 telephone numbers for telemarketing purposes at the
election of Regional Joint Ventures.
<PAGE> 45
OFFSHORE SALES OF COMMON STOCK UNDER REGULATION S
On March 29, 1996, Vista received $212,500 in proceeds from the sale of
100,000 shares of the Company's common stock at $2.125 per share under a
Regulation S offshore private placement transaction with one foreign investor,
Corundum B.V. The quoted closing market price for the Company's common stock
on March 29, 1996 was $2.625 per share. No fees or commissions to third
parties were paid in connection with this offering.
On June 13, 1996, Vista received $212,500 in proceeds from the sale of
100,000 shares of the Company's common stock at $2.125 per share under a
separate Regulation S offshore private placement transaction with two foreign
investors, Solar Ventures Limited as to 50,000 shares and Armilla Holdings
Limited as to 50,000 shares. The quoted closing market price for the
Company's common stock on June 13, 1996 was $3.25 per share. No fees or
commissions to third parties were paid in connection with this offering.
PURCHASE OF LASER EQUIPMENT FROM AFFILIATE OF A DIRECTOR
On February 1, 1996, the Company entered into an asset purchase and
lease assumption agreement with a corporate affiliate of Dr. J. Charles
Casebeer providing for the purchase by Vista of an excimer laser system. The
purchase price for the equipment was $75,000 in cash, a $96,591 promissory
note with interest at 8% per annum originally due May 31, 1996, and the
assumption of outstanding obligations under an existing lease of the laser
including future lease payments not to exceed $328,409. Dr. Casebeer was
subsequently elected a director of the Company on February 16, 1996. Vista
later determined to replace its intended use of this equipment with newer
technology, resulting in a charge to earnings in the amount of $446,636 for
the impairment of an idle asset. As of July 12, 1996, the note to Dr.
Casebeer's corporate affiliate remained unpaid and is expected to be paid by
Vista later in the current fiscal year ending March 31, 1997.
ISSUANCE OF SHARES FOR EXPENSES FROM JUNE THROUGH DECEMBER 1995
During the period from June to December 1995, certain clients of the
Company's then acting President, Jac. J. Lam, invested approximately
$1,470,000 to sustain Vista's corporate operations during that period. These
advances included approximately $700,000 for travel by the Company's officers
and consultants and corporate office expenses in New York and Europe,
approximately $100,000 in out-of-pocket advances for various expenses, and
$670,000 in compensation paid for personnel assigned to support the Company's
corporate activities and its program to establish various Regional Joint
Ventures in North America under the "Vista Laser Centers" name. The $670,000
figure for personnel included $200,000 paid or payable to the Company's then
acting President, Jac. J. Lam, and $60,000 accrued for its then acting
Treasurer and Chief Financial Officer, Theodore J. Mayer. The Company's Board
of Directors agreed these charges should be billed at a flat negotiated rate
of $1,470,000 and in December 1995 authorized the issuance of 925,000 shares
of the Company's common stock in payment of these obligations.
These shares were issued to Therapeutic Patch Research, N.V. (300,000
shares), Saliva Research Ltd. (325,000 shares) and Westcliff Partners Inc.
(300,000 shares). Mr. Lam acted at the time as a managing director for
Saliva Research Ltd. and Westcliff Partners Inc., but disclaimed any
beneficial interest in the securities held by those entities.
REPURCHASE OF SHARES FROM SEMERA AB
In June 1994, the Company formed a subsidiary in Sweden, Vista Vision
Scandinavia AB ("Vista-Sweden"). Under an agreement dated June 1, 1994,
Vista-Sweden purchased certain assets of a PRK surgical center clinic in
Stockholm, Sweden, from Semera AB, an unaffiliated company. The price paid
for the assets was approximately $100,000 in cash, 28,600 shares of Vista
common stock and 28,600 Class A Warrants. Vista-Sweden concurrently engaged
the services of Professor Bjorn Tengroth, a noted authority in PRK procedures.
<PAGE> 46
All of the capital stock of Vista-Sweden is owned by Convista Vision BV, an
inactive Dutch company ("Convista") purchased by Vista in April 1994 as a
subsidiary to administer financing and management of the Company's
international operations.
As part of the negotiated agreement with Semera AB, 20% of Convista's
capital stock was sold to Professor Tengroth for $3,000 and Vista-Sweden
advanced a loan of approximately $134,000 to Professor Tengroth. Exercising
an option granted in June 1994, Convista subsequently repurchased Professor
Tengroth's 20% interest in Convista for SEK 1,250,000 (approximately
$167,000), and his loan was repaid from the proceeds. In June 1995, the
Company repurchased 25,640 shares of Vista common stock and 25,640 Class A
Warrants from Semera AB for the sum of $277,777 pursuant to a commitment made
in June 1994.
The funds required for the $277,777 payment to Semera AB in June 1995
were obtained by the Company from proceeds of 12% convertible promissory notes
issued by Vista in June 1995. These 12% notes were issued and sold to G.
Lennart Perlhagen ($177,777), then a director of the Company, and Quintillion
B.V., an affiliate of Jac. J. Lam (who was elected a director and acting
President of the Company in June 1995). The 12% notes are due on June 15,
1998 and are convertible into shares of Vista common stock at $5.00 per share.
Payment obligations on the 12% notes are collateralized by the pledge of 51%
of the outstanding shares of Vista-Sweden. In consideration of these loans,
Vista-Sweden is obligated to pay the noteholders a royalty of $100 for each
Incremental PRK procedure performed by Vista-Sweden during the three years
ending May 31, 1996, 1997 and 1998. Incremental PRK procedures for this
purpose are generally defined as the number of PRK procedures performed by
Vista-Sweden in excess of its first 800 PRK procedures for the twelve months
ended May 31, 1996, and the number of PRK procedures in each following 12
month period that exceed PRK procedures performed for the prior 12 month
period.
ABANDONMENT OF OPERATIONS BY VISTA VISION INTERNATIONAL LTD. (UNITED KINGDOM)
Vista Vision International Ltd. ("Vista-UK"), formed in July 1992, owned
a 50% interest in Precision Laser Eye Centres Ltd., a joint venture with
Optika Holdings Limited formed in June 1993, which owned and operated an
excimer laser eye surgical clinic in London, England. G. Lennart Perlhagen,
President and Chief Executive Officer of the Company from February 1994 to
January 15, 1995, served as the managing director of Vista-UK since its
organization. The Company purchased all of the capital stock of Vista-UK and
advances to Vista-UK of approximately 24,000 British pounds from an
unaffiliated third party under an agreement dated March 31, 1994. The
consideration paid by the Company included $134,000 in cash (U.S. funds) and
250,000 shares of the Company's common stock issued to the seller, Laser
Technologies (Jersey) Ltd.
In June 1995, Vista closed the operations of Vista-UK and Precision
Laser Eye Centres Ltd. due to their unprofitable history, a change in business
strategy of the joint venture partner and extremely competitive market
conditions in London.
ABANDONMENT OF PROPOSED ACQUISITION OF MEDICAL DEVELOPMENT RESOURCES, INC.
Medical Development Resources, Inc. ("MDRI") is a privately-held
Delaware corporation engaged in research and development of a proprietary
production process for the manufacture of scalpels and other cutting
instruments from natural obsidian and/or an obsidian formulation. MDRI owned
100% of two operating subsidiaries, KMI I, Inc. ("KMI") which designs,
manufactures and markets precision surgical instruments and related products,
and Micra Instruments Limited ("Micra"), a company was formed by MDRI in July
1993 to purchase the assets of a business involved in design, development,
manufacturing and marketing of titanium microsurgical instruments for
ophthalmology and neurosurgery.
<PAGE> 47
As previously reported in the Company's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1995 and Reports on Form 10-QSB for the
quarterly periods ended June 30, 1995 and September 30, 1995, the Company
engaged in a series of transactions and proposed transactions relating to
investments in MDRI and its subsidiaries from April 1994 through June 1995.
Vista wrote-off all of its investment in MDRI and loans advanced for MDRI's
account, aggregating $5,643,000, as of March 31, 1995.
INITIAL INVESTMENT BY VISTA IN MDRI. On April 1, 1994, Vista entered
into an agreement with Obsidian Research N.V., an unaffiliated partnership, to
acquire 715,563 shares of MDRI common stock and warrants to purchase up to
601,073 shares of MDRI common stock exercisable at $6.60 per share until
December 31, 1996. The purchase price paid by Vista for these MDRI securities
consisted of 200,000 shares of Vista Common Stock and 200,000 Vista Class A
Warrants. The MDRI common stock and warrants were originally acquired by
Obsidian Research N.V. at a cost of $1,125,000 in February 1993. Vista's
purpose in acquiring this interest in MDRI was to establish a long-term
relationship with the KMI subsidiary for future access to U.S.
ophthalmologists.
ADDITIONAL MDRI INVESTMENTS IN MAY 1994. On May 5, 1994, Vista entered
into a Stock Purchase Agreement (the "May 1994 Stock Agreement") with six
individuals who were principal stockholders of MDRI and included certain
members of MDRI and KMI's management (the "MDRI Management Stockholders").
Under the May 1994 Stock Agreement, Vista purchased 1,000,000 newly issued
shares of MDRI common stock from MDRI on May 6, 1994 for $1,250,000 in cash
and acquired 1,000,000 shares of MDRI common stock from the MDRI Management
Stockholders in exchange for $2 million in principal amount of non-interest
bearing promissory notes due on December 31, 1994. At the time of this
investment, MDRI's management projected MDRI would generate net income for
fiscal 1994 of at least $900,000 and there was proposed an initial public
offering of MDRI securities in which Vista would participate as a selling
stockholder.
Concurrent with the closing of the May 1994 Stock Agreement, seven
foreign private investors purchased an additional 1,000,000 shares of MDRI
common stock from the MDRI Management Stockholders for $2 million in non-
interest bearing promissory notes due in ten equal bi-weekly installments from
July 5, 1994 through November 9, 1994. Under separate agreements on May 24,
1994, Vista acquired these 1,000,000 MDRI shares from the seven foreign
investors in exchange for 200,000 shares of Vista common stock and 100,000
Vista Class A Warrants (all of which Vista shares and warrants were
subsequently cancelled, as described below). With the consent of the MDRI
Management Stockholders, Vista common stock issued to the seven foreign
investors were substituted as a collateral pledge to secure obligations of the
foreign investors on their non-interest bearing notes to the MDRI Management
Stockholders.
In July 1994, Vista was advised that the seven foreign investors were
unable at that time to make payment of the installments due on their $2
million in notes to the MDRI Management Stockholders. As an accommodation to
the MDRI Management Stockholders, during July and August 1994 Vista prepaid
$600,000 in principal amount of Vista's $2 million note obligations otherwise
maturing on December 31, 1994 to the MDRI Management Stockholders.
EXCHANGES WITH TNC MEDIA, INC. FOR MDRI SECURITIES. Under an agreement
dated October 11, 1994, MDRI transferred shares of common stock in TNC Media,
Inc. ("TNC") to TNC in exchange for the forgiveness of $450,000 in principal
and $56,140 of accrued interest due from MDRI and KMI to TNC and for the
cancellation of 155,000 shares of MDRI common stock then held by TNC. As a
consequence of the cancellation of these shares, Vista's then percentage
ownership of MDRI capital stock increased from 52.41% to approximately 53.48%.
In consideration of this increase in Vista's ownership of MDRI, TNC received
from Vista redeemable Class B warrants to purchase up to 31,000 shares of
Vista common stock exercisable at $10.00 per share at any time through October
11, 1999 unless earlier called for redemption. Vista has the optional right
<PAGE> 48
of calling the Class B warrants for redemption if the Vista common stock
issuable upon exercise of Class B Warrants have been registered for sale under
the Securities Act of 1933 and if Vista common stock is traded in the NASDAQ
over-the-counter market or on a national securities exchange and the closing
sale price is $22.50 per share or more for at least 20 consecutive trading
days on the date Class B Warrants are called for redemption.
During December 1994, Vista acquired 778,777 shares of MDRI common stock
(representing approximately 11.2% of the MDRI shares then outstanding) from
TNC in exchange for 155,755 shares of Vista common stock in order to increase
its voting position in MDRI. Vista demanded that MDRI call an annual meeting
of its stockholders to elect directors, but this demand was ignored by MDRI.
As a result of the above transactions, Vista owned 4,809,340 shares of
MDRI capital stock, or approximately 69.13% of the total then outstanding, at
December 31, 1994. The MDRI Management Stockholders continued to manage MDRI
and its subsidiaries and controlled the policies and operations of MDRI and
its subsidiaries.
DECEMBER 1994 REORGANIZATION AGREEMENT WITH MDRI. In order to resolve
certain disputes which arose between MDRI Management Stockholders and the
seven foreign investors, on the one hand, and between MDRI Management
Stockholders and Vista on the other hand, and in an effort to obtain control
over the operating policies and management of MDRI and its subsidiaries, Vista
entered into an Agreement and Plan of Reorganization with MDRI and the MDRI
Management Stockholders dated as of December 15, 1994 (the "Reorganization
Agreement") and amended in January and March 1995. In order to obtain access
to historical financial records retained by independent public accountants for
MDRI, Vista further agreed that upon the closing of the Reorganization
Agreement Vista would assume $70,000 of MDRI's indebtedness to its independent
public accountants and would guarantee an additional $70,000 of such
indebtedness assumed by KMI. Vista advanced $40,000 of the funds
contemplated by these obligations prior to closing the Reorganization
Agreement as an accommodation to MDRI and KMI.
Due to numerous problems observed by Vista during its due diligence
review of the operations and reported financial condition of MDRI and its
subsidiaries, the original closing contemplated by the Reorganization
Agreement was postponed pending a renegotiation of certain terms and
provisions of the Reorganization Agreement. Vista also extended an exchange
offer to the holders of certain MDRI notes and warrants as required by the
Reorganization Agreement, subject to the closing of the Reorganization
Agreement. The Reorganization Agreement further provided for a proposed
merger later in 1995 of MDRI with a wholly-owned subsidiary of Vista.
EXCHANGE AGREEMENT FOR LOAN TO MICRA. In June 1995, Quintillion B.V.,
an affiliate of the Company's then acting President, Jac. J. Lam, advanced the
sum of $100,000 to Micra Instruments Ltd. for working capital to sustain
Micra's operations in exchange for a 15% debenture issued by Micra. The 15%
debenture was for a term of six months and payable thereafter on three months
written notice and secured by a fixed and floating charge on the assets of
Micra. In consideration of this financial accommodation, Vista entered into
an Exchange Agreement with Quintillion B.V. which grants Quintillion the right
to exchange the 15% Micra debenture for shares of the Company's common stock
at an exchange price of $1.25 per share of Vista common stock.
TERMINATION AND RESCISSION OF AGREEMENTS RELATING TO MDRI. Following
the failure of MDRI and the MDRI Management Stockholders to comply with
conditions set forth in the Reorganization Agreement and the inadequacy of
MDRI's financial records, Vista elected on July 7, 1995 to terminate all
obligations on its part under the Reorganization Agreement and advised MDRI
and the MDRI Management Stockholders that Vista was further rescinding all
transactions with the MDRI Management Stockholders contemplated by the May
1994 Purchase Agreement including all obligations under promissory notes
previously issued by Vista. The reasons given by Vista for these actions
included Vista's allegations of fraud, intentional misconduct and breach of
<PAGE> 49
fiduciary duties on the part of the MDRI Management Stockholders,
misrepresentations of material facts by the MDRI Management Stockholders and
MDRI, and failures in the timely performance of conditions precedent to
Vista's obligations. Vista further demanded that the MDRI Management
Stockholders make full restitution to Vista of $600,000 in cash previously
paid by Vista to the MDRI Management Stockholders under notes issued pursuant
to the May 1994 Stock Purchase Agreement.
As a result of this action, all shares issued by Vista under the
Reorganization Agreement and to seven foreign investors in exchange for Vista
securities were cancelled and Vista returned to the MDRI Management
Stockholders all certificates representing shares of MDRI common stock
previously received by Vista except for 2,794,340 MDRI shares, believed to
represent approximately 40% of MDRI's outstanding common stock, paid for in
cash by Vista. Vista wrote-off all of its investment in MDRI and loans
advanced for MDRI's account, aggregating $5,643,000 as of March 31, 1995.
TRANSACTIONS WITH FORMER OFFICERS AND DIRECTORS
In June 1994, Vista engaged the services of Drago A. Cerchiari to render
consulting services relating to financial and accounting matters, including
identification of suitable candidates for the position of the Company's Chief
Financial Officer. Vista issued 7,000 Class A Warrants in consideration of
this agreement, and agreed to repurchase all or any portion of these Class A
Warrants at the price of $5.00 per warrant. Mr. Cerchiari exercised his put
option and the 7,000 Class A Warrants were cancelled in June 1995.
The Company previously had employment agreements with Robert L. Ferrara,
who resigned as the Company's Chief Financial Officer on April 14, 1995; Drago
A. Cerchiari, who resigned as the Company's President, Chief Executive Officer
and a director on June 1, 1995; and G. Lennart Perlhagen, who resigned as the
Company's Chairman on June 1, 1995 and as a director on July 4, 1995.
Under an agreement dated as of July 5, 1995, the Company issued 16,000
shares of its common stock to Mr. Perlhagen in payment of $80,000 of
unreimbursed business expenses.
Under an agreement dated as of June 1, 1995, the Company paid Mr.
Cerchiari $8,740 in cash and issued 4,000 shares of common stock for
reimbursement of a total of $29,000 of unreimbursed business expenses. Vista
agreed that Mr. Cerchiari had a put option right to sell the 4,000 shares of
common stock to the Company after January 31, 1996 at a price equal to $20,260
plus interest from June 1, 1995 at the rate of 1% per month. Mr. Cerchiari
exercised that option on February 1, 1996. The Company also issued 5,000
shares of common stock to Mr. Cerchiari under the June 1, 1995 agreement as a
negotiated settlement for a one-time hiring bonus in his original employment
agreement dated as of January 15, 1995.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed with this Report or are
incorporated by reference herein:
# Indicates exhibits filed with this Report; all other exhibits are
incorporated by reference to prior filings.
(M) Denotes management contract or compensation plan or arrangement.
<PAGE> 50
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -------------------------------------------------------
<S> <C> <C>
2.1 Stock Purchase Agreement and Regulation S Private Placement
Agreement dated March 31, 1994 among the Registrant, Laser
Technologies (Jersey) Limited and Storford Limited as to the
Registrant's purchase of the capital stock of Vista Vision
International Ltd. [incorporated by reference to Exhibit 10.8
filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended December 31, 1993].
2.1.2 Shareholders Agreement dated June 1993 between Vista Vision
International Limited and Optika Holdings Limited as to Precision
Laser Eye Centres Limited joint venture [incorporated by
reference to Exhibit 10.9 filed with Registrant's Annual Report on
Form 10-KSB for the Fiscal Year ended December 31, 1993].
2.2.1 Revised Stock Purchase Agreement dated March 9, 1994 among
Registrant, Global Funding Holding Ltd., Penguin Investments
Limited, Murren Investments Limited and Intesar SpA as to the
Registrant's purchase of 231,995 shares of Vista Vision SpA and
81,456 Class A warrants of Vista Vision Spa for the sum of one
billion Italian Lira [incorporated by reference to Exhibit 10.10
filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended December 31, 1993].
2.2.2 Form of Exchange Agreement and Regulation S Private Placement
Agreement between Registrant and foreign sellers of shares in
Vista Vision SpA [incorporated by reference to Exhibit 10.11
filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended December 31, 1993].
2.2.3 Form of Exchange Agreement and Regulation D Private Placement
Agreement between Registrant and United States sellers of shares
in Vista Vision SpA [incorporated by reference to Exhibit 10.12
filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended December 31, 1993].
3.1.1 Articles of Incorporation of Registrant filed with the Secretary
of State of Nevada on June 15, 1992 [incorporated by reference to
Exhibit 3.1 filed with Registrant's Registration Statement on Form
SB-2, Commission File No. 33-51194-NY].
3.1.2 Certificate of Amendment to Articles of Incorporation of
Registrant, filed with the Secretary of State of Nevada on
February 23, 1994 [incorporated by reference to Exhibit 3.1.2
filed with Registrant's Current Report on Form 8-K dated as of
February 15, 1994].
3.1.3 Certificate of Amendment to Articles of Incorporation of
Registrant, filed with the Secretary of State of Nevada on
September 12, 1995 [incorporated by reference to Exhibit 3.1.3
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995].
3.2 Bylaws of the Registrant, as amended and restated on February 3,
1994 [incorporated by reference to Exhibit 3.2 filed with
Registrant's Current Report on Form 8-K dated as of February 15,
1994].
4.1 Specimen of Registrant's Common Stock certificate [incorporated by
reference to Exhibit 4.1 filed with Registrant's Annual Report on
Form 10-KSB for the Fiscal Year ended December 31, 1993].
(M) 10.1.1 Registrant's 1994 Stock Option Plan [incorporated by reference to
Exhibit 10.1.1 filed with Registrant's Current Report on Form 8-K
dated as of February 15, 1994].
<PAGE> 51
(M)10.1.2 Stock option agreement under 1994 Stock Option Plan dated February
3, 1994 granted by Registrant to corporate designee of Murray D.
Watson covering 8,000 shares after giving effect to 1-for-5
reverse stock split [incorporated by reference to Exhibit 10.1.4
filed with Registrant's Current Report on Form 8-K dated as of
February 15, 1994].
# (M)10.1.3 Stock Option Agreement dated February 15, 1996 between Registrant
and Trident Management, corporate designee of Murray D. Watson,
covering 150,000 shares of common stock exercisable in the last 30
days of option term or earlier if stock price goal of at least $10
per share is attained.
# (M)10.1.4 Stock Option Agreement dated February 15, 1996 between Registrant
and Jac J. Lam covering 150,000 shares of common stock exercisable
in the last 30 days of option term or earlier if stock price goal
of at least $10 per share is attained.
# (M)10.1.5 Stock Option Agreement dated February 15, 1996 between Registrant
and Thomas A. Schultz covering 150,000 shares of common stock
exercisable in the last 30 days of option term or earlier if stock
price goal of at least $10 per share is attained.
(M)10.1.6 Stock Option Agreement dated February 15, 1996 between Registrant
and Trident Management, corporate designee of Murray D. Watson,
covering 150,000 shares of common stock vesting in installments
over a 36 month period [incorporated by reference to Exhibit
10.1.9 filed with Registrant's Quarterly Report on Form 10-QSB for
the Period ended December 31, 1995].
(M)10.1.7 Stock Option Agreement dated February 15, 1996 between Registrant
and Jac. J. Lam covering 150,000 shares of common stock vesting in
installments over a 36 month period [incorporated by reference
to Exhibit 10.1.10 filed with Registrant's Quarterly Report on
Form 10-QSB for the Period ended December 31, 1995].
(M) 10.1.8 Stock Option Agreement dated February 15, 1996 between Registrant
and Thomas A. Schultz covering 150,000 shares of common stock
vesting in installments over a 36 month period [incorporated by
reference to Exhibit 10.1.11 filed with Registrant's Quarterly
Report on Form 10-QSB for the Period ended December 31, 1995].
(M)10.1.9 Stock Option Agreement dated February 15, 1996 between Registrant
and J. Charles Casebeer, M.D. covering 60,000 shares of common
stock vesting in installments over a 36 month period
[incorporated by reference to Exhibit 10.1.12 filed with
Registrant's Quarterly Report on Form 10-QSB for the Period ended
December 31, 1995].
(M)10.1.10 Stock Option Agreement dated February 15, 1996 between Registrant
and Donald G. Johnson, M.D. covering 60,000 shares of common stock
vesting in installments over a 36 month period [incorporated by
reference to Exhibit 10.1.13 filed with Registrant's Quarterly
Report on Form 10-QSB for the Period ended December 31, 1995].
(M)10.1.11 Stock Option Agreement dated February 15, 1996 between Registrant
and Kenneth G. Howling covering 100,000 shares of common stock
vesting in installments over a 36 month period [incorporated by
reference to Exhibit 10.1.14 filed with Registrant's Quarterly
Report on Form 10-QSB for the Period ended December 31, 1995].
(M)10.2.1 Registrant's Restricted Stock Option Plan [incorporated by
reference to Exhibit 10.2.1 filed with Registrant's Current Report
on Form 8-K dated as of February 15, 1994].
(M)10.2.2 Stock option agreement under Restricted Stock Option Plan dated
February 3, 1994 granted by Registrant to corporate designee of
Murray D. Watson covering 4,000 shares after giving effect to 1-
for-5 reverse stock split [incorporated by reference to Exhibit
10.2.4 filed with Registrant's Current Report on Form 8-K dated as
of February 15, 1994].
<PAGE> 52
(M)10.3.1 Indemnification Agreement dated February 1, 1994 between
Registrant and Murray D. Watson [incorporated by reference to
Exhibit 10.6 filed with Registrant's Current Report on Form 8-K
dated as of February 15, 1994].
(M)10.3.2 Indemnification Agreement dated February 14, 1996 between
Registrant and Thomas A. Schultz [incorporated by reference to
Exhibit 10.3.6 filed with Registrant's Quarterly Report on Form
10-QSB for the Period ended December 31, 1995].
(M) 10.3.3 Indemnification Agreement dated February 14, 1996 between
Registrant and J. Charles Casebeer, M.D. [incorporated by
reference to Exhibit 10.3.7 filed with Registrant's Quarterly
Report on Form 10-QSB for the Period ended December 31, 1995].
(M) 10.3.4 Form of Indemnification Agreement dated February 14, 1996 between
Registrant and Donald G. Johnson, M.D. [incorporated by reference
to Exhibit 10.3.8 filed with Registrant's Quarterly Report on Form
10-QSB for the Period ended December 31, 1995].
# (M) 10.3.5 Indemnification Agreement dated February 16, 1996 between
Registrant and Kenneth G. Howling.
10.4 Form of Redeemable Class A Common Stock Purchase Warrants
exercisable at $15.00 per share, after giving effect to 1-for-5
reverse stock split, and expiring on December 31, 1998
[incorporated by reference to Exhibit 10.3 filed with Registrant's
Current Report on Form 8-K dated as of February 15, 1994].
10.5 Form of Regulation S Private Placement Subscription Agreement
between Registrant and various foreign investors subscribing to
the purchase of units of Registrant's common stock and redeemable
Class A common stock purchase warrants, without lock-up agreement
[incorporated by reference to Exhibit 10.18 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended December 31, 1993].
10.6 Form of Regulation S Private Placement Subscription Agreement
between Registrant and various foreign investors subscribing to
the purchase of units of Registrant's common stock and redeemable
Class A common stock purchase warrants, with lock-up agreement
[incorporated by reference to Exhibit 10.19 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended December 31, 1993].
10.7 Form of Subscription Agreement and Investment Letter between
Registrant and various United States investors subscribing to the
purchase of units of Registrant's common stock and redeemable
Class A common stock purchase warrants [incorporated by reference
to Exhibit 10.20 filed with Registrant's Annual Report on Form 10-
KSB for the Fiscal Year ended December 31, 1993].
10.8 Form of Regulation S Offshore Transaction Subscription Agreement
between Registrant and various foreign investors subscribing to
the purchase of units of Registrant's common stock and redeemable
Class A common stock purchase warrants [incorporated by reference
to Exhibit 10.8 filed with Registrant's Annual Report on Form 10-
KSB for the Fiscal Year ended March 31, 1995].
10.9 Form of Regulation D Private Placement Subscription Agreement
between Registrant and various U.S. investors subscribing to the
purchase of units of Registrant's common stock and redeemable
Class A common stock purchase warrants [incorporated by reference
to Exhibit 10.9 filed with Registrant's Annual Report on Form 10-
KSB for the Fiscal Year ended March 31, 1995].
10.10 Private Agreement Concessionary Contract for the Use of Technical
Services and Buildings dated February 22, 1993 between Vista
Vision SpA, under its former name of Laser Vision Centers
International SpA, and Casa di Cura Privata San Rossore S.r.l.
relating to the operation of an outpatient clinic in Pisa, Italy,
as translated from the original in Italian [incorporated by
reference to Exhibit 10.21 filed with Registrant's Annual Report
on Form 10-KSB for the Fiscal Year ended December 31, 1993].
<PAGE> 53
10.11 Agreement dated June 1, 1994 between Vista Vision Scandinavia AB
and Semera AB as to the Registrant's purchase of certain assets of
a PRK surgical center in Stockholm, Sweden [incorporated by
reference to Exhibit 10.37 filed with Registrant's Annual Report
on Form 10-KSB for the transition fiscal period ended March 31,
1994].
10.12 Agreement dated July 1, 1994 between the Registrant and Professor
Bjorn Mortimer Tengroth for the sale to Professor Tengroth of
eight shares representing 20% of the outstanding capital stock of
Convista Vision B.V. [incorporated by reference to Exhibit 10.38
filed with Registrant's Annual Report on Form 10-KSB for the
transition fiscal period ended March 31, 1994].
10.13.1 Stock Purchase Agreement and Regulation S Private Placement
Agreement dated as of April 1, 1994 between the Registrant and
Obsidian Research N.V. as to the Registrant's purchase of capital
stock and warrants in Medical Development Resources, Inc.
[incorporated by reference to Exhibit 10.13 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended December 31, 1993].
10.13.2 Stock Purchase Agreement dated May 5, 1994 among the Registrant,
Medical Development Resources, Inc, Robert M. Gruschow, Francis J.
King, Louise M. King, William Knepshield, William Knepshield, Jr.
and Kristen K. Fay as to Registrant's purchase of 1,000,000 shares
of common stock from Medical Development Resources, Inc. for
$1,250,000 in cash and 1,000,000 shares of common stock in Medical
Development Resources, Inc. from certain selling shareholders for
$2,000,000 in non-interest bearing notes due December 31, 1994
[incorporated by reference to Exhibit 10.14 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended December 31, 1993].
10.13.3. Full Recourse Installment Promissory Notes due December 31, 1994
and dated May 5, 1994 in the aggregate principal amount of
$2,000,000 issued by the Registrant and its wholly-owned
subsidiary, Pawnee Finance B.V., subsequently renamed ConVista
Vision B.V., for the purchase of 1,000,000 shares of common in
Medical Development Resources, Inc. from certain selling
shareholders [incorporated by reference to Exhibit 10.15 filed
with Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended December 31, 1993].
10.13.4 Side Letter Agreement dated May 5, 1994 among the Registrant,
Robert M. Gruschow, Francis J. King and William Knepshield as to
the escrow of 315,000 shares of common stock in Medical
Development Resources, Inc. [incorporated by reference to Exhibit
10.16 filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended December 31, 1993].
10.13.5 Form of Regulation S Offshore Transaction Exchange Agreement dated
May 24, 1994 between Registrant and seven foreign investors
providing for the exchange of units of Vista common stock and
Class A Warrants for 1,000,000 shares of Medical Development
Resources, Inc. [incorporated by reference to Exhibit 10.34 filed
with Registrant's Report on Form 8-K dated as of May 31, 1994].
10.13.6 Letter agreement dated June 20, 1994 among five management
stockholders of Medical Development Resources, Inc. and KMI I,
Inc. as holder, and seven foreign investors, as makers, of certain
promissory notes to substitute shares of Vista common stock for
shares of Medical Development Resources, Inc. common stock held as
collateral for the notes [incorporated by reference to Exhibit
10.35 filed with Registrant's Report on Form 8-K dated as of May
24, 1994].
10.13.7 Agreement and Plan of Reorganization dated as of December 15, 1994
among the Registrant, Medical Development Resources, Inc., Robert
M. Gruschow, Francis J. King, Louise M. King, William R.
Knepshield, William R. Knepshield, Jr. and Kristen F. Fay
[incorporated by reference to Exhibit 2.10.1 filed with
Registrant's Amendment No. 1 to Report on Form 10-QSB for the
Quarter ended June 30, 1994].
<PAGE> 54
10.13.8 Amendment dated as of January 13, 1995 to Agreement and Plan of
Reorganization among Registrant, Medical Development Resources,
Inc., Robert M. Gruschow, Francis J. King, Louise M. King, William
R. Knepshield, William R. Knepshield, Jr. and Kristen F. Fay
[incorporated by reference to Exhibit 2.10.2 filed with
Registrant's Amendment No. 1 to Report on Form 10-QSB for the
Quarter ended June 30, 1994].
10.13.9 Second Amendment dated as of March 31, 1995 to Agreement and Plan
of Reorganization among Registrant, Medical Development Resources,
Inc., Robert M. Gruschow, Francis J. King, Louise M. King, William
R. Knepshield, William R. Knepshield, Jr. and Kristen F. Fay
[incorporated by reference to Exhibit 10.13.9 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended March 31, 1995].
10.13.10 Letter dated July 7, 1995 on behalf of Registrant terminating and
rescinding prior agreements of Registrant with Medical Development
Resources, Inc., Robert M. Gruschow, Francis J. King, Louise M.
King, William R. Knepshield, William R. Knepshield, Jr. and
Kristen K. Fay [incorporated by reference to Exhibit 10.13.10
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995].
10.14.1 Put Option Agreement dated June 13, 1994 between the Registrant
and Drago Cerchiari as to 35,000 Class A Warrants [incorporated by
reference to Exhibit 10.14.1 filed with Registrant's Annual Report
on Form 10-KSB for the Fiscal Year ended March 31, 1995].
10.14.2 Amendment dated March 31, 1995 to Put Option Agreement dated June
13, 1994 between the Registrant and Drago Cerchiari [incorporated
by reference to Exhibit 10.14.2 filed with Registrant's Annual
Report on Form 10-KSB for the Fiscal Year ended March 31, 1995].
10.15 Agreement dated October 11, 1994 among TNC Media, Inc., the
Registrant, Medical Development Resources, Inc. and KMI I, Inc.
[incorporated by reference to Exhibit 10.40 filed with
Registrant's Amendment No. 1 to Report on Form 10-QSB for the
Quarter ended June 30, 1994].
10.16 Form of Registrant's Redeemable Class B Common Stock Purchase
Warrants exercisable at $10.00 per share, after giving effect to
1-for-5 reverse stock split, and expiring on October 11, 1999
[incorporated by reference to Exhibit 10.41 filed with
Registrant's Amendment No. 1 to Report on Form 10-QSB for the
Quarter ended June 30, 1994].
10.17 Letter agreement dated December 14, 1994 between Registrant and
TNC Media Inc. as to exchange of shares in Medical Development
Resources, Inc. for shares of Registrant's common stock
[incorporated by reference to Exhibit 10.17 filed with
Registrant's Annual Report on Form 10-KSB for the Fiscal Year
ended March 31, 1995].
10.18 10% promissory note date March 31, 1995 issued to Registrant by
Honing Handel Holland B.V. [incorporated by reference to Exhibit
10.18 filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended March 31, 1995].
10.19 Exchange Agreement dated June 28, 1995 between the Registrant and
Quintillion B.V. as to right of exchanging $100,000 debentures
issued by Micra Instruments Limited into Registrant's common stock
at $0.25 per share, or $1.25 per share after giving effect to 1-
for-5 reverse stock split [incorporated by reference to Exhibit
3.1.3 filed with Registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended March 31, 1995].
10.20 Agreement dated as of July 5, 1995 between Registrant and G.
Lennart Perlhagen for issuance of common stock in payment of
reimbursable expenses [incorporated by reference to Exhibit 10.20
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995].
<PAGE> 55
10.21.1 Termination Agreement dated as of June 7, 1995 between Registrant
and Drago A. Cerchiari [incorporated by reference to Exhibit
10.21.1 filed with Registrant's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1995].
10.21.2 Exercise of put option dated February 1, 1996 as to 4,000 shares
of Registrant's common stock, after giving effect to 1-for-5
reverse stock split, for $20,260 by Drago A. Cerchiari under
Termination Agreement dated as of June 7, 1995 between Registrant
and Drago A. Cerchiari [incorporated by reference to Exhibit
10.21.2 filed with Registrant's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1995].
10.22.1 Form of Regulation S Offshore Transaction Subscription Agreement
between Registrant and G. Lennart Perlhagen for sale of $177,777
in principal amount of 12% Convertible Promissory Notes due June
15, 1998 [incorporated by reference to Exhibit 10.22.1 filed with
Registrant's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1995].
10.22.2 Form of Regulation S Offshore Transaction Subscription Agreement
between Registrant and Quintillion B.V. for sale of $100,000 in
principal amount of 12% Convertible Promissory Notes due June 15,
1998 [incorporated by reference to Exhibit 10.22.2 filed with
Registrant's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1995].
10.22.3 Form of $177,777 in principal amount of 12% Convertible Promissory
Notes due June 15, 1998 issued by Registrant to G. Lennart
Perlhagen dated June 1, 1995 [incorporated by reference to
Exhibit 10.22.3 filed with Registrant's Annual Report on Form 10-
KSB for the fiscal year ended March 31, 1995].
10.22.4 Form of $100,000 in principal amount of 12% Convertible Promissory
Notes due June 15, 1998 issued by Registrant to Quintillion B.V.
dated June 15, 1995 [incorporated by reference to Exhibit 10.22.4
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995].
10.22.5 Form of Royalty Agreement dated as of June 15, 1995 by Vista
Vision Scandinavia in favor of G. Lennart Perlhagen and
Quintillion B.V. [incorporated by reference to Exhibit 10.22.5
filed with Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995].
10.23.1 Consulting Services Agreement dated as of October 16, 1995 between
Registrant and The Laser Eye Sites of Michigan, Inc., since
renamed Vista Laser Centers of Michigan, Inc. [incorporated by
reference to Exhibit 10.23 filed with Registrant's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 1995].
# 10.23.2 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi
and Dr. Fouad Tayfour executed by the Registrant as to shares of
5% Series B Cumulative Convertible Preferred Stock in Vista Laser
Centers of Michigan, Inc. owned by the Registrant.
# 10.23.3 Irrevocable Proxy in favor of the Registrant's Board of Directors
executed by Vista Laser Centers of Michigan, Inc. as to 200,000
shares of Registrant's common stock.
10.24 Option Agreement dated as of November 15, 1995 between Registrant
and Refractive Services-800, Inc. granting Registrant an option to
purchase capital stock of Refractive Services 800 Corp.
[incorporated by reference to Exhibit 10.24 filed with
Registrant's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1995].
(M)10.25 Employment Agreement dated as of January 31, 1996 between the
Registrant and Thomas A. Schultz [incorporated by reference to
Exhibit 25 filed with Registrant's Quarterly Report on Form 10-QSB
for the Period ended December 31, 1995].
<PAGE> 56
10.26 Stock Purchase Agreement dated March 1, 1996 between the
Registrant and Pharma Patch Plc as to the sale of 200,000 shares
of Vista common stock for $500,000 [incorporated by reference to
Exhibit 10.26 filed with Registrant's Current Report on Form 8-K
dated as of March 1, 1996].
10.27.1 Agreement dated as of March 1, 1996 between the Registrant and
Pharma Patch Plc. as to sale of 2,060,000 shares of Vista common
stock for $5,150,000 [incorporated by reference to Exhibit 10.27
filed with Registrant's Current Report on Form 8-K dated as of
March 1, 1996].
10.27.2 Form of $750,000 Promissory Note issued by Pharma Patch Plc to the
Registrant [incorporated by reference to Exhibit 10.28 filed with
Registrant's Current Report on Form 8-K dated as of March 1,
1996].
10.27.3 Form of Registration Rights Agreement between the Registrant and
Pharma Patch Plc [incorporated by reference to Exhibit 10.30
filed with Registrant's Current Report on Form 8-K dated as of
March 1, 1996].
10.28 Form of the Registrant's Class C common stock purchase warrants
expiring February 28, 1998 [incorporated by reference to Exhibit
10.29 filed with Registrant's Current Report on Form 8-K dated as
of March 1, 1996].
# 10.30 Regulation S Offshore Transaction Subscription Agreement dated
March 30, 1996 between the Registrant and Corundum B.V. as to the
sale of 100,000 shares of common stock for $212,500.
# 10.31.1 Irrevocable Proxy and Voting Agreement in favor of the board of
directors of Vista Laser Centers of the Pacific, Inc. as to all
shares of voting capital stock in Vista Laser Centers of the
Pacific, Inc. owned by the Registrant.
# 10.31.2 Irrevocable Proxy in favor of the Registrant's Board of Directors
executed by Vista Laser Centers of the Pacific, Inc. as to 500,000
shares of Registrant's common stock.
# 10.32 Los Altos Financial Center Lease Agreement dated June 28, 1996
between Los Altos Financial Center as lessor and Registrant as
lessee covering office premises in Los Altos, California.
# 10.33 Registrant's 1996 Stock Compensation Plan.
# 10.34 Exchange Agreement and Regulation S Offshore Transaction dated
July 18, 1996 between Registrant and Refractive Services-800 Inc.
16 Letter from A J. Robbins P.C. responding to disclosures set forth
in Item 4 of Registrant's Report on Form 8-K dated as of May 13,
1996 [incorporated by reference to Exhibit 16 filed with
Registrant's Report on Form 8-K dated as of May 13, 1996].
# 21 Subsidiaries of the Registrant.
# 27 Financial Data Schedule at March 31, 1996.
</TABLE>
(b) REPORTS ON FORM 8-K.
The Company filed a Current Report on Form 8-K dated as of March 1, 1996
relating to financing transactions between Vista and Pharma Patch PLC
described in Item 12 of this Report under the caption "Agreements With Pharma
Patch PLC For Equity Financing and Change In Control".
The Company also filed a Current Report on Form 8-K dated as of May 13,
1996 as to a change in independent public accountants discussed in Item 8 of
this Report.
<PAGE>
<PAGE> 57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Independent Auditors' Report F-3
Consolidated Financial Statements:
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F - 1
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Vista Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of Vista
Technologies, Inc. and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vista Technologies,
Inc. and subsidiaries as of March 31, 1996, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
July 12, 1996
F - 2
<PAGE> 59
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Vista Technologies, Inc. and Subsidiaries
Sunnyvale, California
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity and cash flows for the year ended March 31, 1995, of
Vista Technologies, Inc. and subsidiaries. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of its operation and cash flows
for the year ended March 31, 1995, of Vista Technologies, Inc. and subsidiaries
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, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred significant operating losses from inception
totaling $11,432,110, has substantial commitments and contingencies relating to
the rescission of an incomplete acquisition, recognized a permanent impairment
of goodwill incurred in the acquisitions of subsidiaries in the amount of
$3,825,990 and the Company is a party in a lawsuit more fully discussed at note
7. These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding these matters are to abandon its UK
operations, complete a private placement of common stock, attempt to generate
revenues from other European operations and establish laser centers in the
United States. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Denver, Colorado AJ. Robbins, P.C.
May 24, 1995 Certified Public Accountants
and Consultants
F - 3
<PAGE> 60
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1996
<TABLE>
<S> <C>
Assets
Current Assets:
Cash $ 288,312
Accounts receivable:
Trade 29,515
VAT 41,434
Related parties 214,454
Stock subscriptions receivable (notes 1, 2 and 17) 962,500
Prepaid expenses and other 256,081
------------
Total current assets 1,792,296
Investment securities (note 5):
Available for sale 2,475,000
Held-to-maturity 115,468
Long-term VAT receivables 191,571
Property and equipment, net (note 4) 1,219,798
Investment in equity investees (note 1) 468,350
Other assets 7,299
------------
$ 6,269,782
============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 520,825
Accounts payable, officers 29,535
Accrued expenses 633,206
Current portion of notes payable (note 10) 296,591
Current portion of long-term debt (note 11) 137,351
Current portion of obligation under capital lease (note 12) 67,588
------------
Total current liabilities 1,685,096
Notes payable, net of current portion (note 10) 277,777
Long-term debt, net of current portion (note 11) 463,240
Obligation under capital lease, net of current portion (note 12) 196,956
------------
937,973
Minority interest (note 2) 653,306
------------
Commitments and contingencies (notes 7, 10, 12 and 17)
Total liabilities 3,276,375
Stockholders' equity (notes 7, 8, 9 and 17):
Preferred stock, $.001 par value; 15,000,000 shares authorized; none issued --
Common stock, $.005 par value; 15,000,000 shares authorized; 5,256,106 shares
issued and outstanding 26,281
Additional paid-in capital 18,026,096
Unrealized loss on securities available for sale (187,500)
Accumulated deficit (15,247,045)
Foreign currency translation adjustments 375,575
------------
Total stockholders' equity 2,993,407
------------
$ 6,269,782
============
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE> 61
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues $ 2,130,073 1,209,673
----------- -----------
Costs and expenses:
General and administrative 4,624,630 2,773,390
Depreciation and amortization 467,509 580,870
----------- -----------
Total costs and expenses 5,092,139 3,354,260
----------- -----------
Other (income) expense:
Foreign currency exchange loss 695 28,887
Unrealized (gains) loss on trading securities -- (116,707)
Realized loss (gains) on trading securities 148,005 (129,621)
Impairment of idle equipment (note 3) 446,636 --
Legal judgment (note 7) -- 186,055
Impairment of goodwill (note 1) -- 3,825,990
Write off of note receivable, stockholder (note 1) -- 125,000
Interest 63,645 9,781
Loss on sale of equipment -- 1,053
Loss on closure of UK clinic (note 1) 135,097 --
Other 49,405 (75,758)
----------- -----------
Net other (income) expense 843,483 3,854,680
----------- -----------
Loss from operations (3,805,549) (5,999,267)
Equity investees (loss) income (note 1 and 6) (11,202) 28,132
----------- -----------
Loss before income taxes, minority interest and
extraordinary loss (3,816,751) (5,971,135)
Income taxes (note 13) -- --
----------- -----------
Loss before minority interest and extraordinary loss (3,816,751) (5,971,135)
Minority interest 1,816 193,842
----------- -----------
Net loss before extraordinary loss (3,814,935) (5,777,293)
Extraordinary loss (note 1) -- (5,642,887)
----------- -----------
Net loss $(3,814,935) (11,420,180)
=========== ===========
Loss per common share:
Before extraordinary loss $ (1.92) (4.88)
Extraordinary loss -- (4.76)
----------- -----------
Net loss per common share $ (1.92) (9.64)
=========== ===========
Weighted average number of common shares outstanding 1,985,675 1,184,976
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE> 62
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Subscribed Stock Additional
--------------------------- ---------------------------- Paid-in Unrealized
Number Amount Number Amount Capital Loss
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance March 31, 1994 712,613 $ 3,564 125,000 $ 1,132,152 $ 5,310,161 $ --
Common stock issued for
cash proceeds, net of
offering costs of
$471,991 (note 8) 335,000 1,675 (125,000) (1,132,152) 2,876,334 --
Common stock issued in
exchange for Medical
Development Resources
Inc. (MDRI) (note 1)
stock and warrants 200,000 1,000 -- -- 1,999,000 --
Private placement issued in
exchange for the assets
of Klara Clinic 2,960 15 -- -- 8,208 --
Common stock adjustment
for Vista-Italy
acquisition (note 1) 2,381 11 -- -- 23,807 --
Common stock issued to
acquire MORI stock
from TNC Media, Inc. 155,756 779 -- -- 1,556,775 --
Foreign currency
adjustment -- -- -- -- -- --
Net (loss) for the period -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1995 1,408,710 7,044 -- -- 11,774,285 --
Common stock, issued for
services and cash
advances, net of
repurchases (note 3) 1,021,000 5,105 -- -- 1,632,395 --
Common stock issued to
Pharma Patch Plc
(note 1) 2,260,000 11,300 -- -- 3,901,200 --
Common stock issued to
Vista Laser Centers of
Michigan, Inc. (VLC-
Michigan) in exchange
for 200,000 shares of
Series B preferred stock
of VLC-Michigan
(note 1) 200,000 1,000 -- -- 216,600 --
Common stock issued to
Vista Laser Centers of
Southwest, Inc. (VLC-
Southwest) in exchange
for 350,000 shares of
Series B preferred stock
of VLC-Southwest
(note 1) 250,000 1,250 -- -- 270,500 --
Common stock issued for
stock subscriptions
receivable (note 2) 100,000 500 -- -- 212,000 --
Common stock issued in
exchange for Vista
Vision SpA stock 16,396 82 -- -- 8,116 --
Unrealized loss on
securities available for
sale -- -- -- -- -- (187,500)
Compensation expense for
non employee stock
options -- -- -- -- 11,000 --
Foreign currency
adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1996 5,256,106 $ 26,281 -- $ -- $ 18,026,096 $ (187,500)
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Foreign Total
Accumulated Currency Stockholders'
Deficit Adjustments Equity
------------- ------------ -------------
<S> <C> <C> <C>
Balance March 31, 1994 $ (11,930) $ (1,962) $ 6,431,985
Common stock issued for
cash proceeds, net of
offering costs of
$471,991 (note 8) -- -- 1,745,857
Common stock issued in
exchange for Medical
Development Resources
Inc. (MDRI) (note 1)
stock and warrants -- -- 2,000,000
Private placement issued in
exchange for the assets
of Klara Clinic -- -- 8,223
Common stock adjustment
for Vista-Italy
acquisition (note 1) -- -- 23,818
Common stock issued to
acquire MORI stock
from TNC Media, Inc. -- -- 1,557,554
Foreign currency
adjustment -- 234,327 234,327
Net (loss) for the period (11,420,180) -- (11,420,180)
------------ ------------ ------------
Balance, March 31, 1995 (11,432,110) 232,365 581,584
Common stock, issued for
services and cash
advances, net of
repurchases (note 3) -- -- 1,637,500
Common stock issued to
Pharma Patch Plc
(note 1) -- -- 3,912,500
Common stock issued to
Vista Laser Centers of
Michigan, Inc. (VLC-
Michigan) in exchange
for 200,000 shares of
Series B preferred stock
of VLC-Michigan
(note 1) -- -- 217,600
Common stock issued to
Vista Laser Centers of
Southwest, Inc. (VLC-
Southwest) in exchange
for 350,000 shares of
Series B preferred stock
of VLC-Southwest
(note 1) -- -- 271,750
Common stock issued for
stock subscriptions
receivable (note 2) -- -- 212,500
Common stock issued in
exchange for Vista
Vision SpA stock -- -- 8,198
Unrealized loss on
securities available for
sale -- -- (187,500)
Compensation expense for
non employee stock
options -- -- 11,000
Foreign currency
adjustment -- 143,210 143,210
Net loss (3,814,935) -- (3,814,935)
------------ ------------ ------------
Balance, March 31, 1996 $(15,247,045) $ 375,575 $ 2,993,407
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F - 6
<PAGE> 63
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows used by operating activities:
Net loss $(3,814,935) (11,420,180)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 467,509 580,870
Extraordinary loss from advanced funds for incomplete acquisition -- 5,642,887
Write off of impaired and abandoned assets, net 453,467 --
Impairment of goodwill -- 3,825,990
Legal judgment -- 186,055
Write off of note receivable, stockholder -- 125,000
Loss on sale of equipment -- 1,053
Unrealized loss (gain) on trading securities -- (116,707)
Realized loss (gain) on trading securities 148,005 (129,621)
Minority interest (1,816) (193,842)
Interest income received in common stock -- (50,000)
Foreign currency translation on operating assets and liabilities 146,656 (39,462)
Equity investees loss (income), net 11,202 (28,132)
Stock issued for services 1,637,500 --
Compensation related to stock options issued to non-employees 11,000 --
Changes in operating assets and liabilities, net of foreign
currency translation:
Accounts receivable:
Trade 41,326 (70,841)
VAT 99,142 (140,576)
Related parties 99,293 (482,132)
Prepaid expenses 6,864 (5,401)
Other current assets (179,250) 70,800
Other assets (16,793) 109,774
Bank overdraft protection (86,913) 86,913
Accounts payable, trade 73,484 371,560
Accounts payable, officers (99,516) 129,051
Accrued expenses 309,909 (38,526)
Other liabilities 145,234 --
----------- -----------
Net cash used by operating activities (548,632) (1,585,467)
----------- -----------
Cash flows used by investing activities:
Proceeds from sales of trading securities 417,652 432,859
Repayment of notes receivable -- 753,526
Repayment of capital lease obligation (10,501) --
Proceeds from sale of equipment -- 7,656
Redemption of equity investment in partnership -- 595,313
Purchase of trading securities (162,531) (589,657)
Issuance of notes receivable -- (254,870)
Purchase of property and equipment (302,121) (95,557)
Sale purchase of investment-held to maturity 11,875 (145,215)
Purchase of investment, at cost -- (1,850,000)
Loss on investment-held to maturity 29,813 --
Purchase of equity investment -- (419,675)
Foreign currency translation -- 11,749
Purchase of Klara Clinic assets -- (102,225)
Purchase of ConVista -- (163,597)
Advances to investee companies (214,454) --
----------- -----------
Net cash used by investing activities (230,267) (1,819,693)
----------- -----------
Cash flows from financing activities:
Payment of note payable -- (90,876)
Payment of long-term debt (107,497) (190,410)
Sale of common stock 500,000 3,350,000
Payment of offering costs -- (864,488)
Issuance of notes payable 302,777 --
Redeemed stock of subsidiary (277,777) --
----------- -----------
Net cash provided by financing activities 417,503 2,204,226
----------- -----------
Net increase (decrease) in cash (361,396) (1,200,934)
Cash, beginning of period 649,708 1,850,642
----------- -----------
Cash, end of period $ 288,312 649,708
=========== ===========
</TABLE>
Supplemental disclosure of cash flow information: See note 15. See accompanying
notes to consolidated financial statements.
F - 7
<PAGE> 64
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Vista Technologies, Inc. (the Company), formerly Mercury Acquisitions,
Inc., was organized under the laws of the State of Nevada on June 15,
1992. Since inception, the Company has devoted its efforts to raising
capital, locating merger and acquisition candidates and establishing
excimer laser clinics throughout Europe and North America to provide
facilities and support services for photorefractive keratectomy (PRK)
and other laser surgical procedures. On February 23, 1994 the Company
changed its name from Mercury Acquisitions, Inc. and amended certain
provisions relating to its authorized and unissued preferred stock. The
Company was in the development stage as defined by Financial Accounting
Standards Board Statement Number 7, until March 31, 1994, at which date
it acquired operating subsidiaries. During March 1994 the Company
changed its year end from December 31 to March 31.
(a) Vista Vision SpA
On March 31, 1994 the Company acquired 61.83% of the common stock of
Vista Vision, SpA (Vista-Italy) for cash of approximately $625,000 and
262,760 shares of the Company's common stock.
As the result of a default judgment entered against the Company which
terminates and rescinds the provisions of the agreement between
Vista-Italy and Laser Vision Centers, Inc. (LVCI) (note 7 (c)), the
Company's ownership interest in Vista-Italy increased to 69.87% as of
March 31, 1995. During fiscal year 1996, the Company's ownership
interest was increased to 73.57%.
The acquisition of Vista-Italy was recorded using the purchase method of
accounting resulting in goodwill of $2,997,506 which was being amortized
over 10 years using the straight-line method. At March 31, 1995, the
Company's management determined that the goodwill was impaired. As a
result, the Company wrote off goodwill of $2,761,506 (note 2).
(b) Vista Vision International Ltd.
On March 31, 1994 the Company acquired all of the outstanding common
stock of Vista Vision International Ltd. (Vista-UK) from Laser-Jersey
for $134,000 in cash and 50,000 shares of the Company's common stock.
The acquisition of Vista-UK was recorded using the purchase method of
accounting resulting in goodwill of $703,159 which was being amortized
over ten years using the straight-line method. As of March 31, 1995, the
Company's management determined that the goodwill was impaired. As a
result, the Company wrote off goodwill of $633,159 (note 2). Effective
June 1, 1995, the Company abandoned its Vista-UK operations.
Vista-UK owned 50% of Precision Laser Eye Centers Limited (PLEC), a
joint venture that leased laser equipment, which was recorded using the
equity method of accounting. The Company's proportionate share of the
loss from its equity investment in the joint venture was $147,506 for
the year ended March 31, 1995.
(Continued)
F - 8
<PAGE> 65
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
(c) ConVista Vision BV
During April 1994, the Company acquired 100% of Pawnee Finance B.V., an
inactive company in the Netherlands, since renamed ConVista Vision B.V.
(ConVista), to serve as a future vehicle for financing and management of
its international operations. The Company acquired ConVista for
approximately $20,986 and subsequently contributed additional capital of
$163,597 for a total investment of approximately $184,583. The
acquisition of ConVista was recorded using the purchase method of
accounting resulting in goodwill of $163,597 which was being amortized
using the straight-line method over ten years beginning May 1, 1994. At
March 31, 1995, the Company's management determined that the goodwill
was impaired. As a result, the Company wrote off goodwill of $149,597
(note 2).
ConVista's results of operations from the date of acquisition are
included in the statement of operations for the year ended March 31,
1995.
During June 1994 ConVista acquired 100% of Vista-Sweden for $6,494. On
June 1, 1994 Vista-Sweden acquired the assets of a PRK surgical center
in Sweden for cash and a note payable totaling $383,000.
Vista-Sweden's investment resulted in goodwill of $324,211 which was
being amortized over three years using the straight-line method. At
March 31, 1995, the Company's management determined that goodwill was
impaired. As a result, the Company write off goodwill of $281,728 (note
2).
(d) Medical Development Resources, Inc.
During 1995, the Company was unsuccessful in its attempt to acquire a
controlling interest in MDRI and its subsidiaries due to the failure of
MDRI and its principal stockholders to satisfy certain conditions of the
acquisition. Therefore, the Company rescinded and terminated the
acquisition agreements entered into with MDRI and its principal
stockholders. MDRI and its wholly-owned subsidiaries are engaged in the
design, development, manufacture and marketing of surgical instruments
and related products for ophthalmology and neurosurgery.
(Continued)
F - 9
<PAGE> 66
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
On July 7, 1995, the Company notified MDRI, the MDRI principal
stockholders and the MDRI 8% promissory noteholders that it rescinded
all transactions contemplated by the MDRI Stock Agreement and the MDRI
Agreement among the Company, MDRI and the MDRI principal stockholders.
The Company's reasons for rescinding the MDRI Stock Agreement and the
MDRI Agreement include alleged fraud, intentional misconduct, breach of
fiduciary duties, misrepresentation of material facts and failure of
MDRI and its principal stockholders to satisfy conditions to the
obligations of the Company under the MDRI Agreement. As a result, the
Company canceled 1) the 200,000 shares of its common stock and the
100,000 Class A Warrants issued to the foreign investors; 2) the
promissory notes totaling $1,400,000 issued to the MDRI stockholders; 3)
the 67,800 shares of its common stock issued to terminate employment and
consulting agreements; 4) the obligation to issue 67,617 share of its
common stock upon completion of the exchange stage of the MDRI
agreement; 5) the obligation to issue 60,000 shares of its common stock
to secure certain MDRI indebtedness; and 6) the Company's 8% convertible
promissory note and Class A Warrants issued under the Exchange Offer.
However, a contingent liability may exist relating to the cancellation
of the above items.
As a result of the rescission, the Company owns 2,794,340 shares of MDRI
common stock, or a 40.1% ownership interest, which was acquired for
consideration valued at $5,407,554, which was comprised of $1,850,000 in
cash and $3,557,554 ($10.00 per share) in the Company's common stock.
Because the Company never had the ability to influence the financial and
operating activities of MDRI, the Company's 40.1% investment in MDRI was
recorded using the cost method of accounting. In addition, the Company
made advances totaling $235,333 to fund the operations of MDRI and its
subsidiaries during 1995.
As of March 31, 1995, the Company's investment in MDRI of $5,407,554 and
advances made to MDRI and its subsidiaries of $235,333 have been written
off to reflect a permanent impairment due to the deterioration of MDRI's
financial condition. As a result, the Company recorded an extraordinary
loss of $5,642,887 for the misappropriation of advances made to MDRI and
the investment in MDRI for the year ended March 31, 1995.
During 1995, the Company advanced $125,000 to a stockholder subject to a
promissory note due December 31, 1995, bearing interest at 10% per
annum, payable upon maturity. The note was collateralized by not less
than 100,000 shares of the Company's common stock issued to the
stockholder as part of the MDRI acquisition. As a result of the
rescission of the MDRI Agreement, a majority of the shares of the
Company's common stock pledged as collateral have been canceled. As of
March 31, 1995, the note receivable has been written off as collection
is doubtful.
(e) Agreements with Pharma Patch Plc
In March 1996, the Company executed Agreements with Pharma Patch Plc (PP
Plc) which resulted in PP Plc acquiring approximately 60% of the voting
interest of the Company.
(Continued)
F - 10
<PAGE> 67
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
Under these Agreements, the Company issued to PP Plc: (a) 2,260,000
shares of new common stock; (b) 500,000 Class C common stock purchase
warrants (note 8); and, (c) an option to purchase an additional 250,000
shares of new common stock for cash, on or before September 30, 1996, at
an exercise price of $2.50 per share (note 17). In return, the Company
received (a) $500,000 cash; (b) a $750,000 subscription note, which was
subsequently paid in May, 1996; and, (c) 200,000 shares of Technical
Chemicals and Products, Inc. (TCPI) restricted stock previously held by
PP Plc, valued at $2,662,550. The value of the TCPI stock was based on
the trading value of unrestricted TCPI stock on the date of the closing
of the transaction after making appropriate adjustments for the
restrictions placed on the TCPI stock received by the Company.
In a separate transaction, PP Plc agreed to provide 4,500,000 newly
issued PP Plc Common Shares to three Company shareholders in exchange
for a total of 900,000 shares of the Company's outstanding common stock.
(f) Regional Joint Ventures
The Company's business strategy is to expand in North America by
organizing and sponsoring independently financed regional enterprises
(Regional Joint Ventures) in which the Company will obtain a significant
equity interest and long-term fee-based consulting arrangements. As of
March 31, 1996, two such Regional Joint Ventures, Vista Laser Centers of
Michigan, Inc. and Vista Laser Centers of the Southwest, Inc. had been
formed. Subsequent to March 31, 1996 several more Regional Joint
Ventures were formed (note 17).
Investment in Vista Laser Centers of Michigan, Inc.
In November 1995, the Company 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). VLC-Michigan is a development
stage enterprise organized on June 30, 1995 to establish, own
and manage laser vision correction centers in Southern Ontario
and Michigan.
To date, the activities of VLC-Michigan have consisted
primarily of market research, seeking affiliation and
negotiating agreements with experienced vision care
professionals in the United States and Canada, and negotiating
to acquire equipment for establishing a laser vision
correction center in Windsor, Ontario after an initial public
offering on its securities has been completed. VLC-Michigan is
also negotiating to enter into a joint venture arrangement
with a group of physicians in Michigan following completion of
a pending initial public offering by VLC-Michigan.
VLC-Michigan has filed a registration statement with the
Securities and Exchange Commission for a proposed initial
public offering of 800,000 shares of its 10% Series A
cumulative convertible preferred stock at $5.00 per share.
There can be no assurance that VLC- Michigan will successfully
complete an initial public offering of its securities, failing
which it will not have sufficient capital to engage in
business operations.
(Continued)
F - 11
<PAGE> 68
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
The Company entered into a consulting services agreement to
provide certain consulting services to VLC-Michigan in
exchange for 5% of VLC-Michigan's revenues attributable to its
charges to health care professionals for the use of equipment
and laser vision correction (LVC) services, less a credit to
VLC-Michigan of $5,000 per month. The consulting services
agreement is for a term of ten years from the date of an
initial public offering by VLC-Michigan, and is automatically
renewed thereafter for periods of five years unless either
party provides six months prior notice of an intent not to
extend the term.
Certain directors of the Company have been elected to serve as
directors of VLC-Michigan. The Company has assigned the voting
rights for its shares of VLC-Michigan Series B convertible
preferred stock to local affiliates of VLC-Michigan.
The Company's initial investment in VLC-Michigan represented
an approximate 61% ownership interest. Such interest is
expected to be reduced to approximately 21% upon completion of
VLC-Michigan's initial public offering. In addition, the
Company does not have voting rights related to its ownership
interest. Accordingly, the Company accounts for this
investment using the equity method of accounting. The initial
value of the investment of $217,600 was determined based upon
an independent appraisal.
As of March 31, 1996, the Company had advanced approximately
$176,000 to VLC-Michigan.
Investment in Vista Center of the Southwest, Inc.
In March, 1996, the Company issued 250,000 shares of its
common stock in exchange for 350,000 shares of 5% Series B
convertible preferred stock in Vista Laser Centers of the
Southwest, Inc. (VLC-Southwest). VLC-Southwest is a
development stage enterprise organized on January 30, 1996 to
establish, own and manage laser vision correction centers in
Arizona, New Mexico, Texas and Nevada. The Company has
assigned the voting rights for its shares of VLC-Southwest
Series B convertible preferred stock to local affiliates of
VLC-Southwest.
The Company has granted VLC-Southwest the use of their service
mark and has entered into a consulting agreement with
VLC-Southwest. Under this agreement, the Company has agreed to
provide advice and assistance to VLC-Southwest for the
development of their business in consideration for 5% of
VLC-Southwest's revenues from wholly-owned subsidiaries of
VLC-Southwest and 2.5% of revenues from non-majority owned
subsidiaries, less $5,000 per month. The Company has agreed to
establish and maintain a Medical Advisory Board and adopt a
stock option program for the members of such board. This
consulting services agreement will be effective with the
successful completion of VLC-Southwest's initial public
offering and shall continue for a period of ten years. If the
initial public offering has not been successfully completed on
or before August 31, 1996, the Company may terminate the
agreement at its discretion with 30 days written notice.
(Continued)
F - 12
<PAGE> 69
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
The Company's initial investment in VLC-Southwest was valued
at $271,750 and represented an approximate 72% ownership
interest. Such interest is expected to be reduced to
approximately 20% upon completion of VLC-Southwest's initial
public offering. In addition, the Company does not have voting
rights related to its ownership interest. Accordingly, the
Company accounts for this investment using the equity method
of accounting.
The Company has a commitment to pay an officer of the Company
a bonus of $75,000 in connection with the initial public
offering of VLC-Southwest.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include accounts of the Company,
and all wholly-owned and majority-owned subsidiaries. Investments in
companies in which the Company's ownership interests range from 20 to 50
percent, and in which the Company exercises significant influence over
operating and financial policies, are accounted for using the equity
method. Investments in companies in which the Company's ownership
interest is currently in excess of 50% but for which majority interest
is considered only temporary and investments in companies in which the
Company's financial interest exceeds 20 percent but in which the Company
has limited or no voting rights are accounted for using the equity
method. Other investments are accounted for using the cost method. All
significant intercompany accounts and transactions have been eliminated.
The Company's subsidiaries in Italy, United Kingdom, Sweden and the
Netherlands have been consolidated at March 31, 1996 using the
subsidiaries' respective fiscal year ends, which were December 31, 1995;
and have been consolidated at March 31, 1995 using December 31, 1994 for
the Company's subsidiary in Italy and March 31, 1995 for the Company's
subsidiaries in Sweden, the Netherlands and the United Kingdom. The
three month period ending March 31, 1995 for the Company's subsidiaries
in Sweden and the Netherlands have been included in the results of
operations for the years ended March 31, 1996 and 1995.
(b) Foreign Currency Translation
Financial statements of international subsidiaries are translated into
US dollars using the exchange rate at each balance sheet date for assets
and liabilities and a weighted average exchange rate for each period for
revenues, expenses, gains and losses. Where the local currency is the
functional currency, translation adjustments are recorded as a separate
component of stockholders' equity.
(Continued)
F - 13
<PAGE> 70
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The balance sheet and income statement data for the foreign subsidiaries
have been translated from their respective foreign currency to U.S.
dollars using the following exchange rates:
<TABLE>
<CAPTION>
Average Rate Average Rate
for the for the
Foreign March 31, 1996 Year Ended Year Ended
Subsidiary Currency Spot Rate March 31, 1996 March 31, 1995
---------- -------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Vista-UK Pounds Sterling 1.527 1.563 1.565
Vista-Italy Lira .001 .001 .001
ConVista Gilders .606 .624 .577
Vista-Sweden Krona .150 .144 .133
</TABLE>
(c) 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.
(d) Intangible Assets
The Company determined that the goodwill resulting from the acquisitions
of its subsidiaries was impaired on March 31, 1995. As a result, the
Company wrote off goodwill of $3,825,990, resulting in zero value of
goodwill. Amortization expense was $-0- and $374,900 for the years ended
March 31, 1996 and 1995, respectively.
The Company assesses the recoverability of intangible assets by
determining whether the amortization of the asset's balance over its
remaining life can be recovered through projected future discounted cash
flows.
(e) Revenue Recognition
Revenues are recognized when services are performed.
(f) Minority Interest
Minority interest represents the minority stockholders' proportionate
share of the equity in Vista-Italy. At March 31, 1996, the Company owned
73.57% of the capital stock of Vista-Italy.
(g) Loss Per Common Share
Loss per common share is based on the weighted average number of common
shares outstanding. Common equivalent shares relating to stock options
and warrants are excluded from the computation as their effect is
anti-dilutive.
(Continued)
F - 14
<PAGE> 71
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Income Taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires the use of the asset and liability method of accounting for
deferred income taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. A valuation allowance is
required to the extent it is more likely than not that a deferred tax
asset will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.
(i) Use of Estimates in the Preparation of Financial Statements
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(j) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or
less to be cash equivalents.
(k) Stock Subscriptions Receivable
The Company has recorded stock subscriptions receivable as a current
asset as of March 31, 1996, because all such receivables were paid
before the issuance of the Company's financial statements.
(l) Investment Securities
The Company accounts for investment securities under the provisions of
SFAS No. 115. This standard requires that individual debt and equity
securities be classified into one of three categories: trading,
held-to-maturity or available-for-sale.
Trading securities are bought and held principally for the purpose of
selling them in the near term. Held-to-maturity securities are those
securities in which the Company has the ability and intent to hold the
security until maturity. All other securities not included in trading or
held-to- maturity are classified as available-for-sale.
(Continued)
F - 15
<PAGE> 72
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trading securities and available-for-sale securities are recorded at
fair value. Held-to-maturity securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses on trading securities are included
in earnings. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and
are reported as a separate component of stockholders' equity until
realized. Realized gains and losses from the sale of securities are
determined on a specific identification basis.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary
results in a reduction in carrying amount to fair value. The impairment
is charged to earnings and a new cost basis for the security is
established. Premiums and discounts are amortized or accreted over the
life of the related held-to-maturity security as an adjustment to yield
using the effective interest method. Dividend and interest income are
recognized when earned.
(m) Offering Costs
Costs associated with public and private offerings by the Company of its
stock have been charged against the proceeds of the offering.
(n) Newly Issued Accounting Standards
In October 1995, Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation (SFAS 123) was issued. SFAS 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans as well as transactions in which an entity
issues its equity instruments to acquire goods or services from
non-employees. This statement defines a fair value based method of
accounting for employee stock options or similar equity instruments, and
encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using
the intrinsic value-based method of accounting prescribed by APB Opinion
No. 25, Accounting for Stock Issued to Employees. Entities electing to
remain with the accounting in Opinion 25 must make proforma disclosures
of net income and, if presented, earnings per share, as if the fair
value based method of accounting defined by SFAS 123 had been applied.
SFAS 123 is applicable to fiscal years beginning after December 15,
1995. The Company currently accounts for its equity instruments using
the accounting prescribed by Opinion 25. The Company does not currently
expect to adopt the accounting prescribed by SFAS 123; however, the
Company will include the disclosures required by SFAS 123 as required in
future consolidated financial statements included in Form 10-KSB.
(o) Reclassification
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
(Continued)
F - 16
<PAGE> 73
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(3) RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere are disclosed in the
following:
On February 1, 1996, the Company 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, the Company replaced this laser with
newer technology resulting to a charge to the statement of operations in
the amount of $446,636 for the impairment of an idle asset. As of July
12, 1996, the note payable for $96,591 had not been paid. The Company
expects to pay the note in fiscal year 1997.
During the period from June to December 1995, certain clients of the
Company's then acting president invested approximately $1,470,000 to
sustain the Company's corporate operations during that period. These
advances included approximately $700,000 for travel by the Company's
officers and consultants and corporate office expenses in New York and
Europe, approximately $100,000 in out-of-pocket advances for various
expenses, and $670,000 in compensation paid for personnel assigned to
support the Company's corporate activities and its program to establish
various Regional Joint Ventures in North America. The $670,000 figure
for personnel included $200,000 paid or payable to the Company's then
acting president, and $60,000 accrued for its then acting treasurer and
chief financial officer. The Company's Board of Directors agreed these
charges should be billed at a flat negotiated rate of $1,470,000 and in
December 1995 authorized the issuance of 925,000 shares of the Company's
common stock in payment of these obligations.
These shares were issued to Therapeutic Patch Research, N.V. (300,000
shares), Saliva Research Ltd. (325,000 shares) and Westcliff Partners
Inc. (300,000 shares). The Company's then acting president acted at the
time as a managing director for Saliva Research Ltd. and Westcliff
Partners Inc., but disclaimed any beneficial interest in the securities
held by those entities.
Under an agreement dated July 5, 1995, the Company issued 16,000 shares
of its common stock to a former chairman of the Company in payment of
$80,000 of unreimbursed business expenses.
Under an agreement dated as of June 1, 1995, the Company paid a former
president of the Company $8,740 in cash and issued 4,000 shares of
common stock for reimbursement of a total of $29,000 of unreimbursed
business expenses. The Company agreed that the former president had a
put option right to sell the 4,000 shares of common stock to the Company
after January 31, 1996 at a price equal to $20,260 plus interest from
June 1, 1995 at the rate of 1% per month. The former president exercised
that option on February 1, 1996. The Company also issued 5,000 shares of
common stock to the former president under the June 1, 1995 agreement as
a negotiated settlement for a one-time hiring bonus in his original
employment agreement dated as of January 15, 1995.
In December, 1995 the Company issued 25,000 shares of common stock to
each of its then three directors in exchange for services performed.
(Continued)
F - 17
<PAGE> 74
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(3) RELATED PARTY TRANSACTIONS (CONTINUED)
During fiscal year 1995, the Company advanced $125,000 to a stockholder
subject to a promissory note due December 31, 1995, bearing interest at
10% per annum, payable upon maturity in connection with the Company's
attempt to acquire MDRI. At March 31, 1995 the note receivable had been
written off as collection is doubtful.
Certain relationships existed from inception of the Company through
March 31, 1995 between the Company's original management, their
affiliates and the Company. Original management had other interest
including business interest to which they devoted their primary
attention.
Effective January 15, 1995 the Company hired a new chief executive
officer and president who was also made a member of the Company's board
of directors. The Company paid $84,000 to the new chief executive
officer and president of the company for consulting services provided
prior to his employment with the Company.
During the fiscal year ended March 31, 1995, the Company paid SEK100,000
(approximately $13,630) to the managing director of Vista-Sweden for
consulting prior to his employment with Vista-Sweden.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 1996:
<TABLE>
<S> <C>
Excimer lasers and other technical equipment $1,896,394
Office furniture and equipment 67,385
----------
1,963,779
Less accumulated depreciation and amortization (743,981)
----------
$1,219,798
==========
</TABLE>
Depreciation and amortization expense was $467,509 and $205,600 for the
years ended March 31, 1996 and 1995, respectively.
(Continued)
F - 18
<PAGE> 75
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(5) INVESTMENT SECURITIES
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for available-for-sale and
held-to-maturity securities by major security type and class of security
at March 31, 1996, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities $2,662,500 -- (187,500) 2,475,000
Held-to-maturity:
8.75% Italian bonds 115,468 -- (5,343) 110,125
</TABLE>
The 8.75% Italian bonds mature in 1997.
Proceeds from sales of trading securities were $417,652 and $432,859,
resulting in gross realized losses of $152,431 in the year ended March
31, 1996 and gross realized gains of $129,621, for the year ended March
31, 1995 respectively.
(6) EQUITY INVESTMENT IN PARTNERSHIP
During July 1994, the Company acquired a 36% ownership interest in Keech
One Partnership (Partnership) for $419,675. During December 1994 the
Partnership was liquidated. The Company's proportionate share of the
income from its equity investment in the partnership was $175,638 for
the year ended March 31, 1995.
(7) COMMITMENTS AND CONTINGENCIES
(a) Employment Agreements
The Company has employment agreements with its executive officers, the
terms of which expire at various times through January 15, 1999. Such
agreements provide for minimum salary levels, as well as for incentive
bonuses which are payable if specified management and operational goals
are attained.
(Continued)
F - 19
<PAGE> 76
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(7) COMMITMENTS AND CONTINGENCIES (CONTINUED)
(b) Exchange Agreement
In order to induce a stockholder to advance $100,000 under a deed of
debenture to MICRA (a wholly owned subsidiary of MDRI), the Company
entered into an exchange agreement on June 28, 1995 with the
stockholder. The exchange agreement provides the stockholder with the
option of exchanging the unpaid principal and interest of the debenture
for fully paid and nonassessable shares of the Company's common stock
issued under Regulation S at a conversion price of $1.25 per share at
any time prior to repayment of the debenture by MICRA. As of March 31,
1996, the stockholder has not exercised this option.
(c) Legal Judgment
In 1991 and 1993, Vista-Italy and LVCI 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, LVCI filed suit for termination of these agreements and a
default judgment was entered into their favor. In connection with this
judgment, Vista-Italy canceled the shares of the common stock they had
issued to LVCI, returned the shares of LVCI which they held and recorded
a note payable for $175,000 plus related legal fees. Vista-Italy filed a
motion to vacate the judgment which was denied by the trial court; the
trial court's decision was recently affirmed on appeal. Vista-Italy
intends to apply for a rehearing by the appellate court, or in the
alternative, to petition for an appeal to the Missouri Supreme Court.
(d) Insurance and Indemnification
Use of laser systems by health care professionals using laser equipment
and other LVC 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 LVC equipment maintain their own
professional liability insurance.
(Continued)
F - 20
<PAGE> 77
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(7) COMMITMENTS AND CONTINGENCIES (CONTINUED)
(e) Physician Commitments
In two separate instances, a physician planning to associate with a
Regional Joint Venture sponsored by the Company has been advised by a
third party that it contends the physician breached commitments or
obligations to the third party by the physician's decision to associate
with one of the Company's Regional Joint Ventures. In one of these
matters, the third party contends that its plan of operations to enter
the business of providing access to LVC equipment in association with
the physician has been damaged. In the other, the third party contends
that the physician breached fiduciary duties to the third party and
misappropriated client lists and data, and the claimant also has
threatened to hold the Company and certain other parties responsible as
well as the physician. To date, neither dispute has resulted in the
filing of legal proceedings although legal proceedings have been
threatened. Based on information currently known to the Company, the
Company believes these claims are without merit and will not result in
material liability to either of the Regional Joint Ventures involved or
to the Company.
(8) COMMON STOCK
(a) Stock Offerings
During fiscal 1996, the Company issued 1,021,000 shares of common stock
in exchange for services and cash advances (note 3), 2,260,000 shares to
Pharma Patch Plc in exchange for cash, a subscription note and tradable
equity securities (note 1(e)), 450,000 shares of common stock in
exchange for interests in two Regional Joint Ventures (note 1(f)),
100,000 shares of common stock in exchange for a $212,500 note which was
paid subsequent to the Company's March 31, 1996 year end and 16,393
shares of common stock in exchange for an additional approximate 5%
interest in Vista Vision SpA.
During May 1994, the Company's Board of Directors authorized an offering
of units (Foreign "B" Units) consisting of 5,000 shares of the Company's
common stock and 2,500 Class A Warrants for $50,000 per Foreign "B"
Unit. As of March 31, 1995, the offering of Foreign "B" Units was
completed and the Company received and accepted subscriptions totaling
$1,250,000 for 25 units to qualified foreign investors representing
125,000 shares of the Company's common stock and 62,500 Class A
Warrants. As of March 31, 1995, the Company received proceeds of
$1,051,192 (net of offering costs of $198,808) for the sale of 25
Foreign "B" Units. The Company has agreed to register the Class A
Warrants.
During May 1994, the Company's Board of Directors authorized an offering
of units (U.S. "B" Units) consisting of 5,000 shares of the Company's
common stock and 5,000 Class A Warrants for $50,000 per U.S. "B" Unit.
As of March 31, 1995, the Company had received and accepted
subscriptions totaling $850,000 for 17 U.S. "B" Units to accredited
investors representing 85,000 shares of the Company's common stock and
85,000 Class A Warrants. As of March 31, 1995 the Company received
proceeds of $714,690 (net of offering costs of $135,310) from the sale
of 17 U.S. "B" Units. The Company has agreed to register the Class A
Warrants.
In connection with the above offerings, the Company also issued 90,000
Class A Warrants to the placement agent.
(Continued)
F - 21
<PAGE> 78
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(8) COMMON STOCK (CONTINUED)
(b) Class A Warrants
As of March 31, 1996, 677,960 Class A Warrants were issued and
outstanding. Each Class A Warrant represents the right to purchase one
share of the Company's common stock with an exercise price of $15.00 per
share at any time between June 30, 1994 through December 31, 1998,
unless earlier called for redemption by the Company. The Company has the
option to call the rights for redemption if the warrants have been
registered for sale under the Securities Act of 1933 and if the
Company's common stock is trading in the NASDAQ over the counter market
or on a national securities exchange and the closing sale price is
$22.50 per share for at least 20 consecutive trading days on the date
the warrants are called for redemption.
No warrants have been exercised to date.
(c) Class B Warrants
As of March 31, 1996, 31,000 Class B Warrants were issued and
outstanding. Each Class B Warrant represents the right to purchase one
share of the Company's common stock with an exercise price of $11.00 per
share, expiring October 11, 1999 unless earlier called for redemption by
the Company. The Company has the option to call the rights for
redemption if the warrants have been registered for sale under the
Securities Act of 1933 and if the Company's common stock is trading in
the NASDAQ over the counter market or on a national securities exchange
and the closing sale price is $22.50 per share for at least 20
consecutive trading days on the date the warrants are called for
redemption.
No warrants have been exercised to date.
(d) Class C Warrants
As of March 31, 1996, 500,000 Class C Warrants were issued and
outstanding. The Class C Warrants represent the right to purchase one
share of the Company's common stock during the month of February 1997
and/or the month of February 1998 and expire thereafter if not
exercised. The exercise price per share will be determined by the
average of the quoted closing prices for the Company's common stock in
the over the counter market during the month of January immediately
preceding the date of exercise. In no event will the exercise price per
share exceed $10 per share.
No warrants have been exercised to date.
(e) Reservation of Common Stock
At March 31, 1996, the Company designated 3,000,000 shares of its common
stock for sale in future private placements to finance the Company's operations
in 1996 and to acquire equity interests in additional laser vision correction
centers sponsored by the Company.
(Continued)
F - 22
<PAGE> 79
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(8) COMMON STOCK (CONTINUED)
(f) Reverse Stock Split
Effective March 15, 1996, the Company completed a one share for five
shares reverse stock split of its common stock. All shares and per share
amounts have been restated retroactively as a result of this reverse
split. As a result, any fractional shares will be rounded up to the
nearest full share.
(9) STOCK OPTION AND STOCK COMPENSATION PLANS
(a) The 1994 Stock Option Plan
During February 1994, the Company's Board of Directors adopted and the
stockholders approved the 1994 stock option plan (the 1994 Plan).
The 1994 Plan provides that options granted thereunder may be either
incentive stock options or nonqualified stock options. The 1994 Plan
provides that incentive stock options must be granted at a option price
which is not less than the fair market value of the common stock on the
date of grant and that nonqualified options must be granted at an option
price which is not less than 50% of the fair market value of the common
stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting rights of the Company's
outstanding capital stock, the exercise price of any incentive stock
option under the 1994 Plan must be not less than 110% of the fair market
value on the date of grant. The options shall expire within ten years
from the date of the grant, except for options granted to optionees
owning more than 10% of the voting stock of the Company for which the
options shall expire within five years from the date of grant. In the
event of termination of employment, the optionee's option will terminate
and may be exercised during a three month period after termination to
the extent the option was exercisable on the date of termination.
(Continued)
F - 23
<PAGE> 80
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(9) STOCK OPTION AND STOCK COMPENSATION PLANS (CONTINUED)
A summary of stock option activity under the 1994 Plan is as follows:
<TABLE>
<CAPTION>
Outstanding Options
--------------------------- Price
Reserved Granted Per
Shares Shares Share
--------- --------- ------
<S> <C> <C> <C>
Reserved, February 3, 1994 80,000 -- $ --
Granted -- 56,000 10.00
-------- ---------
Balance, March 31, 1994 80,000 56,000
Reserved 70,000 -- --
Granted -- 44,000 10.00
Balance, March 31, 1995 150,000 100,000
--------- ---------
Reserved 1,750,000 -- --
Granted -- 1,467,000 2.50
Balance, March 31, 1996 1,900,000 1,567,000
========= =========
</TABLE>
At March 31, 1996, options for 47,000 shares were exercisable and
options for 333,000 shares were available for future grants under the
1994 Plan. To date, no options have been exercised under the 1994 Plan.
A portion of the options granted during fiscal year 1996 will vest and
may be exercised after the 30th trading day (whether or not consecutive)
following the date of grant on which the closing price for the Company's
common stock price equals or exceeds $10.00 per share or five years
after the date of grant, whichever occurs sooner. The remaining options
will vest and may be exercised in 12 equal quarter-annual installments
commencing on May 15, 1996 subject to the optionee's continued
employment by, or active service as a director or consultant for, the
Company at the time each installment vests. Each option is for a term of
five years subject to possible earlier termination in accordance with
provisions of the 1994 Plan.
(Continued)
F - 24
<PAGE> 81
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(9) STOCK OPTION AND STOCK COMPENSATION PLANS (CONTINUED)
(b) The Restricted Stock Option Plan
During February 1994, the Company's Board of Directors adopted and the
stockholders approved the restricted stock option plan (the Restricted
Plan) under which shares of the Company's common stock were reserved for
issuance to senior management at prices the lesser of $.50 per share or
10% of the fair market value of the Company's common stock on the date
of grant. The options expire within ten years from the date of grant or
to the extent exercisable within 12 months after termination. The
options may not be exercised until the optionee has remained in
continuous employment as a senior executive officer or as a director of
the Company for a period of at least two years from the date of grant.
A summary of stock option activities under the Restricted Plan is as
follows:
<TABLE>
<CAPTION>
Outstanding Options
--------------------------- Price
Reserved Granted Per
Shares Shares Share
--------- --------- ------
<S> <C> <C> <C>
Reserved, February 3, 1994 20,000 -- $ --
Granted -- 20,000 .50
--------- ----------
Balance, March 31, 1994 20,000 20,000
Reserved 30,000 -- --
Granted -- 12,000 .50
Balance, March 31, 1995 50,000 32,000
--------- ---------
Canceled -- (24,000) .50
--------- ---------
Balance, March 31, 1996 50,000 8,000
========= =========
</TABLE>
As of March 31, 1996, 42,000 shares were available for future grants
under the Restricted Plan. To date no options have been exercised under
the Restricted Plan.
(c) The 1996 Stock Compensation Plan
On February 6, 1996, the Company's Board of Directors adopted a 1996
Stock Compensation Plan (the Stock Plan) subject to approval of the
Stock Plan within one year thereafter by stockholders of the Company.
The purpose of the Stock Plan is to permit the Board or a Committee of
the Board the flexibility of issuing shares 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.
(Continued)
F - 25
<PAGE> 82
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(9) STOCK OPTION AND STOCK COMPENSATION PLANS (CONTINUED)
Subject to approval of the Stock Plan by Vista stockholders, 250,000
shares of common stock will be available for payment of compensation under the
Stock Plan. No compensation awards under the Stock Plan have been made.
(10) NOTES PAYABLE
Notes payable consist of the following at March 31, 1996:
<TABLE>
<S> <C>
12% convertible promissory notes due to related parties;
maturing June 15, 1998 $ 277,777
Note payable to LVCI under a default judgment (note 7) 175,000
Note payable to a related party under an asset purchase and
lease assumption agreement (note 3) 96,591
Note payable to a related party 25,000
---------
574,368
---------
Less current portion (296,591)
---------
$ 277,777
=========
</TABLE>
The 12% notes are convertible, at the option of the holder, to convert
the principal amount and accrued interest on the notes into shares of
the Company's common stock at a conversion price of $5.00 per share. The
notes are collateralized by 51% of the issued and outstanding shares of
Vista- Sweden common stock. Vista-Sweden has also signed 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.
(Continued)
F - 26
<PAGE> 83
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(11) LONG-TERM DEBT
Long-term debt consists of the following as of March 31, 1996:
<TABLE>
<S> <C>
Note payable with interest accrued monthly at 10%; payments due quarterly of
approximately $22,003; maturing January 10, 1999; collateralized by laser
equipment. $ 361,167
Note payable with interest accrued monthly at 10%; payments of $6,789 due
monthly; maturing June 30, 1999; collateralized by laser equipment. 239,424
---------
600,591
Less current portion (137,351)
---------
$ 463,240
=========
</TABLE>
Future maturities of long-term debt are as follows for the years ended
March 31:
<TABLE>
<S> <C>
1997 $ 137,351
1998 151,903
1999 167,809
2000 143,528
---------
$ 600,591
=========
</TABLE>
(12) LEASES
The Company leases equipment, vehicles and office space under
noncancelable operating leases and leases certain equipment under
capital leases.
As of March 31, 1996, future minimum lease payments under the operating
and capital leases are as follows:
<TABLE>
<CAPTION>
Operating
--------------------------
Vehicles Laser
and Equipment Centers Capital Total
------------- ------- ------- -------
<S> <C> <C> <C> <C>
1997 $24,360 73,226 95,696 193,282
1998 24,360 76,362 95,696 196,418
1999 -- 73,362 129,748 203,110
2000 -- 57,645 -- 57,645
------- ------- -------- -------
Total minimum lease payments $48,720 280,595 321,140 650,455
======= ======= =======
Less amount representing interest (12%) (56,596)
--------
Present value of net minimum lease payments 264,544
Less current portion (67,588)
Total $196,956
========
</TABLE>
(Continued)
F - 27
<PAGE> 84
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(12) LEASES (CONTINUED)
Rent expense relating to operating leases totaled approximately $161,000
and $125,000 for the years ended March 31, 1996 and 1995, respectively.
(13) INCOME TAXES
The Company is obligated to file U.S. federal income tax returns and
separate tax returns in Italy, United Kingdom, Netherlands and Sweden.
As of March 31, 1996, the Company has not recorded any deferred tax
assets or liabilities. The Company's income tax net operating loss
carryforwards, if any, were not determinable at March 31, 1996. The
annual use of income tax loss carryovers may be limited by Section 382
of the Internal Revenue Code.
(14) 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 are located in the United States, however,
all of the Company's operating assets are located in Italy, Sweden and
the Netherlands.
Revenue by geographic areas is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Domestic $ -- --
Foreign 2,130,073 1,209,673
----------- ------------
$ 2,130,073 1,209,673
=========== ============
</TABLE>
Net loss by geographic areas is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Domestic $(3,428,987) (10,238,767)
Foreign (385,948) (1,181,413)
----------- ------------
$(3,814,935) (11,420,180)
=========== ============
</TABLE>
Identifiable assets by geographic areas are as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Domestic $ 4,216,830
Foreign 2,052,952
------------
$ 6,269,782
============
</TABLE>
(Continued)
F - 28
<PAGE> 85
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(15) SUPPLEMENTAL CASH FLOWS INFORMATION FOR NONCASH INVESTING AND FINANCING
ACTIVITIES
<TABLE>
<CAPTION>
For the Years Ended
March 31,
----------------------------------
1996 1995
----------- ---------
<S> <C> <C>
Common stock issued in exchange for
Vista Vision SpA stock $ 8,198 --
=========== =========
Issuance of common stock for investment in
VLC-Michigan $ 217,600 --
=========== =========
Issuance of common stock for investment in
VLC-Southwest $ 271,750 --
=========== =========
Issuance of common stock for investment in TCPI
stock received from PP Plc $ 2,662,500 --
=========== =========
Issuance of common stock for stock
subscriptions receivable $ 962,500 --
=========== =========
Note payable issued to acquire equipment $ 96,591 --
=========== =========
Capital lease assumed to acquire equipment $ 275,045 --
=========== =========
Long-term debt issued to acquire laser equipment $ -- 901,112
=========== =========
Common stock issued to acquire MDRI $ -- 3,557,554
=========== =========
Note payable to acquire assets of Klara Clinic $ -- 286,000
=========== =========
Common stock issued to retire note payable issued
to acquire assets of Klara Clinic $ -- 286,000
=========== =========
Rescission and cancellation of stock issued to
acquire investment in LVCI $ -- 968,907
=========== =========
Note payable issued to LVCI for legal settlement $ -- 175,618
=========== =========
Cash paid during the period for interest $ 61,415 9,781
=========== =========
</TABLE>
(16) FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1995, the Company recorded the following
year-end adjustments which it believes are material to the results of
that quarter:
<TABLE>
<S> <C>
Extraordinary loss from advanced funds for incomplete acquisition $5,642,887
Impairment of goodwill 3,825,990
Accrual of payroll and payroll taxes 113,836
----------
$9,582,713
==========
</TABLE>
(Continued)
F - 29
<PAGE> 86
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(17) SUBSEQUENT EVENTS
(a) Cash Received
Subsequent to March 31, 1996 the Company received $1,675,000 in cash
related to the following:
(i) In May 1996, payment was received for the $962,500 of
stock subscriptions receivable reflected in the Company's
financial statements as of March 31, 1996.
(ii) In June 1996, the Company completed the sale of 100,000
shares of its common stock on a Regulation S basis for
cash proceeds of $212,500.
(iii) In July 1996, PP Plc exercised options to purchase 200,000
shares of the Company's common stock resulting in proceeds
to the Company of $500,000.
(b) Rental Agreements
In June 1996, the Company entered into two rental agreements with Summit
Technologies, Inc. to rent two Summit Apex excimer lasers. The term of
each rental agreement commences upon installation of the equipment and
shall continue for a period of 27 months. After the first three months
of operation, each equipment lease provides for a minimum monthly rental
fee of $6,500. The Company anticipates installing these lasers at one or
more of its Regional Joint Ventures under a sublease arrangement.
In June 1996, the Company entered into a five year lease agreement for
additional office space. The lease provides for a base rental of $2,084
per month which will be adjusted at the end of each year for changes in
the consumer price index and in any event not less than three percent
increase per year.
(c) Establishment of Regional Joint Ventures
In May 1996, the Company 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 of New York, Inc. (VLC-New York). At March 31,
1996, the Company had advanced VLC-New York approximately $38,000.
In May 1996, the Company 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).
In May 1996, the Company 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).
VLC-New York, VLC-Northwest and VLC-Pacific have been organized to
establish, own and manage laser vision correction centers.
(Continued)
F - 30
<PAGE> 87
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(17) SUBSEQUENT EVENTS (CONTINUED)
The Company does not exercise control over any of the Regional Joint
Ventures insofar as it has granted or has committed to grant to one or
more local affiliates of each of the Regional Joint Ventures an
irrevocable five year proxy to vote the Series A and Series B preferred
shares owned by the Company.
(d) Agreement to Acquire Refractive Services-800 (unaudited)
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 $520,00) 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.
The Company recently 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 ("RS-800") for $50,000 from Refractive Services-800,
Inc. Refractive Services-800, Inc. organized RS-800 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.
F - 31
<PAGE> 88
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: August 5, 1996
VISTA TECHNOLOGIES INC.
(Registrant)
By: /s/ Thomas A. Schultz
---------------------------------
Thomas A. Schultz, President and Chief Executive Officer
(principal executive officer)
By: /s/ Kenneth G. Howling
---------------------------------
Kenneth G. Howling, Vice President of Finance and Treasurer
(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/ J. Charles Casebeer
- ------------------------ Director August 5, 1996
J. Charles Casebeer, M.D.
- ------------------------ Director
Donald G. Johnson, M.D.
/s/ Thomas A. Schultz
- ------------------------ Director August 5, 1996
Thomas A. Schultz
/s/ Murray D. Watson
- ------------------------ Director August 5, 1996
Murray D. Watson
</TABLE>
<PAGE> 1
VISTA TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Date of Grant: February 15, 1996
VISTA TECHNOLOGIES INC., a Nevada corporation (the "Company"), hereby
grants to TRIDENT MANAGEMENT INC. (the "Optionee"), pursuant to the 1994 Stock
Option Plan of the Company (the "Plan"), a copy of which is appended hereto
and made a part hereof as Schedule I, an option to purchase a total of ONE
HUNDRED FIFTY THOUSAND (150,000) shares of Common Stock of the Company at a
price of TWO DOLLARS FIFTY CENTS ($2.50) per share (subject to adjustment as
provided in Section 6(i) of the Plan), on the terms and conditions set forth
in the Plan and hereinafter. This option shall not be exercisable later than
on February 15, 2001 (hereinafter referred to as the "Expiration Date"),
except that the Expiration Date may be accelerated in certain events as
provided in paragraph 6(f) of the Plan in the event of the death or disability
of Murray D. Watson (the "Executive Officer") and as provided in paragraph
6(e) of the Plan in the event of the Executive Officer's termination of
employment by, or status as an active consultant to, or director of, the
Company or any Subsidiary.
1. Vesting. Subject to the terms and conditions of this Agreement and
the Plan, the shares subject this option shall be exercisable as follows: All
150,000 shares covered by this option may be exercised, in whole or in part,
(i) during the last 30 days of the five-year term of this Option, or
alternatively, (ii) from and after any date on which the Company's Common
Stock Price (as hereinafter defined) shall equal or exceed $10.00 per share
(the "Target Price"); provided, however, that in no event shall this option be
exercisable later than the Expiration Date.
For the purposes of this Section 1, the Company's Common Stock Price
shall be deemed to equal or exceed the Target Price of $10.00 per share, or
such price adjusted as hereinafter provided, if the closing price for the
Common Stock quoted in the NASDAQ over-the-counter market shall equal or
exceed the Target Price per share for a total of not less than 30 days,
whether or not such days are consecutive, after the date this option was
originally granted. If no closing price is quoted on any day on which
securities are regularly traded in the NASDAQ system, the closing price shall
be deemed to be the last reported bid price for the Common Stock in the NASDAQ
system on such date.
The Target Price per share shall be adjusted (i) in case the Company
shall hereafter at any time change as a whole, by split-up, subdivision or
combination in any manner, or by the making of a stock dividend, the number of
outstanding shares of Common Stock into a different number of shares of Common
Stock (excluding the one-for-five reverse stock split previously authorized by
the Company's stockholders in 1995), or (ii) in case of any capital
reorganization or any reclassification of the capital stock of the Company.
In any such event, the Target Price per share of Common Stock shall be
proportionately and equitably adjusted to give effect to such split-up,
subdivision, combination, stock dividend, reorganization or reclassification.
2. Termination. This option and all rights hereunder to the extent
such rights shall not have been exercised shall terminate and become null and
void if the Executive Officer ceases to be a director or employee of, or
active consultant to, the Company or any Subsidiary (whether by resignation,
retirement, dismissal, death or otherwise), except that: (a) in the event of
<PAGE> 2
the death or disability of the Executive Officer while a director or employee
of, or active consultant to, the Company or any Subsidiary, this option only
to the extent exercisable at the date of death or disability may be exercised
within the applicable period of time by any persons indicated in Section 6(f)
of the Plan; (b) in the event of the termination of employment of the
Executive Officer while a director or employee of, or active consultant to,
the Company or any Subsidiary, this option only to the extent exercisable at
the date of such termination may be exercised prior to the expiration of
ninety (90) from the date of such termination, and shall terminate in all
other respects; provided, however, that in no event may this option be
exercised after the Expiration Date. Notwithstanding the foregoing, this
option may in no event be exercised by any one to any extent in the event of a
voluntary dissolution, liquidation or winding up of the affairs of the Company
or in the event of merger into, consolidation with, or sale or transfer of all
or substantially all of the assets of the Company, except under the
circumstances and pursuant to the terms and conditions of Section 6(h) of the
Plan.
3. Exercise. This option is exercisable with respect to all, or from
time to time with respect to any portion, of the shares then subject to such
exercise, by delivering written notice of such exercise, in the form
prescribed by the Stock Option Committee, to the principal office of the
Secretary of the Company. Each such notice shall be accompanied by payment in
full of the purchase price of such shares.
4. Non-Transferable. This option shall during the lifetime of the
Executive Officer shall be exercisable only by the Optionee, and neither it
nor any right thereunder shall be transferable except by will or laws of
descent and distribution or by a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended, or be subject to attachment,
execution or other similar process. In the event of any attempt by the
Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of the
option or any right thereunder, except as provided for herein, or in the event
of the levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Company may terminate the option by notice to
the Optionee and the option shall thereupon become null and void.
5. Miscellaneous.
(a) Neither the granting of this option nor the exercise thereof
shall be construed as conferring upon the Executive Officer any right to
continue as an employee of, or consultant to, the Company or any Subsidiary,
or as interfering with or restricting in any way the right of the Company or
any Subsidiary to terminate such employment at any time.
(b) Neither the Optionee, nor any person entitled to exercise
its rights in the event of the death of the Executive Officer, shall have any
of the rights of a stockholder with respect to the shares subject to the
option, except to the extent that certificates for such shares shall have been
issued upon exercise of the option as provided for herein.
(c) The Company is relieved from any liability for the non-
issuance or non-transfer or any delay in the issuance or transfer of any
shares of Common Stock subject to this option which results from the inability
of the Company to obtain, or in any delay in obtaining, from each regulatory
body having jurisdiction all requisite authority to issue or transfer shares
of Common Stock of the Company in satisfaction of this option if counsel for
the Company deems such authority necessary for the lawful issuance or transfer
of any such shares.
(d) No Common Stock acquired by exercise of this option shall be
sold or otherwise disposed of in violation of any federal or state securities
law or regulation.
<PAGE> 3
(e) This option shall be exercised in accordance with such
administrative regulations as the Stock Option Committee may from time to time
adopt. All decisions of the Stock Option Committee upon any question arising
under the Plan or under this instrument shall be conclusive and binding upon
the Optionee and all other persons.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed on
behalf of the Company as of the day and year first written above by the
undersigned officers, thereunto duly authorized.
VISTA TECHNOLOGIES INC.
[CORPORATE SEAL]
By: /s/ Thomas A. Schultz
-----------------------------
Thomas A. Schultz, President
By: /s/ William M. Curtis
--------------------------------
William M. Curtis, Secretary
<PAGE> 1
VISTA TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Date of Grant: February 15, 1996
VISTA TECHNOLOGIES INC., a Nevada corporation (the "Company"), hereby
grants to JAC. J. LAM (the "Optionee"), pursuant to the 1994 Stock Option Plan
of the Company (the "Plan"), a copy of which is appended hereto and made a
part hereof as Schedule I, an option to purchase a total of ONE HUNDRED FIFTY
THOUSAND (150,000) shares of Common Stock of the Company at a price of TWO
DOLLARS FIFTY CENTS ($2.50) per share (subject to adjustment as provided in
Section 6(i) of the Plan), on the terms and conditions set forth in the Plan
and hereinafter. This option shall not be exercisable later than on February
15, 2001 (hereinafter referred to as the "Expiration Date"), except that the
Expiration Date may be accelerated in certain events as provided in paragraph
6(f) of the Plan in the event of the death or disability of the Optionee and
as provided in paragraph 6(e) of the Plan in the event of the Optionee's
termination of employment or status as an active consultant to, or director
of, the Company or any Subsidiary.
1. Vesting. Subject to the terms and conditions of this Agreement and
the Plan, the shares subject this option shall be exercisable as follows: All
150,000 shares covered by this option may be exercised, in whole or in part,
(i) during the last 30 days of the five-year term of this Option, or
alternatively, (ii) from and after any date on which the Company's Common
Stock Price (as hereinafter defined) shall equal or exceed $10.00 per share
(the "Target Price"); provided, however, that in no event shall this option be
exercisable later than the Expiration Date.
For the purposes of this Section 1, the Company's Common Stock Price
shall be deemed to equal or exceed the Target Price of $10.00 per share, or
such price adjusted as hereinafter provided, if the closing price for the
Common Stock quoted in the NASDAQ over-the-counter market shall equal or
exceed the Target Price per share for a total of not less than 30 days,
whether or not such days are consecutive, after the date this option was
originally granted. If no closing price is quoted on any day on which
securities are regularly traded in the NASDAQ system, the closing price shall
be deemed to be the last reported bid price for the Common Stock in the NASDAQ
system on such date.
The Target Price per share shall be adjusted (i) in case the Company
shall hereafter at any time change as a whole, by split-up, subdivision or
combination in any manner, or by the making of a stock dividend, the number of
outstanding shares of Common Stock into a different number of shares of Common
Stock (excluding the one-for-five reverse stock split previously authorized by
the Company's stockholders in 1995), or (ii) in case of any capital
reorganization or any reclassification of the capital stock of the Company.
In any such event, the Target Price per share of Common Stock shall be
proportionately and equitably adjusted to give effect to such split-up,
subdivision, combination, stock dividend, reorganization or reclassification.
2. Termination. This option and all rights hereunder to the extent
such rights shall not have been exercised shall terminate and become null and
void if the Optionee ceases to be a director of, or active consultant to, the
Company or any Subsidiary (whether by resignation, retirement, dismissal,
death or otherwise), except that: (a) in the event of the death or disability
<PAGE> 2
of the Optionee while a director of, or active consultant to, the Company or
any Subsidiary, this option only to the extent exercisable at the date of
death or disability may be exercised within the applicable period of time by
any persons indicated in Section 6(f) of the Plan; (b) in the event of the
termination of employment of the Optionee while an director of, or active
consultant to, the Company or any Subsidiary, this option only to the extent
exercisable at the date of such termination may be exercised prior to the
expiration of ninety (90) from the date of such termination, and shall
terminate in all other respects; provided, however, that in no event may this
option be exercised after the Expiration Date. Notwithstanding the foregoing,
this option may in no event be exercised by any one to any extent in the event
of a voluntary dissolution, liquidation or winding up of the affairs of the
Company or in the event of merger into, consolidation with, or sale or
transfer of all or substantially all of the assets of the Company, except
under the circumstances and pursuant to the terms and conditions of Section
6(h) of the Plan.
3. Exercise. This option is exercisable with respect to all, or from
time to time with respect to any portion, of the shares then subject to such
exercise, by delivering written notice of such exercise, in the form
prescribed by the Stock Option Committee, to the principal office of the
Secretary of the Company. Each such notice shall be accompanied by payment in
full of the purchase price of such shares.
4. Non-Transferable. This option shall during the lifetime of the
Optionee shall be exercisable only by the Optionee, and neither it nor any
right thereunder shall be transferable except by will or laws of descent and
distribution or by a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended, or be subject to attachment,
execution or other similar process. In the event of any attempt by the
Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of the
option or any right thereunder, except as provided for herein, or in the event
of the levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Company may terminate the option by notice to
the Optionee and the option shall thereupon become null and void.
5. Miscellaneous.
(a) Neither the granting of this option nor the exercise thereof
shall be construed as conferring upon the Optionee any right to continue as a
director or employee of, or consultant to, the Company or any Subsidiary, or
as interfering with or restricting in any way the right of the Company or any
Subsidiary to terminate such employment at any time.
(b) Neither the Optionee, nor any person entitled to exercise
its rights in the event of the death of the Optionee, shall have any of the
rights of a stockholder with respect to the shares subject to the option,
except to the extent that certificates for such shares shall have been issued
upon exercise of the option as provided for herein.
(c) The Company is relieved from any liability for the non-
issuance or non-transfer or any delay in the issuance or transfer of any
shares of Common Stock subject to this option which results from the inability
of the Company to obtain, or in any delay in obtaining, from each regulatory
body having jurisdiction all requisite authority to issue or transfer shares
of Common Stock of the Company in satisfaction of this option if counsel for
the Company deems such authority necessary for the lawful issuance or transfer
of any such shares.
(d) No Common Stock acquired by exercise of this option shall be
sold or otherwise disposed of in violation of any federal or state securities
law or regulation.
<PAGE> 3
(e) This option shall be exercised in accordance with such
administrative regulations as the Stock Option Committee may from time to time
adopt. All decisions of the Stock Option Committee upon any question arising
under the Plan or under this instrument shall be conclusive and binding upon
the Optionee and all other persons.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed on
behalf of the Company as of the day and year first written above by the
undersigned officers, thereunto duly authorized.
VISTA TECHNOLOGIES INC.
[CORPORATE SEAL]
By: /s/ Murray D. Watson
-----------------------
Murray D. Watson,
Vice Chairman of the Board
By: /s/ William M. Curtis
-----------------------
William M. Curtis, Secretary
<PAGE> 1
VISTA TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Date of Grant: February 15, 1996
VISTA TECHNOLOGIES INC., a Nevada corporation (the "Company"), hereby
grants to THOMAS A. SCHULTZ (the "Optionee"), pursuant to the 1994 Stock
Option Plan of the Company (the "Plan"), a copy of which is appended hereto
and made a part hereof as Schedule I, an option to purchase a total of ONE
HUNDRED FIFTY THOUSAND (150,000) shares of Common Stock of the Company at a
price of TWO DOLLARS FIFTY CENTS ($2.50) per share (subject to adjustment as
provided in Section 6(i) of the Plan), on the terms and conditions set forth
in the Plan and hereinafter. This option shall not be exercisable later than
on February 15, 2001 (hereinafter referred to as the "Expiration Date"),
except that the Expiration Date may be accelerated in certain events as
provided in paragraph 6(f) of the Plan in the event of the death or disability
of the Optionee and as provided in paragraph 6(e) of the Plan in the event of
the Optionee's termination of employment by the Company.
1. Vesting. Subject to the terms and conditions of this Agreement and
the Plan, the shares subject this option shall be exercisable as follows: All
150,000 shares covered by this option may be exercised, in whole or in part,
(i) during the last 30 days of the five-year term of this Option, or
alternatively, (ii) from and after any date on which the Company's Common
Stock Price (as hereinafter defined) shall equal or exceed $10.00 per share
(the "Target Price"); provided, however, that in no event shall this option be
exercisable later than the Expiration Date.
For the purposes of this Section 1, the Company's Common Stock Price
shall be deemed to equal or exceed the Target Price of $10.00 per share, or
such price adjusted as hereinafter provided, if the closing price for the
Common Stock quoted in the NASDAQ over-the-counter market shall equal or
exceed the Target Price per share for a total of not less than 30 days,
whether or not such days are consecutive, after the date this option was
originally granted. If no closing price is quoted on any day on which
securities are regularly traded in the NASDAQ system, the closing price shall
be deemed to be the last reported bid price for the Common Stock in the NASDAQ
system on such date.
The Target Price per share shall be adjusted (i) in case the Company
shall hereafter at any time change as a whole, by split-up, subdivision or
combination in any manner, or by the making of a stock dividend, the number of
outstanding shares of Common Stock into a different number of shares of Common
Stock (excluding the one-for-five reverse stock split previously authorized by
the Company's stockholders in 1995), or (ii) in case of any capital
reorganization or any reclassification of the capital stock of the Company.
In any such event, the Target Price per share of Common Stock shall be
proportionately and equitably adjusted to give effect to such split-up,
subdivision, combination, stock dividend, reorganization or reclassification.
2. Termination. This option and all rights hereunder to the extent
such rights shall not have been exercised shall terminate and become null and
void if the Optionee ceases to be an employee of the Company or any Subsidiary
(whether by resignation, retirement, dismissal, death or otherwise), except
that: (a) in the event of the death or disability of the Optionee while an
employee of the Company or any Subsidiary, this option only to the extent
exercisable at the date of death or disability may be exercised within the
<PAGE> 2
applicable period of time by any persons indicated in Section 6(f) of the
Plan; (b) in the event of the termination of employment of the Optionee while
an employee of the Company or any Subsidiary, this option only to the extent
exercisable at the date of such termination may be exercised prior to the
expiration of ninety (90) from the date of such termination, and shall
terminate in all other respects; provided, however, that in no event may this
option be exercised after the Expiration Date. Notwithstanding the foregoing,
this option may in no event be exercised by any one to any extent in the event
of a voluntary dissolution, liquidation or winding up of the affairs of the
Company or in the event of merger into, consolidation with, or sale or
transfer of all or substantially all of the assets of the Company, except
under the circumstances and pursuant to the terms and conditions of Section
6(h) of the Plan.
Notwithstanding the foregoing, and pursuant to Section 6(e) of the Optionee's
Employment Agreement with the Company dated January 31, 1996, in the event a
Termination Without Cause as defined in Section 6(d) of said Employment
Agreement shall occur, this option to the extent exercisable upon the
expiration of a twelve month period following such event of Termination
Without Cause (i.e., as if the Optionee had remained employed for such twelve
month period) may be exercised in whole or in part, at any time or from time
to time, by the Optionee within such twelve month period following the date of
such Termination Without Cause.
3. Exercise. This option is exercisable with respect to all, or from
time to time with respect to any portion, of the shares then subject to such
exercise, by delivering written notice of such exercise, in the form
prescribed by the Stock Option Committee, to the principal office of the
Secretary of the Company. Each such notice shall be accompanied by payment in
full of the purchase price of such shares.
4. Non-Transferable. This option shall during the lifetime of the
Optionee shall be exercisable only by the Optionee, and neither it nor any
right thereunder shall be transferable except by will or laws of descent and
distribution or by a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended, or be subject to attachment,
execution or other similar process. In the event of any attempt by the
Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of the
option or any right thereunder, except as provided for herein, or in the event
of the levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Company may terminate the option by notice to
the Optionee and the option shall thereupon become null and void.
5. Miscellaneous.
(a) Neither the granting of this option nor the exercise thereof
shall be construed as conferring upon the Optionee any right to continue as an
employee of, or consultant to, the Company or any Subsidiary, or as
interfering with or restricting in any way the right of the Company or any
Subsidiary to terminate such employment at any time.
(b) Neither the Optionee, nor any person entitled to exercise
its rights in the event of the death of the Optionee, shall have any of the
rights of a stockholder with respect to the shares subject to the option,
except to the extent that certificates for such shares shall have been issued
upon exercise of the option as provided for herein.
(c) The Company is relieved from any liability for the non-
issuance or non-transfer or any delay in the issuance or transfer of any
shares of Common Stock subject to this option which results from the inability
of the Company to obtain, or in any delay in obtaining, from each regulatory
body having jurisdiction all requisite authority to issue or transfer shares
of Common Stock of the Company in satisfaction of this option if counsel for
the Company deems such authority necessary for the lawful issuance or transfer
of any such shares.
<PAGE> 3
(d) No Common Stock acquired by exercise of this option shall be
sold or otherwise disposed of in violation of any federal or state securities
law or regulation.
(e) This option shall be exercised in accordance with such
administrative regulations as the Stock Option Committee may from time to time
adopt. All decisions of the Stock Option Committee upon any question arising
under the Plan or under this instrument shall be conclusive and binding upon
the Optionee and all other persons.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed on
behalf of the Company as of the day and year first written above by the
undersigned officers, thereunto duly authorized.
VISTA TECHNOLOGIES INC.
[CORPORATE SEAL]
By: /s/ Murray D. Watson
-------------------------
Murray D. Watson,
Vice Chairman of the Board
By: /s/ William M. Curtis
----------------------------
William M. Curtis, Secretary
<PAGE> 1
INDEMNIFICATION AGREEMENT
This Agreement dated February 16, 1996 by and between VISTA TECHNOLOGIES
INC., a Nevada corporation (the "Company") and KENNETH G. HOWLING (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 may
be 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 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
<PAGE> 2
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" VISTA TECHNOLOGIES INC.
By: /s/ Murray D. Watson
------------------------
Murray D. Watson,
Title: Vice Chairman of the Board
-------------------------------
"Indemnified Party" /s/ Kenneth G. Howling
-------------------------------------
KENNETH G. HOWLING
<PAGE> 1
IRREVOCABLE PROXY AND VOTING AGREEMENT
This IRREVOCABLE PROXY and VOTING AGREEMENT (this "Proxy") is executed
as of April 15, 1996, by VISTA TECHNOLOGIES INC., a Nevada corporation (the
"Vista Stockholder"), in favor of GHASSAN BARAZI ("BARAZI") and DR. FOUAD
TAYFOUR ("DR. TAYFOUR"), with reference to 200,000 shares of 5% Series B
Cumulative Convertible Preferred stock in VISTA LASER CENTERS OF MICHIGAN,
INC., a Nevada corporation (the "Corporation"), currently owned of record and
beneficially by the Vista Stockholder (all of such shares being herein called
the "Voting Shares"). Any other voting capital stock of the Corporation
hereafter received by the Vista Stockholder as a result of the conversion of
such shares into common stock of the Corporation or as a result of stock
dividends or other distributions with respect to the Voting Shares shall be
subject to this Proxy and included within the definition of Voting Shares for
the purposes hereof.
This Proxy has been executed in consideration of the employment of
BARAZI as the President and Chief Executive Officer of the Corporation and
shall therefore be considered an instrument coupled with an interest for
purposes of applicable law for the initial five-year term of such employment
following the effective date of a registration statement for a successful
initial public offering of securities by the Corporation.
WHEREAS, the parties hereto believe it to be essential to their
respective interests and to the interests of the Corporation to assure
continuity of the policies and management of the Corporation by having the
Voting Shares of the Corporation subject to this Proxy and voted and dealt
with as herein provided for the period of time specified herein;
NOW, THEREFORE, and in consideration of the premises and of the
covenants and agreements herein contained, it is mutually agreed as follows:
Section 1. Grant of Proxy. The undersigned Voting Stockholder of the
Corporation, acting in consideration of BARAZI's agreement to be elected as
the President and Chief Executive Officer of the Corporation, HEREBY APPOINTS
GHASSAN BARAZI as the true and lawful attorney-in-fact, agent and proxy of the
undersigned Voting Stockholder, with full power of substitution, to vote all
shares of the Corporation's 5% Series B Cumulative Convertible Preferred stock
and other securities included within the Voting Shares, which the undersigned
Voting Stockholder may be entitled to vote, at any meeting of stockholders of
the Corporation or otherwise, and at any adjournment thereof, with all powers
which the undersigned Voting Stockholder would possess if personally present,
including the right to vote, give consents and execute waivers in respect to
all matters, whether or not in the ordinary course of business of the
Corporation. The proxy granted by this Section 1 shall be personal to BARAZI
and may not be assigned or transferred by him to any other party.
Section 2. Irrevocable Nature and Term of this Proxy. This proxy,
having been granted in consideration of the employment of BARAZI described
above, shall be deemed a proxy coupled with an interest and shall be irrevo-
cable until five years after the effective date of a registration statement
under the Securities Act of 1933 relating to a successful initial public
offering of securities by the Corporation. Notwithstanding the foregoing,
however, this proxy shall remain in effect only so long as BARAZI remains
employed by the Company and shall expire in any event after the initial five
year term of his Executive Employment Agreement with the Corporation and
automatically upon any earlier termination of his employment as the
Corporation's President and Chief Executive Officer.
<PAGE> 2
Section 3. Additional Voting Agreements.
(a) In addition to the proxy granted in Section 1 above, the Vista
Stockholder and BARAZI covenant and agree to cause all of the Voting Shares to
be voted in favor of the election of three nominees of DR. TAYFOUR to the
Corporation's Board of Directors and to cause the Voting Shares to be voted in
favor of a Board of Directors that does not exceed six (6) in number for a
term of five years after the effective date of a registration statement under
the Securities Act of 1933 relating to a successful initial public offering of
securities by the Corporation. The parties covenant and agree that so long as
BARAZI remains employed as the Corporation's Chief Executive Officer, one of
DR. TAYFOUR's nominees to the Corporation's Board of Directors shall be
BARAZI. Nothing herein shall be deemed to prevent the Corporation's Board of
Directors from terminating the employment of BARAZI as the Corporation's Chief
Executive Officer is a manner consistent with law and the terms of his
Executive Employment Agreement. In the event the proxy granted under the
provisions of Section 1 hereof shall expire by reason of the termination of
BARAZI's employment as the Corporation's Chief Executive Officer prior to the
end of the initial five-year term of his Executive Employment Agreement, it is
understood and agreed for the unexpired balance of such five-year term that
the Vista Stockholder shall cause all of the Voting Shares to be voted in
favor of the election of three nominees of DR. TAYFOUR to the Company's Board
of Directors except that none of such nominees will be BARAZI.
(b) Except with the written consent of DR. TAYFOUR, the Vista
Stockholder will not take any action during the five-year term of the voting
agreement with DR. TAYFOUR herein to cause more than a total of six (6)
directors to be elected to the Corporation's Board of Directors.
Section 4. Ownership of, and Restrictions Upon, Proxy Shares. The
undersigned Vista Stockholder hereby represents and warrants that (a) the
undersigned Vista Stockholder owns of record and beneficially 200,000 shares
of the Corporation's voting 5% Series B Cumulative Convertible Preferred
stock; and (b) the undersigned Vista Stockholder has not granted, and for the
term hereof will not grant, any proxy or other voting interest with respect to
such shares to any other third party. Nothing herein shall be construed to
prohibit the sale, assignment or other disposition of all, or any portion from
time to time, of the Voting Shares by the Vista Stockholder to an unaffiliated
third party in a bona fide sale transaction free and clear of the provisions
of this Proxy.
Section 5. Legend. The undersigned Vista Stockholder agrees to cause
the certificates evidencing the Voting Shares to be imprinted with a legend
referring to the proxy and voting agreement imposed by this Proxy agreement
and to furnish evidence thereof to BARAZI and DR. TAYFOUR.
Section 6. Filing of Proxy. The undersigned Vista Stockholder
authorizes and directs BARAZI and DR. TAYFOUR to file this Irrevocable Proxy
and Voting Agreement with the Secretary of the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"Vista Stockholder": VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
--------------------------------
Thomas A. Schultz, President
<PAGE> 3
ACCEPTED AND APPROVED:
/s/ Ghassan Barazi
- ---------------------------
GHASSAN BARAZI
/s/ Fouad Tayfour
- ---------------------------
DR. FOUAD TAYFOUR
THE UNDERSIGNED CORPORATION HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ABOVE
IRREVOCABLE PROXY AND VOTING AGREEMENT
"Corporation": VISTA LASER CENTERS OF MICHIGAN, INC.
By: /s/ Ghassan Barazi
------------------------------
Ghassan Barazi, President
LEGEND TO BE IMPRINTED ON THE VOTING SHARE CERTIFICATES AND ANY REISSUANCE(S)
OR CONVERSION THEREOF INTO COMMON STOCK AND STOCK DIVIDENDS OR OTHER VOTING
SECURITIES DISTRIBUTED WITH RESPECT THERETO:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN IRREVOCABLE PROXY AND VOTING AGREEMENT EXECUTED BY THE
REGISTERED HOLDER OF THIS CERTIFICATE IN FAVOR OF GHASSAN BARAZI
AND DR. FOUAD TAYFOUR. A COPY MAY BE OBTAINED FROM THE SECRETARY
OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE IN WINDSOR,
ONTARIO.
<PAGE> 1
IRREVOCABLE PROXY AND VOTING AGREEMENT
Covering Common Stock of Vista Technologies Inc.
This IRREVOCABLE PROXY and VOTING AGREEMENT (this "Proxy") is executed
as of April 15, 1996, by VISTA LASER CENTERS OF MICHIGAN, INC., a Nevada
corporation (the "VLC Stockholder"), in favor of the duly elected and acting
Board of Directors of VISTA TECHNOLOGIES INC., a Nevada corporation
("PROXYHOLDER"), with reference to 200,000 shares of Common Stock in VISTA
TECHNOLOGIES, INC., a Nevada corporation (the "Corporation"), owned of record
and beneficially by the VLC Stockholder at the date hereof (all of such shares
of voting stock being herein called the "Voting Shares"). Any other voting
capital stock of the Corporation hereafter received by the VLC Stockholder as
a result of the reclassification of such Voting Shares into another class of
stock or as a result of stock dividends or other distributions with respect to
the Voting Shares shall be subject to this Proxy and included within the
definition of Voting Shares for the purposes hereof.
WHEREAS, the parties hereto believe it to be essential to their
respective interests and to the interests of the Corporation to assure
continuity of the policies and management of the Corporation by having the
Voting Shares of the Corporation subject to this Proxy and voted and dealt
with as herein provided for the period of time specified herein;
NOW, THEREFORE, and in consideration of the premises and of the
covenants and agreements herein contained, it is mutually agreed as follows:
Section 1. Grant of Proxy. The undersigned VLC Stockholder, acting in
consideration of the investment of the Corporation in the VLC Stockholder,
HEREBY APPOINTS the PROXYHOLDER as the true and lawful attorney-in-fact, agent
and proxy of the undersigned VLC Stockholder, with full power of substitution,
to vote the shares of the Corporation's common stock and any other securities
represented by the Voting Shares, which the undersigned VLC Stockholder may be
entitled to vote, at any meeting of stockholders of the Corporation or
otherwise, and at any adjournment thereof, with all powers which the
undersigned VLC Stockholder would possess if personally present, including the
right to vote, give consents and execute waivers in respect to all matters,
whether or not in the ordinary course of business of the Corporation. The
proxy granted by this Section 1 shall be personal to the PROXYHOLDER and may
not be assigned or transferred by the PROXYHOLDER to any other party.
Section 2. Irrevocable Nature and Term of this Proxy. This proxy,
having been granted in consideration of the investment of the Corporation in
shares of the Series B preferred stock of the VLC Stockholder, shall be deemed
a proxy coupled with an interest and shall be irrevocable until five years
after the later to occur of (i) the date of this Agreement, or (ii) successful
completion of an initial public offering of its securities by Vista Laser
Centers of Michigan, Inc., so long as the same shall occur prior to December
31, 1996.
Section 3. Ownership of, and Restrictions Upon, Proxy Shares. The
undersigned VLC Stockholder hereby represents and warrants that (a) the
undersigned VLC Stockholder owns of record and beneficially 200,000 shares of
the Corporation's common stock; and (b) the undersigned VLC Stockholder has
not granted, and for the term hereof will not grant, any proxy or other voting
interest with respect to such shares to any other third party. Nothing herein
shall be construed to prohibit the sale, assignment or other disposition of
all, or any portion from time to time, of the Voting Shares by the VLC
Stockholder to an unaffiliated third party in a bona fide sale transaction
free and clear of the provisions of this Proxy.
<PAGE> 2
Section 4. Legend. The undersigned VLC Stockholder agrees to cause
the certificates evidencing the Voting Shares to be imprinted with a legend
referring to the proxy and voting agreement imposed by this Proxy agreement
and to furnish evidence thereof to the PROXYHOLDER and the Corporation.
Section 5. Filing of Proxy. The undersigned VLC Stockholder
authorizes and directs the PROXY HOLDER to file this Proxy with the Secretary
of the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"VLC Stockholder": VISTA LASER CENTERS OF MICHIGAN, INC.
By:
---------------------------------
Ghassan Barazi, President
Attest:
/s/ Theodore J. Mayer
- ----------------------------
Theodore J. Mayer, Secretary
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
THE UNDERSIGNED CORPORATION HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ABOVE
IRREVOCABLE PROXY AND VOTING AGREEMENT
"Corporation": VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
------------------------------------
Thomas A. Schultz, President
LEGEND TO BE IMPRINTED ON THE VOTING SHARE CERTIFICATES AND ANY REISSUANCE(S)
THEREOF AND STOCK DIVIDENDS OR OTHER VOTING SECURITIES DISTRIBUTED WITH
RESPECT THERETO:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN IRREVOCABLE PROXY AND VOTING AGREEMENT EXECUTED BY THE
REGISTERED HOLDER OF THIS CERTIFICATE IN FAVOR OF THE BOARD OF
DIRECTORS OF THE CORPORATION. A COPY MAY BE OBTAINED FROM THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
<PAGE> 1
Rev-S-96a VISTA TECHNOLOGIES INC.
(a Nevada corporation)
REGULATION S OFFSHORE TRANSACTION SUBSCRIPTION AGREEMENT
Up to 250,000 shares of Common Stock at $2.125 per share
Any interest in the VISTA TECHNOLOGIES INC. 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, if any, from such
registration. The resale of these securities under Rule 903 of Regulation S
and other regulations under the Securities Act, if applicable, is prohibited
before the expiration of any restricted period required by Rule 903 of
Regulation S, which restricted period cannot commence until all securities
included in this Offering have been sold and fully paid for.
Vista Technologies Inc.
1250 Oakmead Parkway, Suite 210
Sunnyvale, California 92088-3599
FAX No. (408) 746-3630
1. SUBSCRIPTION TO COMMON STOCK. 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
shares of common stock, par value $0.005 per share (the "Common Stock") in
Vista Technologies Inc., a Nevada corporation ("VISTA") indicated on the
signature page hereof for the account of the Foreign Investor upon the terms
and conditions set forth in this Subscription Agreement. The subscription
price for each share of VISTA common stock offered hereby is $2.125 per share
in good U.S. funds, payable in cash upon acceptance hereof.
2. DESCRIPTION OF OFFERING.
2.1. Regulation S Offering. VISTA is offering up to a maximum of
250,000 shares of VISTA Common Stock, par value $.005 per share (the
"Shares"), 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 Shares 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 Shares offered to Foreign Investors are being offered at a price of
$2.125 per Share in U.S. funds. There are no minimum amount of subscriptions
required in order for VISTA to accept any subscriptions to the Offering. The
Offering will terminate on March 31, 1996 unless extended at the option of
VISTA for an additional period of not more than 30 days. VISTA reserves the
right to terminate the Offering at any time, whether or not the maximum Shares
have been sold.
Regulation S Subscription Agreement
<PAGE> 2
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 VISTA 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 VISTA 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 VISTA 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 VISTA.
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 Shares of VISTA. 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 VISTA 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 Shares or for any securities that are convertible into
or exercisable for Shares of VISTA, including but not limited to effecting any
sale of VISTA 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 Shares 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 VISTA Shares, 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 (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
<PAGE> 3
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 Shares 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) if applicable, 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 only following the expiration of any restricted period (if
applicable) required by Regulation S. The Foreign Investor acknowledges that
this Agreement and the VISTA Shares 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 Shares are being
sold in reliance upon the transaction exemption afforded by Regulation S in
connection with an offshore offer and sale of securities of VISTA 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
Shares is proposed to be made in reliance upon an exemption under the
Securities Act, the issuer of the securities 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 VISTA Shares 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.
3.7. The Foreign Investor acknowledges that an investment in the Shares
offered hereby is speculative, involves a high degree of risk, and should not
be purchased by persons who cannot afford the loss of their entire investment,
and represents that the Foreign Investor has relied only on the information
contained herein or otherwise provided in writing by duly authorized
representatives of VISTA. The Foreign Investor has carefully read and
reviewed this Subscription Agreement and all of VISTA's filings with the
Securities and Exchange Commission incorporated by reference herein
(including, without limitation, the section entitled "Cautionary Statements
for Purposes of the 'Safe Harbor' Provisions of the Private Securities
Litigation Reform Act of 1995" in Vista's Report on Form 10-QSB for the Period
ended December 31, 1995), as described in Section 4 of this Agreement, and has
asked such questions of management of VISTA and received such additional
information as he, she or it deems necessary in order for the Foreign Investor
to make an informed decision with respect to the purchase of the Shares. The
undersigned Foreign Investor has received complete and satisfactory answers to
all such inquiries. The Foreign Investor has not received oral or written
representations or assurances from VISTA or any representatives of VISTA,
other than as set forth in this Agreement.
Regulation S Subscription Agreement
<PAGE> 4
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.
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 VISTA.
By its acceptance of any subscription from the Foreign Investor
hereunder, VISTA represents and warrant to the Foreign Investor as follows:
4.1. VISTA is duly organized and validly existing in good standing as
a corporation under the laws of Nevada with corporate power to enter into this
Agreement and to conduct its business as presently conducted.
4.2. VISTA 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. VISTA is not an investment company registered or required to
register as such under the United States Investment Company Act of 1940.
4.3. The common stock of VISTA is a class of securities registered
under Section 12(g) of the 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. All documents filed by VISTA
with the Securities and Exchange Commission pursuant to the Exchange Act for
its most recent full fiscal year and subsequent thereto are available from
VISTA and should be reviewed by the Foreign Investor, including the following
filings which are incorporated herein by reference:
Filings by VISTA with the Securities and Exchange Commission
incorporated by reference:
Annual Report on Form 10-KSB for the Fiscal Year ended March 31, 1995
Proxy Statement dated May 26, 1995 for Special Meeting of Stockholders
Quarterly Report on Form 10-QSB for the Period ended June 30, 1995
Quarterly Report on Form 10-QSB for the Period ended September 30, 1995
Quarterly Report on Form 10-QSB for the Period ended December 31, 1995
Current Report on From 8-K dated as of March 1, 1996
Any other documents filed by VISTA pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 subsequent to the date of this
Agreement and prior to the sale of all Shares in this Offering also shall be
deemed to be incorporated by reference in this Agreement and to be a part
hereof from the date of filing such documents.
Regulation S Subscription Agreement
<PAGE> 5
4.4. VISTA agrees to make available to the Foreign Investor, prior to
this subscription, the opportunity to ask questions of, and receive written
answers from, authorized representatives of VISTA concerning the terms and
conditions of this Offering, the operations of VISTA and its affiliated
companies, and any other relevant matters, and to obtain any additional
written information, to the extent that the VISTA possesses such information
or can acquire it without unreasonable effort or expense, necessary to verify
the accuracy of the information furnished to the Foreign Investor in
connection with this Offering.
4.5. VISTA 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.
4.6. The VISTA Shares, 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 VISTA and will not subject the holders
thereof to personal liability by reason of being such holders.
4.7. This Agreement, upon its acceptance by VISTA, 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.
4.8. 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 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
Shares, the transactions contemplated by this Agreement, or an investment in
the Shares.
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.
Regulation S Subscription Agreement
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the respective dates set forth below.
FOREIGN INVESTOR:
CORUNDUM B.V.
- -------------------------------------
[Full Legal Name]
By: /s/ E. van der Zwaard
----------------------------------
[Authorised Signature]
Name of Signing Officer: E. van der Zwaard
-----------------------------------------------
Title of Signing Officer: Managing Director
-----------------------------------------------
Principal Address of Foreign Investor:
Statenhof Building, Reaal 5-V, P.O. Box 4
-----------------------------------------------
2350 AA Leiderdorp
-----------------------------------------------
The Netherlands
-----------------------------------------------
Jurisdiction in which Foreign Investor is Incorporated or Organized:
The Netherlands
-----------------------------------------------
Number of VISTA Shares subscribed for (100,000 Shares)
-------
at $2.125 per Share equals $212,500.
-------
Date: MARCH 29 1996
------------
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This Agreement is accepted as of MARCH 30 1996
-----------
for VISTA TECHNOLOGIES INC.:
By: /s/ Thomas A. Schultz
-----------------------------
[Authorised Signature]
Name and Title of Signing Officer: THOMAS A. SCHULTZ, President
----------------------------
Rev-S-96a
Regulation S Subscription Agreement
<PAGE> 1
IRREVOCABLE PROXY AND VOTING AGREEMENT
Covering Preferred Stock of Vista Laser Centers of the Pacific, Inc.
This IRREVOCABLE PROXY and VOTING AGREEMENT (this "Proxy") is executed
as of April 23, 1996, by VISTA TECHNOLOGIES INC., a Nevada corporation (the
"Stockholder"), in favor of the duly elected and acting Board of Directors of
VISTA LASER CENTERS OF THE PACIFIC, INC., a Nevada corporation
("PROXYHOLDER"), with reference to all shares of voting capital stock in VISTA
LASER CENTERS OF THE PACIFIC, INC., a Nevada corporation (the "Corporation"),
owned of record and beneficially by the Stockholder (all of such shares of
voting stock being herein called the "Voting Shares"). Any other voting
capital stock of the Corporation hereafter received by the Stockholder as a
result of acquisition or conversion or reclassification of such Voting Shares
into another class of stock or as a result of stock dividends or other
distributions with respect to the Voting Shares shall be subject to this Proxy
and included within the definition of Voting Shares for the purposes hereof.
WHEREAS, the parties hereto believe it to be essential to their
respective interests and to the interests of the Corporation to assure
continuity of the policies and management of the Corporation by having the
Voting Shares of the Corporation subject to this Proxy and voted and dealt
with as herein provided for the period of time specified herein;
NOW, THEREFORE, and in consideration of the premises and of the
covenants and agreements herein contained, it is mutually agreed as follows:
Section 1. Grant of Proxy. The undersigned Stockholder, acting in
consideration of the investment of the Corporation in the Stockholder, HEREBY
APPOINTS the PROXYHOLDER as the true and lawful attorney-in-fact, agent and
proxy of the undersigned Stockholder, with full power of substitution, to vote
all shares of the Corporation's common stock and any other Voting Shares which
the undersigned Stockholder may be entitled to vote at any meeting of
stockholders of the Corporation, or otherwise, and at any adjournment thereof,
with all powers which the undersigned Stockholder would possess if personally
present, including the right to vote, give consents and execute waivers in
respect to all matters, whether or not in the ordinary course of business of
the Corporation. The proxy granted by this Section 1 shall be personal to the
PROXYHOLDER and may not be assigned or transferred by the PROXYHOLDER to any
other party.
Section 2. Irrevocable Nature and Term of this Proxy. This proxy,
having been granted in consideration of the investment of the Corporation in
shares of the common stock of the Stockholder, shall be deemed a proxy coupled
with an interest and shall be irrevocable until five years after the date of
this Agreement.
Section 3. Ownership of, and Restrictions Upon, Proxy Shares. The
undersigned Stockholder hereby represents and warrants that (a) the
undersigned Stockholder owns of record and beneficially 500,000 shares of the
Corporation's Series B preferred stock; and (b) the undersigned Stockholder
has not granted, and for the term hereof will not grant, any proxy or other
voting interest with respect to such shares to any other third party. Nothing
herein shall be construed to prohibit the sale, assignment or other
disposition of all, or any portion from time to time, of the Voting Shares by
the Stockholder to an unaffiliated third party in a bona fide sale transaction
free and clear of the provisions of this Proxy.
<PAGE> 2
Section 5. Legend. The undersigned Stockholder agrees to cause the
certificates evidencing the Voting Shares to be promptly imprinted with a
legend referring to the proxy and voting agreement imposed by this Proxy
agreement and to furnish evidence thereof to the PROXYHOLDER and the
Corporation.
Section 6. Filing of Proxy. The undersigned Stockholder authorizes
and directs the PROXYHOLDER to file this Proxy with the Secretary of the
Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"Stockholder": VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
---------------------------
Thomas A. Schultz, President
THE UNDERSIGNED CORPORATION HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ABOVE
IRREVOCABLE PROXY AND VOTING AGREEMENT
"Corporation": VISTA LASER CENTERS OF THE PACIFIC, INC.
By: /s/ J. Robert Griffin
----------------------------
Dr. J. Robert Griffin,
Chairman of the Board
LEGEND TO BE IMPRINTED ON THE VOTING SHARES CERTIFICATE(S) AND ANY
REISSUANCE(S) OR CONVERSION(S) THEREOF INTO COMMON STOCK AND STOCK DIVIDENDS
OR OTHER VOTING SECURITIES DISTRIBUTED WITH RESPECT THERETO:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN IRREVOCABLE PROXY AND VOTING AGREEMENT EXECUTED BY THE
REGISTERED HOLDER OF THIS CERTIFICATE IN FAVOR OF THE BOARD OF
DIRECTORS OF THE CORPORATION. A COPY MAY BE OBTAINED FROM THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
<PAGE> 1
IRREVOCABLE PROXY AND VOTING AGREEMENT
Covering Common Stock of Vista Technologies Inc.
This IRREVOCABLE PROXY and VOTING AGREEMENT (this "Proxy") is executed
as of April 23, 1996, by VISTA LASER CENTERS OF THE PACIFIC, INC., a Nevada
corporation (the "VLC Stockholder"), in favor of the duly elected and acting
Board of Directors of VISTA TECHNOLOGIES INC., a Nevada corporation
("PROXYHOLDER"), with reference to all shares of voting capital stock in VISTA
TECHNOLOGIES, INC., a Nevada corporation (the "Corporation"), owned of record
and beneficially by the VLC Stockholder (all of such shares of voting stock
being herein called the "Voting Shares"). Any other voting capital stock of
the Corporation hereafter received by the VLC Stockholder as a result of the
acquisition or conversion or reclassification of such Voting Shares into
another class of stock or as a result of stock dividends or other
distributions with respect to the Voting Shares shall be subject to this Proxy
and included within the definition of Voting Shares for the purposes hereof.
WHEREAS, the parties hereto believe it to be essential to their
respective interests and to the interests of the Corporation to assure
continuity of the policies and management of the Corporation by having the
Voting Shares of the Corporation subject to this Proxy and voted and dealt
with as herein provided for the period of time specified herein;
NOW, THEREFORE, and in consideration of the premises and of the
covenants and agreements herein contained, it is mutually agreed as follows:
Section 1. Grant of Proxy. The undersigned VLC Stockholder, acting in
consideration of the investment of the Corporation in the VLC Stockholder,
HEREBY APPOINTS the PROXYHOLDER as the true and lawful attorney-in-fact, agent
and proxy of the undersigned VLC Stockholder, with full power of substitution,
to vote all shares of the Corporation's common stock and any other Voting
Shares which the undersigned VLC Stockholder may be entitled to vote at any
meeting of stockholders of the Corporation, or otherwise, and at any
adjournment thereof, with all powers which the undersigned VLC Stockholder
would possess if personally present, including the right to vote, give
consents and execute waivers in respect to all matters, whether or not in the
ordinary course of business of the Corporation. The proxy granted by this
Section 1 shall be personal to the PROXYHOLDER and may not be assigned or
transferred by the PROXYHOLDER to any other party.
Section 2. Irrevocable Nature and Term of this Proxy. This proxy,
having been granted in consideration of the investment of the Corporation in
shares of the Series B preferred stock of the VLC Stockholder, shall be deemed
a proxy coupled with an interest and shall be irrevocable until five years
after the date of this Agreement.
Section 3. Ownership of, and Restrictions Upon, Proxy Shares. The
undersigned VLC Stockholder hereby represents and warrants that (a) the
undersigned VLC Stockholder owns of record and beneficially 500,000 shares of
the Corporation's common stock; and (b) the undersigned VLC Stockholder has
not granted, and for the term hereof will not grant, any proxy or other voting
interest with respect to such shares to any other third party. Nothing herein
shall be construed to prohibit the sale, assignment or other disposition of
all, or any portion from time to time, of the Voting Shares by the VLC
Stockholder to an unaffiliated third party in a bona fide sale transaction
free and clear of the provisions of this Proxy.
<PAGE> 2
Section 4. Legend. The undersigned VLC Stockholder agrees to cause
the certificates evidencing the Voting Shares to be promptly imprinted with a
legend referring to the proxy and voting agreement imposed by this Proxy
agreement and to furnish evidence thereof to the PROXYHOLDER and the
Corporation.
Section 5. Filing of Proxy. The undersigned VLC Stockholder
authorizes and directs the proxyholder to file this Proxy with the Secretary
of the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"VLC Stockholder": VISTA LASER CENTERS OF THE PACIFIC, INC.
By: /s/ J. Robert Griffin
-----------------------------
Dr. J. Robert Griffin, Chairman
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
THE UNDERSIGNED CORPORATION HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ABOVE
IRREVOCABLE PROXY AND VOTING AGREEMENT
"Corporation": VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
-------------------------------
Thomas A. Schultz, President
LEGEND TO BE IMPRINTED ON THE VOTING SHARE CERTIFICATES AND ANY REISSUANCE(S)
OR CONVERSION THEREOF INTO COMMON STOCK AND STOCK DIVIDENDS OR OTHER VOTING
SECURITIES DISTRIBUTED WITH RESPECT THERETO:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN IRREVOCABLE PROXY AND VOTING AGREEMENT EXECUTED BY THE
REGISTERED HOLDER OF THIS CERTIFICATE IN FAVOR OF THE BOARD OF
DIRECTORS OF THE CORPORATION. A COPY MAY BE OBTAINED FROM THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
<PAGE> 1
LOS ALTOS FINANCIAL CENTER
LEASE AGREEMENT
THIS LEASE is made this 28th day of June, 1996, between LOS ALTOS
FINANCIAL CENTER (hereinafter called "Lessor") and Vista Technologies, Inc.
(hereinafter called "Lessee") at Los Altos, California.
LEASE
1. PREMISES: Subject to the following terms and conditions, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor that portion of
that certain building (such portion hereinafter called "the premises") which
constitutes an improvement on that real property located in the City of Los
Altos, County of Santa Clara, State of California, commonly known as:
167 So. San Antonio Road, Suite # 9
Los Altos, CA 94022
2. TERM: The term of this Lease shall be for a period of sixty (60)
months, commencing on August 1, 1996, and ending on July 31, 2001 unless
sooner terminated pursuant to any provision of this Agreement.
3. USE: The premises shall be used and occupied only for an office
and for no other purpose without the Lessor's express written consent. Lessee
shall not do or permit to be done anything in or about the premises which is
unlawful, which will in any way interfere with the rights of other tenants,
including but not limited to, maintaining or permitting any nuisance,
generating any odors, committing waste, and using noise generating apparatus
or equipment which can be heard outside the leased premises.
4. RENT:
A. Basic Rent: Lessee agrees to pay to Lessor as the basic
rent, to be adjusted as provided in this paragraph 4 and paragraph 5, for the
use and occupancy of this premises the sum of two thousand and eighty four
dollars only ($2,084.00) per month payable on the first day of each and every
month commencing on the first day of the term.
B. Direct Operating Expenses: In addition to the above stated
basic rent, Lessee shall pay to Lessor, at the same time basic rent is paid,
its proportional share of the direct operating expenses as defined and
determined by paragraph 5 below.
C. RENTAL ADJUSTMENT. The basic rent shall be subject to
increase at the end of each one year anniversary of the beginning of the Lease
Term ("Adjustment Date") as provided in this subparagraph 4C. The monthly
rental for the ensuing twelve (12) months shall be adjusted upward by the
greater of either (i) the same percentage proportion that the revised
Consumers Price Index [All Urban Consumers] (Base Year 1982-84 = 100) for San
Francisco - Oakland - San Jose, published by the U.S. Department of Labor,
Bureau of Labor Statistics, which is published most immediately preceding the
"Adjustment Date", shall increase over the price index for the month in which
this Lease commenced as set forth in paragraph 2 of this Lease, or (ii) three
percent (3%) of the basic rent in subparagraph 4A. In the event such
statistic is not published for the particular month required, the statistic
published in the nearest preceding month shall be used in the calculations.
If for any reason there is a change of any kind in the method of calculation
or formulation of such Consumer Price Index, the Lessor and Lessee shall
mutually select such other Commodity Index which is satisfactory to both. If
the parties cannot agree, then such index shall be selected by one (1)
arbitrator in accordance with the rules of the American Arbitration
<PAGE> 2
Association and the Arbitrator's determination shall be final and binding upon
the parties. Basic Rent shall not increase by more than 7% per year.
D. LATE PAYMENT: Lessee acknowledges that late payment by
Lessee to Lessor of rent or other amounts due under this Lease will cause
Lessor to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to fix. Such costs include,
without limitation, processing and accounting charges, and late charges that
may be imposed on Lessor by lenders. Therefore, if any installment of rent or
any other amount due under this Lease from Lessee is not received within five
(5) days when due, Lessee agrees to pay to Lessor a late fee in the amount of
seven percent (7%) of the overdue amount accruing on the first day the overdue
amount is outstanding, plus one percent (1%) of the overdue amount accruing
each day from the second through the day the overdue amount is outstanding.
The parties agree that this late charge represent a fair and reasonable
estimate of the costs that Lessor will incur by reason of Lessee's late
payment. Acceptance of any late charge shall not constitute a waiver of
Lessee's default with respect to any overdue amount, nor prevent Lessor from
exercising any other rights or remedies available to Lessor.
E. INITIAL PAYMENT: Concurrently with Lessee's execution of
this Lease, Lessee will deposit the sum of two thousand seven hundred & nine
dollars and twenty cents ($2,709.20) representing the following: first
month's rent.
F. SECURITY DEPOSIT: Concurrently with the execution of this
Lease, Lessee shall deposit with Lessor the sum of fifty-four hundred and
eighteen dollars and forty cents ($5,418.40). Said Deposit shall be held by
Lessor as security for the faithful performance by Lessee of all the terms,
covenants, and conditions of this Lease. If Lessee defaults with respect to
any provision of this Lease, Lessor may (but shall not be requited to) use,
apply or retain all or any part of this Security Deposit for the payment of
any amount which Lessor may spend by reason of Lessee's default or to
compensate Lessor for any loss or damage which Lessor may suffer by reason of
Lessee's default. If any portion of said Deposit is so used or applied,
Lessee shall, within ten (10) days after written demand therefore, deposit
cash with Lessor in the amount sufficient to restore the Security Deposit to
its original amount. Lessee's failure to do so shall be a material breach and
default of this Lease. Lessor shall not be required to keep this Security
Deposit separate from its general funds. Lessor shall not be required to pay
Lessee interest on amounts deposited pursuant to this subparagraph 4F.
5. DIRECT EXPENSES:
A. Lessee shall pay Lessor as additional rent an amount equal to
the Lessee's share of the building's direct operating expenses (hereinafter
"Direct Expenses"). The term "Direct Expenses" shall mean all reasonable
expenses incurred by Lessor each calendar year for the administration,
operation, and maintenance of the building and its parking facilities and
land, including by way of illustration but not by way of limitation: (1) real
and personal property taxes, assessments, and governmental charges levied
against the building, its parking facilities, and land for the period or any
portion of the period of the Lessee's possession of the leased premises under
this Lease, (2) the costs of all utilities required, by this Lease or
otherwise, to be furnished by Lessor, (3) insurance premiums on insurance
policies for public liability, property damage, economic loss, earthquake,
fire and extended coverage respecting the building, (4) the costs of
janitorial services, (5) capital improvements necessitated by governmental
regulations not in effect at time lease is signed, (6) capital improvements
which reduce tenant operating expenses, and (7) labor and costs incurred in
managing the building and maintaining, replacing and repairing its elevators,
hallways, exterior walls, roof, parking facilities, facilities, landscaping
and appurtenances, and other parts of its economic life, and (8) appropriate
reserves for costs incurred in managing, maintaining and repairing the
building and common areas and replacement of the component parts of the
building, including its elevators, hallways, exterior walls and roof. Any
direct expense which is a capital expense shall be prorated over the useful
life of the expense in such a manner that Lessee shall be responsible for
<PAGE> 3
payment to Lessor of that prorata portion of the expense or cost that falls
within the then remaining term of the Lease. Determination of a "capital
expense" and of the "useful life" of any expense shall be made in accordance
with generally accepted accounting principles.
B. Lessee's share of such expenses shall be determined and paid
as follows:
(i) Lessee's share of such expenses shall be determined by
dividing the total square footage leased by the Lessee under this Lease by the
total square footage deemed available for lease by Lessor to tenants and then
multiplying resulting number, expressed as a percentage, by the total amount
of such expenses. The percentage of the space available for lease to tenants
that the Lessee occupies is agreed to be approximately five and twenty-two
one-hundredths percent (5.22%).
(ii) Concurrently with the execution of this Lease and at
the beginning of each calendar year thereafter, Lessor shall provide Lessee
with an estimate of the Direct Expenses derived from expenses for the previous
year(s). Through the balance of the calendar year of the execution of this
Lease and every year thereafter, Lessee shall pay Lessor, at the same time as
the monthly basic rent is paid, an amount each month equal to one-twelfth
(1/12) of the estimated Direct Expenses allocated to Lessee under the
provisions of subparagraph 5B(i) above. Within sixty (60) days of the end of
each calendar year during the term of this Lease, Lessor shall prepare and
deliver to Lessee, a statement showing the total actual Direct Expenses for
the previous calendar year. If Lessee's share of such expenses exceeds the
total monthly payments made towards the Lessee's share of such Direct Expenses
during the previous year (taking into account any proration required by
Lessee's occupation of the premises during only a portion of the year), Lessee
shall pay the Lessor the deficiency within thirty (30 days after receipt of
the statement. If Lessee's total monthly payments made towards the Lessee's
share of such Direct Expenses throughout the preceding calendar year exceed
Lessee's actual share of expenses, Lessor shall pay Lessee the amount of such
excess at the time such statement of operating expenses is delivered to
Lessee. Lessor shall have the right to bill for any item of Direct Expense
that accrued during the Lease term which the Lessee has not previously paid;
provided that the Lessor was not aware of the accrual of such item at the time
the item accrued. Lessee shall promptly pay any billing for such item even if
the Lease term has expired. If requested by Lessee, Lessor shall provide
verification of accounting of Direct Expenses being passed through to Lessee.
6. UTILITIES: Lessee shall be liable for and pay all telephone
charges, electrical and other utility charges for utilities provided to
Lessee. Lessee shall not install any equipment requiring extraordinary
electric capacity (in excess of 110 volts) without the prior written consent
of Lessor.
7. PARKING AND COMMON AREAS: Lessor shall operate, manage, and
maintain all parking areas and common area facilities located on the real
property of which the premises are a part. The manner in which such areas and
facilities shall be maintained shall be at the discretion of Lessor, and the
use of such areas and facilities shall be subject to such reasonable
regulations and rules as Lessor shall make from time to time. At no
additional cost, Lessee shall have the exclusive use of two (2) underground
parking spaces.
8. MAINTENANCE OF LEASED PREMISES:
A. Lessee acknowledges that by entering into possession that
the premises are in a good, clean, and safe condition and repair. Lessee
shall, at all times during the term and any renewal or extension of this
Lease, keep and maintain in good condition and repair, except for reasonable
use and wear, (1) the interior of the premises, including fixtures, interior
walls, floors, ceilings, appliances, and similar equipment, light bulbs, and
(2) the exterior and interior portions of all doors, windows, and plate glass,
in the premises.
<PAGE> 4
B. If Lessee refuses or neglects to repair or properly maintain
the leased premises as required hereunder and continues to refuse or neglect
after demand by Lessor, Lessor may make repairs without liability to Lessee
for any loss or damage that may occur to Lessee's merchandise, stock,
fixtures, or other property or to Lessee's business by reason hereof. Upon
completion of repairs and billing by Lessor, Lessee shall pay Lessor's cost
for making such repairs plus twenty percent (20%) of such cost for overhead
and handling.
C. Lessee waives the provision of any law permitting Lessee to
make repairs at Lessor's expense.
D. Lessee shall be liable for, and indemnify the Lessor
against, any damage to the building in which the premises are located or
liability resulting from the acts or omissions of Lessee or the Lessee's
agents, employees, or invitees.
9. ALTERATIONS, MECHANIC'S LIENS: Lessee shall make no alterations,
installations, additions or improvements in or to the leased premises without
Lessor's written consent. Any additions to, or alterations of, the leased
premises, except movable furniture and trade fixtures, shall become at once a
part of the realty belonging to Lessor and shall be surrendered with the
premises on expiration or termination of this Lease subject to the option
given Lessor below. However, the preceding sentence shall not prevent the
Lessee from installing trade fixtures, machinery or other trade equipment in
compliance with the ordinances of the above-specified city and county, and the
same may be removed upon the termination of this Lease, without Lessee then
being in default under the terms and conditions of this Lease. Lessee shall
return the premises on the termination of this Lease in the same condition as
when rented to Lessee, reasonable wear and tear excepted. Lessee shall keep
the leased premises and property in which the leased premises are situated
free from any liens arising out of any work performed for Lessee, materials
furnished to Lessee or obligations incurred by Lessee. Lessee will notify
Lessor in writing thirty (30) days prior to commencing any alterations or
additions to allow Lessor time to file notice of non-responsibility. Lessor
reserves the right to approve any contractor and the method of payment prior
to said contractor making any improvements to the leased premises. At the
expiration of Lessee's tenancy, Lessor shall have the option to require the
Lessee to remove any alterations or improvements made to the leased premises
by Lessee, and to have any damage caused by such removal repaired at Lessee's
sole expense. Lessee's obligation hereunder shall survive the expiration or
other termination of this Lease. If Lessee installs wallcoverings of any
type, wallpaper, paneling, etc., upon expiration of the lease, Lessee at
Lessor's option, shall return all walls to a smooth, painted condition.
10. A. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall, at
Lessee's sole cost and expense, comply with all of the requirements of all
city, county, municipal, state, federal and other applicable governmental
authorities, now in force, or which may hereafter be in force, pertaining to
the said premises, including the installation of additional facilities as
required for the conduct and continuance of Lessee's business, and shall
faithfully observe in the use of the premises all municipal and county
ordinances and state and federal statutes now in force or which may hereafter
be in force.
B. HAZARDOUS WASTES: (1) Lessee shall not use the Premises
in any manner that will constitute a violation of any federal, state or local
law, ordinance, or regulation now or hereinafter in force relating to health,
safety, hygiene, pollutants or to the environmental conditions including, but
not limited to, soil and ground water condition. Lessee shall not use,
generate, manufacture, store or dispose of on, under or about the Premises or
transport to or from the Premises any flammable explosives, radioactive
materials, hazardous wastes, pollutants, contaminants, toxic substances or
related materials (hereinafter "Hazardous Materials"). For the purpose of
this paragraph, Hazardous Materials shall also include, but not limited to
substances defined as "hazardous substances", "hazardous materials" or "toxic
substances", in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 43 USC 9601 et seq; the Hazardous Materials
<PAGE> 5
Transportation Act, 49 USC 1801 et seq; the Resource Conservation and Recovery
Act, 42 USC 6901 et seq; and those substances defined as "hazardous wastes" in
25117 of the California Health and Safety Code or as "hazardous substances" in
25316 of the California Health and Safety Code; and in the regulations adopted
and publications promulgated pursuant to all of the aforesaid laws. All waste
or Hazardous Materials contained or that Lessee installs on the Premises shall
comply with all federal, state and local laws and regulations pertaining to
hazardous substances and Hazardous Materials.
(2) If at any time during the term of this Lease, Hazardous Materials
attributable to Lessee, its agents, or its employees are discovered on the
Premises which in Lessor's sole discretion may expose Lessor to liability or
constitute a threat to Lessor's interest in the Premises, Lessee, at Lessee's
sole cost and expense, shall remove such Hazardous Materials from the Premises
or groundwater underlying the Premises, in accordance with requirements of
Lessor including, but not limited to (i) repair of any damage to structures,
improvements and fixtures located on the Premises reasonably caused by such
actions, (ii) excavation, removal and disposal off-site of all contaminated
soil, (iii) remediation of all contamination of surface and subsurface water,
(iv) testing and analysis to confirm the extent and remediation of any and
all such contamination, and (v) restoration, grading and compaction of all
excavated areas with clean sanitary fill obtained off-site (collectively
"Remedial Actions"). If such Hazardous Materials are not removed from the
Premises or the groundwater underlying the Premises by Lessee and Remedial
Actions commenced within ninety (90) days after Lessor discovers such
Hazardous Materials, Lessor, at its sole discretion, may pay to have the
same removed (and may cause to have the same removed) and take whatever
Remedial Actions that are required or Lessor reasonably feels are necessary
and Lessee shall reimburse Lessor for all costs and expenses incurred by
Lessor within five (5) days of Lessor's demand for payment. Lessor's right to
remove any Hazardous Materials shall include the right to enter upon the
premises for such purposes and/or to cause its agents or employees to enter
the Premises for such purposes. Although Lessor may take action under this
paragraph, Lessor does not have to do so. Any sums incurred by Lessor
pursuant to this paragraph shall bear interest at the maximum rate per annum
from the date of payment by Lessor until the date of repayment by Lessee.
(3) If at any time during the term of this Lease, Hazardous Materials are
discovered on the Premises, Lessee must notify Lessor in writing within two
(2) days of the date at which Lessee first obtains knowledge of the existence
of such Hazardous Materials on the Premises.
(4) Lessee shall indemnify and hold Lessor harmless from and against any and
all loss, damage, liability (including any foreseeable or unforeseeable
consequential damages), all reasonable attorneys' fees and expenses directly
or indirectly arising out of or attributable to Lessee's or its agents' or
employees' use, generation, storage, release, threatened release, discharge,
disposal or presence on, under or about the Premises of any Hazardous
Materials.
11. SIGNS: Lessor, at its cost, shall install building standard
signage in the building directory. Lessee shall not place, or suffer to be
placed or maintained, on any exterior door, wall or window of the leased
premises, on any part of the real property upon which the premises are
located, any sign, awning or canopy, or advertising matter or other thing of
any kind, and will not place or maintain any decoration, lettering or
advertising matter on the glass of any window or door of the leased premises
without first obtaining Lessor's written approval and consent. Lessee
further agrees to maintain such sign, awning, canopy, decoration, lettering,
advertising matter or thing as may be approved in good condition and repair at
all times. Approved signs or signage are to be paid for by Lessee.
12. ENTRY BY LESSOR: Lessee shall permit Lessor and Lessor's agents
to enter the leased premises at all reasonable times for the purpose of
inspecting the same for the purpose of maintaining the building of which the
leased premises are a part, or for the purpose of making repairs, alterations,
or additions to any portion of same, including the erection and maintenance of
such scaffolding, canopies, fences, and props as may be required, or for the
<PAGE> 6
purpose of posting notices of non-responsibility for alterations, additions,
or repairs. Lessee shall permit Lessor, at any time within ninety (90) days
prior to the expiration of this Lease, to place upon the leased premises any
usual or ordinary "to let" or "to lease" signs. Lessee shall permit Lessor
to show the premises to prospective brokers, agents, tenants, buyers or
persons interested in an exchange at any time within ninety (90) days prior to
the expiration of the Lease. Lessor shall exercise the rights granted by
this paragraph in a considerate manner that will attempt to minimize
inconvenience, annoyance, or disturbance to Lessee. Lessee shall not be
entitled to any abatement or reduction in rent if the Lessor exercises any of
the rights reserved in this paragraph.
13. PERSONAL PROPERTY TAXES: Lessee shall pay before delinquency any
and all taxes, assessments, license fees, and public charges levied, assessed,
or imposed and which become payable during the term of the Lease upon Lessee's
fixtures, furniture, appliances and personal property installed or located in
the leased premises. On demand by Lessor, Lessee shall furnish Lessor with
satisfactory evidence of such payments.
14. ABANDONMENT: Lessee shall not vacate or abandon the premises at
any time during the term.
15. LIABILITY INSURANCE: Lessee, at its own expense, shall
provide and keep in force with companies acceptable to Lessor public liability
insurance for the benefit of Lessor and Lessee jointly against liability for
bodily injury and property damage in the amount of not less than Five Hundred
Thousand Dollars ($500,000.00) in respect to injuries to or death of any one
(1) person, and in an amount of not less than One Million Dollars
($1,000,000.00) in respect to injuries to or death of more than one (1) person
in any one occurrence, and in the amount of not less than Two Hundred
Thousand Dollars ($200,000.00) per occurrence in respect to damage to
property, such limits to be for any greater amounts as may be reasonably
indicated by circumstances from time to time existing. Lessee shall furnish
Lessor with certificate of such policies and whenever required shall satisfy
Lessor that such policies are in full force and effect. Such policies shall
further provide that they shall not be cancelled or altered without twenty
(20) days prior written notice to Lessor. If from time to time, though not
more frequently than once every two (2) years, Lessor's lender or insurance
broker shall determine that the amount of such public liability and property
damage coverage at that time is not adequate, Lessee shall increase the amount
of such coverage as required by either Lessor's lender or insurance broker.
16. EXCULPATION AND INDEMNIFICATION BY LESSEE: Lessor shall not be
liable to Lessee for any damage to Lessee or Lessee's property from any cause.
Lessee waives all claims against Lessor for damage to person or property
arising from any reason. Lessee agrees to indemnify and save Lessor harmless
from and against any and all claims arising from any act, omission, or
negligence of Lessee, or its contractors, licensees, agents, servants, or
employees or arising from any accident, injury, or damage whatsoever caused to
any person or property occurring in, or about the premises or any part of
them, the sidewalks adjoining the premises and any loading dock used
exclusively by Lessee; and from and against all costs, expenses, and
liabilities incurred in or in connection with any such claim or proceeding
brought thereon.
17. CONDEMNATION: If title to all the premises is taken for any
public or quasi-public use under any statute, or by right of eminent domain,
or by private purchase in lieu of eminent domain, or if title to so much of
the premises is so taken that a reasonable amount of reconstruction of the
premises will result in the premises being a practical improvement and
reasonably suitable for Lessee's continued occupancy for the uses and purposes
for which the premises are leased, then in either event, this Lease shall
terminate on the date that possession of the premises, or part of the premises
is taken. All compensation awarded or paid upon a total or partial taking of
the fee title of the premises shall belong to the Lessor, whether such
compensation be awarded or paid as compensation for diminution in value of the
leasehold or of the fee; provided, however, that Lessor shall not be entitled
<PAGE> 7
to any award to Lessee for loss of business or depreciation to and cost of
removal of stock and fixtures.
18. FIRE INSURANCE HAZARDS:
A. No use shall be made or permitted to be made on the leased
premises, nor acts done, which will increase the existing rate of insurance
upon the building or buildings of which the leased premises are a part or
cause the cancellation of any insurance policy covering same, or any part
thereof, nor shall Lessee sell, or permit to be kept, used or sold, in or
about the leased premises, any article which may be prohibited by the standard
form of fire insurance policies. Lessee shall, at its sole cost and expense,
comply with any and all requirements pertaining to the leased premises, or any
insurance organization or company, necessary for the maintenance of reasonable
fire and public liability insurance, covering the leased premises, buildings,
and appurtenances. Lessee agrees to pay to Lessor as additional rent, on
demand, any increase in premiums due to Lessee's activities, on policies which
may be carried by Lessor on the leased premises covering damage to the
building containing same and loss of rent caused by fire and perils normally
included in extended coverage above the rates for the least hazardous type
occupancy for office operations.
B. Lessee shall maintain in full force and effect on all of its
fixtures and equipment in the leased premises a policy or policies of fire and
extended coverage insurance with standard coverage endorsement to the extent
of at least ninety percent {90%) of their insurable value. During the Lease
term, the proceeds from any such policy or policies of insurance shall be used
for the repair or replacement of the fixtures so insured. Lessor shall have
no interest in the insurance upon Lessee's equipment and fixtures and will
sign all documents necessary or proper in connection wish the settlement of
any claim or loss by Lessee.
19. ASSIGNMENT AND SUBLETTING: Without Lessor's prior written
consent, which shall not be unreasonably withheld, Lessee shall not assign,
mortgage or hypothecate this Lease or any interest in this Lease, permit the
use of the leased premises by any person or persons other than Lessee, or
sublet the leases premises or any part of the leased premises. Any transfer
of this Lease from Lessee by merger, consolidation, or liquidation shall
constitute an assignment for purposes of this Lease. Any attempted assignment
or subletting without Lessor's prior written consent shall be void and shall
at the option of the Lessor terminate this Lease. Consent by Lessor to any
assignment or subletting shall not release Lessee from its primary liability
under the Lease, and Lessor's consent to one assignment, subletting, or
occupation or use by other parties shall not be deemed a consent to other
subleases or assignments or occupation or use by other parties. Lessee and
personal guarantors' liability on the lease shall continue after any sublease
or assignment.
20. DAMAGE BY FIRE; CASUALTY: If the premises or any part of the
building of which the premises are a part are damaged by fire or other
casualty, Lessor shall promptly repair such damage if, in Lessor's judgment,
such repair can be made within one hundred twenty (120) days after the
occurrence of such damage under the laws and regulations of the state,
federal, county and municipal authorities having jurisdiction over the
premises and such activities, and this Lease shall remain in full force and
effect. If there shall be such damage to the premises, Lessee shall, during
the period in which damages and repairs render the premises or a portion
thereof untenantable, be entitled to a reduction of rent while such repair is
being made in the proportion that the area of the premises rendered
untenantable by such damage bears to the total area of the premises. If such
repairs cannot, in Lessor's judgment, be made within one hundred twenty (120)
days after the occurrence of such damage, Lessor shall have the option to
either (a) repair such damage with this lease continuing in full force and
effect but with the rent proportionately reduced upon the condition and in the
manner described above, or (b) to terminate this Lease by written notice
within thirty (30) days after the occurrence of such damage as of a date set
out in the notice which shall not be less than thirty (30) nor more than one
<PAGE> 8
hundred twenty (120) days after the giving of such notice. If such notice of
termination is so given, this Lease and all interest of Lessee in the premises
shall terminate on the date specified in such notice, and the rent, reduced by
any proportionate reduction based upon the extent, if any, to which any such
damage to the premises interfered with the business carried on by Lessee in
the premises, shall be paid up to the date of such termination. Lessor shall
refund to Lessee any rent prepaid for any period of time subsequent to such
date. Notwithstanding any of the provisions of this Lease, Lessor shall not
be required to repair any injury or damage due to fire or any other cause or
to repair or replace any panelings, decorations, partitions, railings,
ceilings, floor coverings, trade or office fixtures or other property or
improvements installed on the premises by Lessee. Lessee hereby waives the
provision of subsection 2 of Section 1932 and subsection 4 of Section 1933 of
the California Civil Code.
21. INSOLVENCY OR BANKRUPTCY: The following acts shall constitute a
breach of this Lease by Lessee:
(a) The appointment, in any action or proceeding in which the
Lessee is a party, of a receiver with the authority to take possession of the
premises;
(b) The adjudication of Lessee as a bankrupt;
(c) The filing by Lessee of a petition for reorganization or
discharge under the Bankruptcy Act; or
(d) An assignment for the benefit of creditors by the Lessee.
On the happening of any such event, the Lessor shall have the
right to terminate this Lease upon five (5) days written notice to Lessee.
In no event shall the leasehold estate created by this Lease, or
any interest therein, be assigned or assignable by operation of law, voluntary
or involuntary bankruptcy proceedings, or otherwise, and in no event shall
this Lease or any rights or privileges created hereunder be an asset of Lessee
under any bankruptcy, insolvency or reorganization proceedings.
22. DEFAULT: In the event that Lessee fails to pay rent or other
sums payable hereunder when due, or fails to perform or observe any other
term, covenant or condition of this Lease on Lessee's part to be performed or
observed, or in the event of any other breach of this Lease by Lessee, then
Lessor, in addition to any other rights and remedies of Lessor at law or in
equity, may:
(a) Continue this Lease in effect by not terminating Lessee's
right to possession of the premises and thereby be entitled to enforce all
Lessor's rights and remedies under this Lease including the right to recover
the rent specified in this Lease as it becomes due under this Lease; or
(b) Terminate Lessee's right to possession of said premises,
thereby terminating this Lease, and recover from Lessee:
(1) The amount of the unpaid rent which had been earned at
the time of termination of this Lease;
(2) The amount that is the excess of the rent that would
have been earned during the balance of the term of the lease over the amount
of rental loss that the Lessee proves could have been reasonably avoided by
the Lessor;
(3) Any other amount necessary to compensate Lessor for
all damage proximately caused by Lessee's failure to perform Lessee's
obligations under this Lease; or
(c) In lieu of, or in addition to, bringing an action for any or
all of the recoveries described in subparagraph (b) of this paragraph, bring
<PAGE> 9
an action to recover and regain possession of said premises in the manner
provided by the laws of unlawful detainer of the State of California then in
effect.
23. LESSEE'S LIABILITY FOR ADVANCES BY LESSOR: In the event of
Lessee's breach of any covenant in this Lease, Lessor may at any time, without
notice to Lessee, cure such breach for the account and at the expense of
Lessee. If Lessor at any time, by reason of such breach, is compelled to
pay, or elects to pay, any sum of money or to do any act that will require the
payment of any sum of money, or is compelled to incur any expense, including
reasonable attorney's fees, in instituting, prosecuting or defending any
action or proceeding to enforce Lessee's rights under this Lease or otherwise,
the sum or sums so paid by Lessor, with all interests, costs, and damages,
shall be deemed to be additional rent under this Lease and shall be due from
Lessee to Lessor on the first day of the month following the incurring of such
expenses.
24. HOLDING OVER: Any holding over after the expiration or other
termination of the term of this Lease without the written consent of Lessor
delivered to Lessee shall be construed to be a tenancy from month to month at
125% of the monthly rent in effect on the date of such expiration or
termination subject to adjustment as provided herein, and on the terms,
covenants, and conditions herein specified so far as applicable. Acceptance
by Lessor of rent after such expiration or termination shall not result in any
other type of tenancy or any renewal or extension of the term of this Lease.
The provisions of this paragraph are in addition to, and do not affect,
Lessor's right of re-entry or other rights hereunder or provided by law.
25. SUBORDINATION AND MORTGAGES: In the event Lessor's title is now
or hereunder encumbered by any lien or deed of trust upon the interest of
Lessor in the land and buildings in which the leased premises are located,
lessee shall, at the request of Lessor, execute in writing an agreement
subordinating its rights under this Lease to such lien or deed of trust.
Lessee hereby irrevocably appoints Lessor the attorney in fact of Lessee to
execute, deliver and record any such instrument or instruments for and in the
name and on behalf of Lessee.
26. EFFECT OF LESSOR'S CONVEYANCE: If, during the term of this
Lease, Lessor shall sell its interest in the premises, then from and after the
effective date of the sale, Lessor shall be released and discharged from any
and all obligations and responsibilities under this Lease except those already
accrued.
27. ARBITRATION OF DISPUTES: All disputes arising under or related
to this Agreement shall be submitted for resolution to binding arbitration
pursuant to the California Code of Civil Procedure Sections 1282.2, 1283.05,
and 1283.1, and except as provided herein, in accordance with the arbitration
procedures of the American Arbitration Association, which procedures are
deemed to be incorporated by reference into this Agreement. The parties
shall select one arbitrator for this purpose who shall be an attorney licensed
to practice law in the State of California. The place of arbitration shall be
within Santa Clara County, California. The award of the arbitrator shall be
accompanied by written statement of the basis for such judgment and may be
enforced by any court having proper jurisdiction. The cost of arbitration
shall be borne by the losing party or in such proportions as the arbitrator
shall decide. The provisions of this Paragraph shall survive the termination
of this Agreement.
28. SHAREHOLDER GUARANTY: In the event that the Lessee is a
Corporation or an LLC, each of the following persons:
NOT APPLICABLE
-----------------------------
(attach and initial sheets if necessary)
who are shareholders of the Lessee (hereafter referred to as "Guarantor")
unconditionally and on a continuing basis guarantee and promise to and for the
<PAGE> 10
benefit of Lessor the payment and performance of the obligations and covenants
set forth in the provisions of the Lease.
If Guarantor is more than one person, Guarantor's obligations are
joint and several and are independent of Lessee's obligations under this
Lease. A separate action may be brought or prosecuted against any Guarantor
whether the action or proceeding is brought or prosecuted against any other
Guarantor or the Lessee, or all, are joined in the action or proceeding.
Guarantor waives the benefit of any statute of limitations
affecting Guarantor's liability under this guaranty paragraph.
The provisions of this Lease, or any of them, may be changed by
agreement between Lessor and Lessee at any time, or by course of conduct,
without the consent of, or without notice to, Guarantor including, but not
limited to, any renewal, compromise, acceleration, or other change in the
provisions of this Lease. The guaranty given herein shall guarantee the
performance of this Lease as changed. Assignment of this Lease (as permitted
herein) shall not affect this guaranty.
This guaranty shall not be affected by Lessor's failure or delay
to enforce any of its rights.
If Lessee defaults under the Lease, Lessor can proceed
immediately against Guarantor or Lessee, or both, or Lessor can enforce
against Guarantor or Lessee, or both, any rights that it has under this Lease,
or under any applicable laws. If this Lease terminates and Lessor has any
rights it can enforce against Lessee after termination, Lessor can enforce
those rights against Guarantor without giving previous notice to Lessee or
Guarantor, or without making any demand on either of them.
In addition to the requirement to perform and pay the obligations
as stated above, the Guarantor unconditionally guarantees the performance of
and payment by Lessee to Lessor, whether or not then immediately due or
payable by Lessee, upon (a) the dissolution, insolvency, or business failure
of, or any assignment for the benefit of creditors by, or commencement of any
bankruptcy, reorganization, arrangement, moratorium, or other debtor relief
proceedings by or against Lessee or the Guarantor, whether voluntary or
involuntary, or (b) the appointment of a receiver for, or the attachment,
restraint of, or making or levying of any court order or legal process
affecting the property of Lessee or the Guarantor. The Guarantor
unconditionally promises to pay any amounts owing to Lessor, or order, on
demand, in lawful money of the United States.
Guarantor waives the right to require Lessor to (1) proceed
against Lessee; (2) proceed against or exhaust any security that Lessor holds
from Lessee; or (3) pursue any other remedy in Lessor's power. Guarantor
waives any defense by reason of any disability of Lessee, and waives any other
defense based on the termination of Lessee's obligations to Lessor have been
discharged in full. Guarantor waives its rights to enforce any remedies that
Lessor now has, or later may have, against Lessee. Guarantor waives any right
to participate in any security now or later held by Lessor. Guarantor waives
all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance
of this guaranty, and waives all notices of the existence, creation, or
incurring of new or additional obligations.
Any and all rights, claims and/or amounts owing of or by Lessee
now or hereafter held by Guarantor are hereby subordinated to the amounts
owing by Lessee to Lessor, and all such amounts owing by Lessee to the
Guarantor, if Lessor so requests, shall be collected, enforced, and received
by the Guarantor as trustee for Lessor, and be paid over to Lessor, on account
of the amounts owing by Lessee to Lessor, without affecting or impairing in
any manner the liability of the Guarantor under the other provisions of this
guaranty. Any instruments now or hereafter evidencing any amounts owing by
Lessee to the Guarantor shall be marked with a legend that such amounts owing
are subject to the foregoing subordination provision, and, if Lessor so
<PAGE> 11
requests, shall be delivered to Lessor. Notwithstanding anything to the
contrary in this guaranty, the Guarantor hereby irrevocably and
unconditionally waives all rights it may have at law or in equity (including,
without limitation, any law subrogating the Guarantor to the rights of Lessor)
to seek contribution, indemnification, setoff, subrogation, counterclaim, or
any other form of reimbursement from Lessee, any other guarantor, or any other
person now or hereafter primarily or secondarily liable for any obligations of
Lessee or Lessor, for any disbursement or other performance made by the
Guarantor under or in connection with this guaranty or otherwise.
If Lessor disposes of its interest in this Lease, "Lessor", as
used in this guaranty paragraph, shall mean Lessor's successors.
If Lessor is required to enforce Guarantor's obligations by legal
proceedings, Guarantor shall pay to Lessor all costs incurred, including,
without limitations, reasonable attorneys' fees.
The liability of the Guarantor hereunder shall be in addition to
all other liabilities otherwise incurred by the Guarantor to Lessor. This
guaranty shall continue in full force and effect as to all the amounts owing
by Lessee until such amounts owing are fully paid, performed, and discharged.
The amounts owing shall not be considered fully paid, performed, or discharged
unless and until all amounts owing by Lessee to Lessor are no longer subject
to any rights on the part of any person whomsoever, including Lessee as a
debtor-in-possession, or any trustee in bankruptcy, to set aside such payments
or to seek to recoup the amount of such payments, or any part thereof. The
foregoing shall include, by way of example, all rights to recover preferences
voidable under Title 11 of the United States Code. In the event that any
such payments by Lessee to Lessor are set aside after the making thereof, in
whole or in part, or settled without litigation, to the extent of such
settlement, all of which is within the sole discretion of Lessor, Guarantor
shall be liable for the full amount Lessor is required to repay, plus costs,
interest, attorneys' fees, and any and all expenses of Lessor paid or incurred
in connection therewith. Guarantor hereby waives any right to the deferral or
modification of Guarantor's obligations hereunder by virtue of any such
proceeding.
Guarantor's obligations under this guaranty shall be binding on
Guarantor's successors.
29. NOTICES: All notices under this Lease shall be in writing and
shall be deemed to have been duly given on the date of service if served
personally on the party to whom the notice is given, or on the third (3rd) day
after mailing, if mailed, by first class mail, registered or certified,
postage prepaid, and properly addressed to the party at the address set forth
on the signature page of this Lease, or any other address that any party
may designate by written notice to the others.
30. GENERAL PROVISIONS:
A. The term "Lessor" as used herein shall mean only the owner
or owners at the time in question of the fee title or interest in a ground
lease of the premises, and except as expressly herein provided, in the event
of any transfer of such title or interest, Lessor herein named (and in the
case of any subsequent transfers, the then grantor) shall be relieved from
and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds in the hands
of Lessor or the then grantor after the time of such transfer, in which Lessee
has an interest shall be delivered to the grantee. The obligations contained
in this Lease to be performed by Lessor shall, except as provided above, be
binding on Lessor's successors and assigns, only during their respective
periods of ownership.
B. The unenforceability, invalidity, or illegality of any of the
provisions of this Lease shall not render the other provisions unenforceable,
invalid or illegal.
<PAGE> 12
C. Except as expressly provided herein, any amount due from
Lessee not paid when due or any past due obligation of Lessee paid by Lessor
shall bear interest at the greatest percentage interest per annum from the
date due as the law then allows (but in no event less than seven percent (7%)
per annum). Payment of such interest shall not excuse or cure any default by
Lessee under this Lease.
D. Time is of the essence.
E. Article and paragraph captions are not a part hereof.
F. This Lease contains all agreements of the parties with
respect to any matter mentioned herein. No prior agreement or understanding
pertaining to any such matter shall be effective. This Lease may be modified
only by a writing signed by the parties in interest at the time of the
modification.
G. Any written notice to any of the parties hereto, required or
permitted under this Lease shall be deemed to have been duly given on the date
of service if served personally on the party to whom notice is to be given, or
on the second day after mailing if mailed to the party to whom notice is to be
given, by certified first class mail, return receipt requested, postage
prepaid, and addressed to the party to whom notice is to be given at the
address set forth after their signatures at the end of this Lease.
H. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent
to, or approval of, any such subsequent act by Lessee.
I. Subject to any provisions hereof restricting assignment or
subletting by Lessee, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.
J. No remedy or election hereunder shall be deemed exclusive but
shall, wherever possible, be cumulative with all other remedies in law or
equity.
K. Each provision of this Lease to be performed by Lessee shall
be deemed both a covenant and a condition.
L. Lessee, as a material part of the consideration to be
rendered to Lessor, hereby waives all claims against Lessor for damages to
goods, wares and merchandise, in, upon and about said premises and for injury
to Lessee, its agents, or third persons in or about said premises from any
cause arising at any time.
M. Whenever the singular number is used in this Lease and when
required by the context, the same shall include the plural. The masculine
gender shall include the feminine and neuter genders. The word "person" shall
include corporations, firms or associations. If there be more than one
Lessee, the obligations imposed under this lease upon Lessee shall be joint
and several.
N. If Lessee is a corporation, each individual executing this
Lease on behalf of the corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation, in
accordance with a duly adopted Board of Directors of said corporation or in
accordance with the By-Laws of the corporation, and that this Lease is binding
upon the corporation in accordance with its terms.
O. Lessor reserves the right to assign all parking areas as
developed.
<PAGE> 13
P. In the event that Lessor should bring suit for the possession
of the premises, for the recovery of any sum due under, or seek arbitration
because of the breach of any covenant of this Lease, or for any other relief
against Lessee, declaratory or otherwise, or should Lessee bring an action for
any relief against Lessor, declaratory or otherwise, arising out of this
Lease, and Lessor should prevail in any such suit, Lessee shall pay Lessor a
reasonable attorney's fee, which shall be deemed to have accrued on the
commencement of such action and shall be enforceable whether or not such
action is prosecuted to judgment.
31. ADDITIONAL PROVISIONS: Additional provisions of this Lease
numbered 32 through 33 are attached hereto and are incorporated herein by this
reference.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of
the day and year written above.
LESSOR
LOS ALTOS FINANCIAL CENTER
By: /s/ Penny M. Woolworth
-------------------------------
Title: Owner
-------------------------------
Address: 167 So. San Antonio Road
-------------------------------
Los Altos, CA 94022
-------------------------------
LESSEE
By: /s/ Thomas A. Schultz
-------------------------------
Address: 1250 Oakmead Pkwy # 210
-------------------------------
Sunnyvale CA 94086
-------------------------------
ADDITIONAL PROVISIONS
REGARDING THAT CERTAIN LEASE DATED June 28, 1996
BY AND BETWEEN THE LOS ALTOS FINANCiAL CENTER ("LESSOR")
AND Vista Technologies, Inc. ("LESSEE")
TO LEASE OFFICE SPACE AT
167 SOUTH SAN ANTONIO ROAD
LOS ALTOS, CALIFORNIA
33. Prior to Lease Commencement Date, Lessor, at Lessor's expense, shall
improve Premises as follows:
* Install a cold water line in the existing kitchen area for a
refrigerator to be supplied by Lessee.
* Install a large window (approx. 4' x 6') in the wall between the
kitchen and the open office with mini blinds to match the existing
blinds in the Premises.
* Install building standard new carpet in the office area or provide
Lessee with a carpet allowance of $2,000.00 including
installation. Lessor to approve selection of carpeting before
installation.
* Patch and paint interior of Premises.
* Install lower sliding window in large private office facing
parking lot.
Lessee, at Lessee's cost, can modify lighting with Lessor's prior
written approval. Tenant improvements shall be built in a good and
workmanlike manner using building standard materials.
<PAGE> 1
VISTA TECHNOLOGIES INC.
1996 STOCK COMPENSATION PLAN
SECTION 1. PURPOSE OF THE PLAN AND CERTAIN DEFINITIONS.
1.1. The purpose of the 1996 Stock Compensation Plan (the "Plan") is to
aid Vista Technologies Inc., a Nevada corporation (the"Corporation") and its
subsidiaries by providing an "employee benefit plan" within the meaning of
that term in Rule 405 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), for use by a Committee of the Board, and at the
discretion of said Committee, to compensate officers, directors, employees and
other individuals acting in the place of employees of the Corporation or its
subsidiaries as professionals, consultants and/or advisers to the Corporation,
in each instance as designated from time to time by the Committee (such
persons being individually called a "Plan Participant" and collectively the
"Plan Participants").
1.2. For purposes of the Plan, a "subsidiary" of the Corporation shall
be any corporation in which the Corporation at the time of a compensation
award hereunder owns or controls, directly or indirectly, at least fifty
percent (50%) or more of the outstanding voting capital stock.
1.3. Compensation issuable under the Plan to Plan Participants shall be
payable in shares of the Corporation's common stock, par value $0.005 per
share (the "Common Stock") in lieu of cash compensation and shall be issued
solely in payment for the value of services actually rendered to the
Corporation by the Plan Participant. Shares issued hereunder shall be valued
at the fair market value thereof on the date such shares are authorized to be
issued to a specified Plan Participant by the Committee for designated
services rendered, or to be rendered, in a specified dollar amount. In
determining the fair market value of any payment in Common Stock issued under
this Plan from time to time, the Committee shall take into consideration the
quoted prices in the public market for the Common Stock on the date such
shares are authorized for issuance by the Committee and, if deemed applicable
by the Committee to its determination of fair market value, a reasonable
discount to quoted market prices not exceeding 25% of the low bid price on the
date of such authorization if such discount is deemed appropriate by the
Committee to allow for price volatility and/or possible lack of liquidity
based on reported price and trading volume in the public market for the Common
Stock when compared to the number of shares and any applicable forfeiture or
restrictive provisions authorized for issuance to a Plan Participant in
accordance herewith.
1.4. Compensation paid in Common Stock under this Plan may be issued
only with respect to services of the type for which shares pursuant to an
employee benefit plan may be registered on Form S-8 under the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto, as the same are in effect at the date this Plan is adopted
by the Board of Directors and as said Form S-8 and such rules and regulations
may be amended from time to time hereafter during the term of this Plan. In
no event shall any compensation be payable hereunder: (i) for services which
are either directly or indirectly related to the offer or sale of securities
in a capital-raising transaction by the Corporation; or (ii) for the sale of
goods, merchandise, products, tangible assets or other personal property.
Shares of Common Stock authorized by this Plan may be issued as compensation
only upon the execution of an agreement by the recipient of such shares to
accept the same in lieu of all or a designated portion of cash compensation
otherwise payable for such services.
1.5. Each prospective recipient of a payment of shares of Common Stock
under this Plan shall not, with respect to such payment, be deemed to have
become a Plan Participant, or to have any rights with respect to such payment,
until and unless such recipient shall have executed an agreement or other
instrument evidencing the payment in form and substance acceptable to the
<PAGE> 2
Committee and delivered a fully executed copy thereof to the Corporation, and
otherwise complied with any then applicable terms and conditions of the
payment.
1.6. Subject to the provisions of this Plan, shares or interests in
shares of Common Stock issued as compensation under the Plan may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the date on
which such shares are issued, or, if later, the date on which any applicable
restriction or performance condition and period shall lapse without a
requirement of forfeiture.
SECTION 2. ADMINISTRATION.
2.1. The Board of Directors of the Corporation (the "Board") shall
designate a Committee of not less than two directors (the "Committee") who
shall serve at the pleasure of the Board. No member of the Committee shall
be eligible to participate in the Plan while serving on the Committee, and
each member of the Committee shall conform to such other qualifications as
shall be necessary for payments of Common Stock compensation under the Plan to
be exempt from the provisions of Section 16(b) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act") by virtue of the provisions of
Rule 16b-3 thereunder as the same shall be amended from time to time.
2.2. The Committee shall have full power and authority, subject to such
resolutions not inconsistent with the provisions of the Plan as may be issued
or adopted by the Board, to authorize the issuance of Common Stock as
compensation for services in accordance with this Plan to eligible Plan
Participants designated by the Committee from time to time. In furtherance of
such powers:
(a) The Committee shall interpret the provisions of this Plan
and any payments of Common Stock compensation issued under the Plan (and
any agreements relating thereto) and supervise the administration of the
Plan.
(b) The Committee shall: (i) select the Plan Participants to
whom Common Stock compensation may from time to time be granted
hereunder; (ii) determine the number of shares and the fair market
value thereof for each payment of Common Stock compensation granted
hereunder; (iii) determine any other terms and conditions of such Common
Stock compensation payments, not inconsistent with the provisions of the
Plan (including but not limited to any restrictions or forfeiture
conditions relating to the performance of services by the Plan
Participant); (iv) determine whether, to what extent and under what
circumstances a Common Stock payment of compensation hereunder may be
deferred either automatically or at the election of the Plan Participant
under a written agreement; and (v) approve any agreement executed by
Plan Participants and the Corporation in accordance with this Plan.
(c) All decisions made by the Committee pursuant to the
provisions of the Plan and related orders or resolutions of the Board
(as and to the extent permitted hereunder) shall be final, conclusive
and binding on all persons, including the Corporation, its shareholders
and Plan Participants.
SECTION 3. STOCK SUBJECT TO THE PLAN.
3.1. The total number of shares of Common Stock of the Corporation
available for payment of compensation under the Plan is Two Hundred Fifty
Thousand (250,000) shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares. If any shares that have
been issued as compensation hereunder cease to be outstanding as a result of
any forfeiture or failure to satisfy restrictive conditions of a payment, such
shares shall again be available for compensation payments under the Plan.
<PAGE> 3
3.2. In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, extraordinary cash dividend, or
other change in corporate structure affecting the Common Stock, such
adjustment shall be made in the aggregate number of shares which may be issued
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion; provided that the number of shares subject to any
compensation payment shall always be a whole number. In addition, the
Committee is authorized to make adjustments in the terms and conditions of,
and performance criteria relating to, payments of compensation hereunder in
recognition of unusual or nonrecurring events affecting the Corporation, the
financial statements of the Corporation, the services to be rendered by a Plan
Participant, or in response to changes in applicable laws, regulations or
accounting principles.
SECTION 4. STOCK CERTIFICATES AND CERTAIN RESTRICTIONS.
4.1. To the extent deemed necessary by the Committee, acting upon the
advice of counsel to the Corporation, stock certificates issued under the Plan
may bear an appropriate legend referring to any applicable restrictions under
the Securities Act. In such event, the Committee may require any Plan
Participant receiving shares pursuant to a Common Stock payment of
compensation under the Plan to represent to and agree with the Corporation in
writing that such Plan Participant is acquiring the shares without a view to
distribution thereof.
4.2. To the extent deemed necessary by the Committee, stock
certificates issued under the Plan may bear an appropriate legend referring to
the any restrictions applicable to any such payment, substantially in the
following form:
"The transferability of this certificate and the shares
represented hereby are subject to the terms and conditions
(including forfeiture) of the Corporation's 1996 Stock
Compensation Plan and an Agreement entered into between the
registered owner and the Corporation. Copies of such Plan and
Agreement are on file in the principal offices of the
Corporation."
4.3. If deemed appropriate by the Committee, the Committee may require
that the stock certificates evidencing shares subject to forfeiture or other
restrictions be held in custody by the Corporation until the restrictions
thereon shall have lapsed, and may require, as a condition of any restricted
payment, that the Plan Participant shall have delivered a stock power,
endorsed in blank, relating to the Common Stock covered by such payment.
SECTION 5. AMENDMENTS AND TERMINATION.
5.1. The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would:
(a) impair the rights previously granted to any Plan Participant
without the Plan Participant's consent;
(b) except with approval of shareholders of the Corporation
within one year after the same is proposed, increase the total number of
shares available for the purpose of the Plan;
(c) amend the Plan or an agreements thereunder in a manner that
would render the shares of Common Stock covered by the Plan to become
ineligible for registration on Form S-8 under the Securities Act (except
in the event Form S-8 shall be revoked by the Securities and Exchange
Commission);
(d) amend the Plan in a manner that would cause payments of
Common Stock compensation under the Plan to become subject to the
provisions of Section 16(b) of the Exchange Act (except in the event
Rule 16b-3 thereunder shall be revoked by the Securities and Exchange
Commission);
<PAGE> 4
(e) otherwise materially increase the benefits accruing to Plan
Participants under the Plan or materially modify the requirements as to
eligibility for participation in the Plan.
5.2 The Committee may amend the terms of any Common Stock payment
theretofore granted under this Plan, prospectively or retroactively, but no
such amendment shall impair the rights of any Plan Participant without such
Plan Participant's consent.
SECTION 6. OTHER PROVISIONS.
6.1. Nothing in the Plan shall confer upon any Plan Participant the
right to continue in the employment of the Corporation or any of its
subsidiaries or affect any right that the Corporation or any of its
subsidiaries may have to terminate the employment of any such employee.
6.2. A Plan Participant shall have no rights as a shareholder until he
or she becomes the registered holder of record of Common Stock certificates
delivered under the Plan. The Corporation shall have no liability to any Plan
Participant for any delay in the issuance and delivery of such Common Stock
certificates; provided, however, that in the event of any unanticipated delay
in the issuance and delivery of shares authorized for issuance under the Plan,
in appropriate circumstances the Committee in its discretion may adjust the
number of share so issued to compensate for any loss to the Plan Participant
arising from a decline in the fair market value of shares issued as a result
of said unanticipated delay.
6.3. If any Plan Participant receiving a payment of Common Stock
compensation hereunder is an employee of the Corporation, such Plan
Participant shall make arrangements satisfactory to the Committee to pay to
the Corporation, in the calendar quarter of such payment, any Federal, state
or local taxes required to be withheld from the employee with respect to such
compensation. If such employee shall fail to make such tax payments as are
required, the Corporation and its subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Plan Participant.
6.4. The Plan shall be effective on the date it is approved by the
Board of Directors, but its continuance shall be subject to the approval,
obtained in accordance with Rule 16b-3(b) of the Exchange Act (if so
required), of the holders of a majority of all outstanding shares of Common
Stock within twelve months after the date the Plan is adopted by the Board.
Any stock compensation payments proposed for issuance before shareholder
approval is obtained must be rescinded if shareholder approval is not obtained
within twelve months after the Plan is adopted by the Board.
6.5. The validity, construction and effect of the Plan and any action
taken or relating to the Plan shall be determined in accordance with the laws
of the state of California and applicable federal law of the United States.
6.6 No payments of compensation hereunder shall be granted pursuant to
the Plan after the tenth anniversary of the earlier of either the date the
Plan is adopted by the Board or the date the Plan is approved by the
shareholders of the Corporation, but payments of compensation theretofore
granted may extend beyond that date.
# # # # # # # # # # #
<PAGE> 1
EXCHANGE AGREEMENT and REGULATION S OFFSHORE TRANSACTION
Any interest in the VISTA TECHNOLOGIES INC. 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 any party to this
Agreement only: (i) pursuant to a registration statement under the Securities
Act; or (ii) pursuant to an applicable exemption, if any, from such
registration. The resale of VISTA TECHNOLOGIES INC. securities under Rule 903
of Regulation S and other regulations under the Securities Act, if applicable,
is prohibited before the expiration of any restricted period required by Rule
903 of Regulation S, which restricted period cannot commence until all
securities included in this offering have been sold and fully paid for.
This EXCHANGE AGREEMENT (the "Agreement") dated as of July 18, 1996 by
and between:
VISTA TECHNOLOGIES INC., a Nevada corporation ("VISTA") with its
principal office at 1250 Oakmead Parkway, Suite 210, Sunnyvale,
California 94086-3599; and
REFRACTIVE SERVICES-800 INC., a company organized under the laws of the
Republic of Panama ("RSINC"), with offices at Statenhof Building, Reaal
5-V, P.O. Box 4, 2350 AA Leiderdorp, The Netherlands.
1. EXCHANGE OF SERIES A CONVERTIBLE PREFERRED SHARES IN VISTA LASER
CENTERS ENTITIES FOR VISTA SECURITIES. Effective as of the date of this
Agreement, RSINC hereby agrees to sell, transfer and assign to VISTA the
following shares of 10% Series A Cumulative Convertible Preferred Stock
(herein collectively called the "VLC Preferred Shares") solely in exchange for
the issuance and delivery to RSINC by VISTA of Five Hundred Twenty Thousand
(520,000) shares of common stock in VISTA (the "VISTA Common Shares"):
<TABLE>
<CAPTION>
Original Cost
Corporation VLC Preferred Shares (U.S. funds)
- ----------------------------------- ---------------------------- --------------
<S> <C> <C>
Vista Laser Centers of Michigan, Inc. 100,000 shares Series A Preferred $100,000 cash
Vista Laser Centers of the Southwest, Inc. 100,000 shares Series A Preferred $100,000 cash
Vista Laser Centers of the Northwest, Inc. 100,000 shares Series A Preferred $120,000 cash
Vista Laser Centers of the Pacific, Inc. 100,000 shares Series A Preferred $100,000 cash
Vista Laser Centers Metro, Inc. 100,000 shares Series A Preferred $100,000 cash
</TABLE>
1.1. RSINC shall deliver the VLC Preferred Shares to VISTA by causing
five original copies of a stock power in the form of EXHIBIT A attached hereto
to be duly executed and delivered to VISTA within 30 days of the date of this
Agreement. VISTA is authorized to present the executed stock powers and a
copy of this Agreement to authorized officers of each of the Vista Laser
Centers corporations, which shall constitute full authority for a stock
certificate evidencing the VLC Preferred Shares in the respective corporation
currently owned by RSINC to be transferred on their books and records into the
name of VISTA. RSINC represents and warrants to VISTA that RSINC is the sole
record and beneficial owner of the VLC Preferred Shares, and has good and
marketable title thereto and the absolute right to sell, assign, transfer and
deliver the same to VISTA, free and clear of all adverse claims of any kind
except for those certain lock-up agreements executed by RSINC in favor of
Dickinson & Co. conditioned upon initial public offerings of securities.
VISTA acknowledges receipt of a copy of the aforesaid lock-up agreements and
agrees to be bound by the provisions thereof as if the same had been executed
by VISTA.
<PAGE> 2
1.2. VISTA shall deliver the VISTA Common Shares to RSINC or its
designated nominees who are not U.S. Persons for purposes of Regulation S
under the Securities Act of 1933 by delivering to RSINC within 30 days of the
date of this Agreement stock certificates evidencing the VISTA Common Shares
registered in accordance with the written instructions of RSINC. VISTA
represents and warrants to RSINC that all of the VISTA Common Shares issued in
accordance with this Agreement, upon receipt of the consideration therefor
will be duly authorized, validly issued, fully paid and nonassessable
securities of VISTA, and have not and will not be issued in violation of any
preemptive, subscription or other right of any person to acquire securities of
VISTA.
1.3. Within 30 days of the date of this Agreement, RSINC shall cause
the bank depositary holding any undisbursed funds remaining from the $520,000
originally invested by RSINC in the VLC Preferred Shares to be transmitted by
wire-transfer for the account of such entities to the attorney Trust accounts
of counsel for VISTA. The amount to be so transferred is accurately stated
on the signature page of this Agreement.
1.4. Within 30 days from the date of this Agreement, RSINC shall render
an accounting to VISTA detailing the amount spent and payee for each
disbursement already spent for the accounts of Vista Laser Centers of the
Northwest, Vista Laser Centers of the Southwest, Vista Laser Centers of the
Pacific and Vista Laser Centers Metro, respectively, from the $420,000
invested in VLC Preferred Shares of those entities. Upon request by VISTA,
RSINC will also provide to VISTA photocopies of cancelled checks for such
disbursement. VISTA acknowledges it has received a satisfactory accounting
the $100,000 originally invested in Series A preferred shares issued by Vista
Laser Centers of Michigan, Inc.
2. AGREEMENT TO SELL 1,000 SHARES OF COMMON STOCK IN REFRACTIVE
SERVICES 800 CORP. FOR $50,000. Effective as of the date of this Agreement,
RSINC hereby agrees to sell, transfer and assign to VISTA a total of 1,000
shares of common stock Refractive Services 800 Corp., a Nevada corporation
(herein called the "RS-Nev Common Shares"), in exchange for the issuance and
delivery to RSINC by VISTA of $50,000 in cash.
2.1. RSINC shall deliver the RS-Nev Common Shares to VISTA by causing a
stock power in the form of EXHIBIT B attached hereto to be duly executed and
delivered to VISTA within 30 days of the date of this Agreement. VISTA is
authorized to present the executed stock power and a copy of this Agreement to
authorized officers of Refractive Services 800 Corp., which shall constitute
full authority for a stock certificate evidencing the RS-Nev Common Shares
currently owned by RSINC to be transferred on the books and records of
Refractive Services 800 Corp. into the name of VISTA. RSINC represents and
warrants to VISTA that RSINC is the sole record and beneficial owner of the
RS-Nev Common Shares, and has good and marketable title thereto and the
absolute right to sell, assign, transfer and deliver the same to VISTA, free
and clear of all adverse claims.
RSINC further represents and warrants that there are no
liabilities, debts or other obligations, whether fixed, contingent or
otherwise, currently outstanding with respect to Refractive Services 800 Corp.
except for certain license agreements between Refractive Services 800 Corp.
and various Vista Laser Centers companies which have been organized and
sponsored by VISTA and RSINC, as to which RSINC hereby releases all claims.
2.2. VISTA shall deliver the consideration for the RS-Nev Common Shares
to RSINC by delivered good cash funds therefor by wire transfer to the account
of RSINC within 30 days of the date of this Agreement.
3. INVESTMENT REPRESENTATION BY VISTA. VISTA acknowledges that the
VLC Preferred Shares and the RS-Nev Common Shares have not been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"). VISTA represents and warrants that it is purchasing all of such
securities for its own account for investment and without a view to the resale
or other distribution thereof. VISTA acknowledges such securities will be
restricted from resale unless such securities are registered for sale in
<PAGE> 3
accordance with the Securities Act of 1933 and applicable state laws or an
exemption from such registration is available.
4. REGULATION S AND OTHER REPRESENTATIONS AND WARRANTIES.
4.1. The parties acknowledge that VISTA Common Shares to be issued to
RSINC hereunder have not been registered under the Securities Act in reliance
upon an exemption from registration provided by Regulation S of the Securities
Act for an offshore transaction. RSINC represents and warrants that neither
RSINC nor any of its officers, directors and shareholders is a U.S. Person as
defined in Rule 902(o) of Regulation S ("Regulation S") promulgated under the
Securities Act.
4.2. RSINC has been duly formed and is validly existing as a company in
good standing under the laws of the Republic of Panama and does not maintain
any offices in the United States. RSINC was not formed for the purpose of
investing in Regulation S securities or the securities of VISTA. RSINC is not
registered as an issuer under the Securities Act, is not required to be
registered with the U.S. Securities and Exchange Commission under the U.S.
Investment Company Act of 1940, as amended, and is not a broker or dealer in
securities. RSINC is entering into this Agreement and is acquiring VISTA
securities 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.
4.3. RSINC and VISTA covenant and agree that no offer to enter into
this Agreement has been made by VISTA to RSINC in the United States. RSINC
represents and warrants that at the times of the offer and execution of this
Agreement, RSINC was located and resident outside the United States.
4.4. Neither RSINC, 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 VISTA securities offered hereby, including but not limited to
effecting any sale of VISTA common stock through RSINC 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"). RSINC agrees that all offers and sales of any VISTA securities
covered by this Agreement or otherwise owned by RSINC and its affiliates from
the date hereof 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
Securities Act. RSINC 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.
4.5. RSINC 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 VISTA Common Shares 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 RSINC only (i) pursuant to a
registration statement under the Securities Act, or (ii) pursuant to an
exemption from such registration, if any. RSINC 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.
RSINC acknowledges that if any transfer of the VISTA Common 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. RSINC acknowledges that, so
long as appropriate, a legend similar to the following may appear on
certificates representing the VISTA Common Shares: "These securities have not
been registered under the Securities Act of 1933 and may be reoffered and sold
<PAGE> 4
only if registered or if an exemption from such registration is available in
the opinion of counsel satisfactory to the issuer."
4.6. RSINC and its principals have sufficient knowledge and experience
in financial and business matters so that RSINC is able to evaluate the merits
and risks of its investment in the VISTA Common Shares.
4.7. RSINC has had an opportunity to ask questions of and to receive
answers from one or more of the executive officers of VISTA as RSINC deems
necessary in order for RSINC to make an informed decision with respect to this
Agreement and its investment in the VISTA Common Shares. RSINC has received
complete and satisfactory answers to all such inquiries. RSINC has not
received oral or written representations or assurances from VISTA or any
representatives of VISTA, other than as set forth in this Agreement.
4.8. This Agreement has been duly authorized, executed and delivered by
RSINC 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.
RSINC has full power and authority necessary to enter into this Agreement and
to perform its obligations hereunder.
4.9. 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 RSINC 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 RSINC 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.
4.10. VISTA further represents and warrants to RSINC as follows:
(a) 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.
(b) VISTA is a "Reporting Issuer" as defined in Rule 902(l) of
Regulation S except that VISTA is delinquent as of the date of this Agreement
in filing its Report on Form 10-KSB under the Securities Exchange Act of 1934
("Exchange Act"); VISTA is not an investment company registered or required
to register as such under the United States Investment Company Act of 1940.
(c) VISTA's Common Stock is a class of securities registered
under Section 12(g) of the Exchange Act. VISTA has made available to RSINC
copies of VISTA's last Annual Report on Form 10-KSB filed for its last fiscal
year ended March 31, 1995 (the "Form 10-KSB"), all Quarterly Reports on Form
10-QSB filed since such Form 10-KSB, all Current Reports on Form 8-K filed
since such 10-KSB, and VISTA's most recent proxy statements to stockholders
for meetings of stockholders held subsequent to March 31, 1995.
(d) VISTA has offered any VISTA securities covered by this
Agreement 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.
(e) This Agreement, upon its acceptance by RSINC, 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
<PAGE> 5
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 and under the Notes.
(f) 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.
5. OTHER TERMS AND AGREEMENTS.
5.1. 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.
5.2. 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.
5.3. No amendment, waiver or consent with respect to any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
5.4. This Agreement and the documents referred to herein contain the
entire understanding among the parties with respect to the subject matter
hereof, including without limitation the interest of RSINC in shares of any
companies named "Vista Laser Centers" sponsored or to be sponsored by VISTA,
and supersede all other agreements, understandings and undertakings among the
parties as to such matters.
5.5. In consideration of this Agreement, RSINC releases and waives any
preemptive rights it may have have as a result of any prior agreements between
the parties to invest in additional Vista Laser Centers or other corporate
entities organized or sponsored by VISTA for any purpose.
5.6. Time shall be of the essence of this Agreement.
<PAGE>
<PAGE> 6
IN WITNESS WHEREOF, each of the parties hereto has executed or caused
this Agreement to be executed all as of the date first written above.
RSINC certifies that the undisbursed balances of the $520,000 in funds
originally invested in VLC Preferred Shares under the control of RSINC as of
the date of this Agreement are as follows:
<TABLE>
<CAPTION>
Corporation Undisbursed balance (U.S. funds)
- ------------------------- --------------------------------
<S> <C>
Vista Laser Centers of Michigan, Inc. NONE
Vista Laser Centers of the Southwest, Inc. $
-------------------
Vista Laser Centers of the Northwest, Inc. $
-------------------
Vista Laser Centers of the Pacific, Inc. $
-------------------
Vista Laser Centers Metro, Inc. $
-------------------
VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
---------------------------------
Thomas A. Schultz, President
ATTEST:
/s/ William M. Curtis
- ----------------------------------
William M. Curtis, Secretary
REFRACTIVE SERVICES-800, INC.
By: /s/ Marcel Jouby
------------------------------------
Marcel Jouby, President
ATTEST:
/s/ Kerry Lynee O'Rourke
- -----------------------------------
Kerry Lynne O'Rourke, Secretary
</TABLE>
The following table lists subsidiaries of the Registrant and certain
other corporate entities in which the Registrant owns an interest:
<TABLE>
<CAPTION>
Jurisdiction of Percentage Ownership
Name of Corporation Organization by the Registrant
- ---------------------------- ------------- --------------------
<S> <C> <C>
SUBSIDIARIES INCLUDED IN CONSOLIDATED
FINANCIAL STATEMENTS AT MARCH 31, 1996:
Vista Vision S.p.A. Italy 73.59%
ConVista Vision B.V. The Netherlands 100 %
Vista Vision Scandinavia AB Sweden 100 % (Note 1)
REGIONAL JOINT VENTURES IN WHICH THE
REGISTRANT OWNS AN INVESTMENT INTEREST:
Vista Laser Centers of Michigan, Inc. Nevada 46.15% (Note 2)
Vista Laser Centers of the Northeast, Inc. Nevada 100 % (Note 2)
Vista Laser Centers of the Northwest, Inc. Nevada 51.06% (Note 2)
Vista Laser Centers of the Pacific, Inc. Nevada 38.52% (Note 2)
Vista Laser Centers of the Southwest, Inc. Nevada 47.68% (Note 2)
DISCONTINUED OPERATIONS
OR ABANDONED INVESTMENTS:
Vista Vision International Ltd. United Kingdom 100% (Note 3)
Precision Laser Eye Centres Ltd. United Kingdom 50% (Note 3)
Medical Development Resources, Inc. Delaware 40% (Note 4)
</TABLE>
___________________________________
Note 1: 100% of the capital stock in Vista Vision Scandinavia AB is owned
by ConVista Vision B.V. 51% of the capital stock in Vista Vision
Scandinavia AB has been pledged as collateral to secure
obligations of the Registrant under $277,777 in principal amount
of 12% convertible promissory notes due on June 15, 1998.
Note 2: Percentage interest in this entity is based on fully-diluted
common stock, assuming the conversion into common stock of all
outstanding preferred shares and convertible notes and the
exercise of all outstanding warrants and stock options. The
Registrant has granted irrevocable proxies to vote all of its
voting shares in favor of third parties and anticipates that its
percentage equity interest will be reduced in the future by
additional equity financings.
Note 3: In June 1995 the operations of Precision Laser Eye Centres Ltd.,
50% owned by Vista Vision International Ltd., a 100% holding
company of the Registrant, were closed and the Registrant has
written-off its investment in these subsidiaries.
Note 4: In July 1995 the Registrant terminated all executory agreements
and rescinded all prior transactions with Medical Development
Resources, Inc. and its subsidiaries and their respective
stockholders and creditors. After giving effect to those actions,
and based on the last information disclosed to the Registrant, the
Registrant's percentage ownership of Medical Development
Resources, Inc. is believed to be approximately 40%. The
Registrant has written-off its investments in Medical Development
Resources, Inc. and its subsidiaries and exercises no influence or
control as to their operations.
<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 Vista Technologies Inc. and Subsidiaries
and is qualified in its entirety by reference to such
consolidated financial statements.
</LEGEND>
<CIK> 0000895725
<NAME> VISTA TECHNOLOGIES INC.
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-START> Apr-01-1995
<PERIOD-END> Mar-31-1996
<PERIOD-TYPE> 12-MOS
<CASH> 288
<SECURITIES> 0
<RECEIVABLES> 285
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,792
<PP&E> 1,964
<DEPRECIATION> 744
<TOTAL-ASSETS> 6,270
<CURRENT-LIABILITIES> 1,685
<BONDS> 938
0
0
<COMMON> 26
<OTHER-SE> 2,967
<TOTAL-LIABILITY-AND-EQUITY> 6,270
<SALES> 2,130
<TOTAL-REVENUES> 2,130
<CGS> 0
<TOTAL-COSTS> 5,092
<OTHER-EXPENSES> 46
<LOSS-PROVISION> 734
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> (3,817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,815)
<EPS-PRIMARY> (1.92)
<EPS-DILUTED> (1.92)
</TABLE>
