<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended: DECEMBER 31, 1996
------------------
Commission File No. 0-23142
VISTA TECHNOLOGIES INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 13-3687830
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
167 S. San Antonio Road, Suite 9, Los Altos, California 94022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 947-1750
--------------
(Not applicable)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
reports), and (2) has been subject to such filing requirements for the past 90
days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, par value
$.005 per share, outstanding as of February 28, 1997: 6,328,912 shares.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
======================================================================
<PAGE>
VISTA TECHNOLOGIES INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements ................................... 1
Consolidated Balance Sheets at December 31, 1996
and March 31, 1996 ................................. 1
Consolidated Statements of Operations for the
Three Months and Nine Months ended
December 31, 1996 and 1995 ......................... 3
Consolidated Statements of Cash Flows for the
Nine Months ended December 31, 1996 and 1995 ....... 4
Consolidated Statement of Changes in Stockholders'
Equity for the Nine Months ended December 31, 1996.. 5
Notes to Unaudited Consolidated Financial Statements
at December 31, 1996 ............................. 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION:
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 21
PART II. OTHER INFORMATION:
Item 2. Changes in Securities ....................... 27
Item 4. Submission of Matters to a Vote
of Security Holders ....................... 30
Item 5. Other Events ................................ 31
Item 6. Exhibits and Reports on Form 8-K ............ 34
SIGNATURES ....................................................... 35
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report under the caption "Management's
Discussion and Analysis or Plan of Operation" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results or performance of the Company to be materially different from future
results or performance expressed or implied by such forward-looking
statements. Such factors, include, among others: market acceptance of new
technologies and services, specifically laser vision correction procedures;
the sufficiency of financial resources available to the Company; 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 by the Company with the Securities and Exchange
Commission. (See, for example, Exhibit 99.1 filed with Amendment No. 2 to the
Company's Report on Form 10-QSB for the Quarterly Period ended September 30,
1996.) The Company's actual results could differ materially from those
suggested or implied by any forward-looking statements as a result of such
risks.
-i-
<PAGE>
PART I. FINANCIAL INFORMATION
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash ...................................... $ 1,067,422 $ 288,312
Accounts receivable:
Trade .................................. 200,525 29,515
VAT .................................... 52,557 41,434
Related parties ........................ 125,100 214,454
Stock subscriptions receivable ............ -- 962,500
Prepaid expenses and other ................ 142,428 256,081
------------- -------------
Total current assets .................. 1,588,032 1,792,296
Investment securities:
Available for sale ........................ -- 2,475,000
Held to maturity .......................... 118,306 115,468
Long-term VAT receivables ................... 196,279 191,571
Long-term receivable, Vista Laser Centers
of the Pacific ............................ 260,838 --
Property and equipment, net ................. 2,475,391 1,219,798
Investment in equity investees .............. -- 468,350
Deferred offering costs ..................... 438,793 --
Other assets ................................ 85,673 7,299
------------- -------------
Total Assets ................................ $ 5,163,311 $ 6,269,782
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable, trade ................... $ 944,900 $ 520,825
Accounts payable, related parties ......... 26,454 29,535
Accrued expenses .......................... 1,244,902 633,206
Current portion of notes payable .......... 500,000 296,591
Current portion of long-term debt ......... 144,885 137,351
Current portion of obligations under
capital leases ......................... 390,843 67,588
------------- -------------
Total current liabilities ............. 3,251,984 1,685,096
------------- -------------
Long-term liabilities:
Note payable to Pharma Patch, related party 515,678 --
Notes payable, net of current portion ..... 277,777 277,777
Long-term debt, net of current portion .... 422,488 463,240
Obligations under capital leases, net
of current portion ..................... 1,147,555 196,956
------------- -------------
Total long-term liabilities ........... 2,363,497 937,973
------------- -------------
Minority Interest ........................... 472,741 653,306
------------- -------------
Commitments and Contingencies
Total liabilities ..................... 6,088,222 3,276,375
------------- -------------
Stockholders' Equity:
Preferred stock, $.001 par value,
15,000,000 shares authorized,
none issued or outstanding ............ -- --
Common stock, $.005 par value;
15,000,000 shares authorized,
issued and outstanding,
6,324,105 shares at Dec 31, 1996 and
5,256,105 shares at March 31, 1996 .... 31,621 26,281
Additional paid-in capital ................ 19,854,811 18,026,096
Unrealized loss on securities
available for sale ...................... -- (187,500)
Accumulated deficit ....................... (21,005,148) (15,247,045)
Adjustment for first quarter of European
operating subsidiaries to conform
reporting periods ..................... 42,003 --
Foreign currency translation adjustments .. 151,802 375,575
------------- -------------
Total stockholders' equity ............ (924,911) 2,993,407
------------- -------------
Total Liabilities and Stockholders' Equity .. $ 5,163,311 $ 6,269,782
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months ended Three Months ended
December 31, December 31,
-------------------------- -------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES ..................... $ 2,580,046 $ 1,405,975 $ 1,116,656 $ 472,647
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and administrative ... 4,874,526 3,788,801 2,289,305 1,275,484
Depreciation and amortization. 251,217 167,367 131,537 66,648
Foreign currency exchange loss 1,119 -- 50 --
Realized loss (gains) on
trading securities ....... 1,132,437 152,496 1,132,437 --
Interest ..................... 143,220 80,511 107,445 36,485
Other ........................ (9,944) (22,316) (8,170) 4,174
----------- ----------- ----------- -----------
6,392,575 4,166,859 3,652,604 1,382,791
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS ......... (3,812,529) (2,760,884) (2,535,948) (910,144)
EQUITY INVESTEES' INCOME (LOSS) (1,952,429) -- (891,243) --
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST ...... (5,764,959) (2,760,884) (3,427,191) (910,144)
INCOME TAXES.................. -- -- -- --
----------- ----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST (5,764,959) (2,760,884) (3,427,191) (910,144)
MINORITY INTEREST............. 6,855 32,422 9,629 24,271
----------- ----------- ----------- -----------
NET LOSS...................... $(5,758,104) $(2,728,462) $(3,417,562) $ (885,873)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE .... $ (0.82) $ (1.81) $ (0.45) $ (0.52)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING... 7,029,690 1,508,814 7,551,605 1,713,472
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months ended December 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ........................................ $ (5,758,103) $ (2,728,462)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization .............. 153,431 167,367
Realized (gain) loss on trading securities . -- 152,496
Minority interest (gains) .................. 6,855 (32,422)
Equity investees (income) loss, net ........ 2,117,472 --
Common stock issued for services ........... -- 1,657,760
Changes in operating assets and liabilities,
net of foreign currency translation:
Accounts receivable:
Trade ................................ (125,277) 148,567
VAT .................................. (49,584)
Related parties ...................... 30,042
Prepaid expenses ....................... (52,295) 54,617
Other current assets ................... (80,144) (102,661)
Other assets ........................... 168,310 (6,899)
Bank overdraft protection .............. -- (19,154)
Accounts payable, trade ................ 292,177 55,198
Accounts payable, related parties ...... (3,080) --
Accounts payable, affiliates ........... 515,678 --
Accrued expenses ....................... 652,272 104,919
Other liabilities ...................... (477,089) --
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES ........... (2,609,336) (548,674)
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sales of trading securities ....... 1,529,063 251,000
Repayment of capital lease obligation ........... 50,292 --
Issuance of note receivable ..................... (307,932)
Purchase of property and equipment .............. (58,115) (109,681)
Change (loss) on investment -- held to maturity . -- 30,941
Change in investment in VLC-Southwest ........... 34,922 --
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES ....... 1,248,230 172,260
------------ ------------
FINANCING ACTIVITIES:
Issuance of (payments on) notes payable ......... 308,176 135,965
Issuance of (payments on) notes payable
related parties ............................... (247,043) --
Payment of long-term debt ....................... 284,545 --
Sale of common stock ............................ 1,050,100 --
Increase in deferred offering costs ............. (438,793) --
Redeemed stock of subsidiary .................... -- (277,777)
Proceeds from stock subscription ................ 962,400 --
------------ ------------
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES 1,919,385 (141,812)
------------ ------------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH . (1,119) 41,603
------------ ------------
EFFECT OF CHANGE IN REPORTING PERIODS
OF EUROPEAN SUBSIDIARIES ...................... 221,950 --
------------ ------------
NET INCREASE (DECREASE) IN CASH ................. 779,110 (476,623)
Cash at beginning of period ..................... 288,312 649,708
------------ ------------
CASH AT END OF PERIOD ........................... $ 1,067,422 $ 173,085
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................. $ 143,220 $ --
Income taxes .............................. -- --
============ ============
</TABLE>
NOTE: During 1996, the Company financed certain capital expenditures and
related maintenance agreements totaling $1,068,321 through the
issuance of capital leases.
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock Additional Foreign Total
-------------------- Paid-in Unrealized Accumulated currency Stockholders'
Shares Amount Capital Loss deficit adjustments Equity
--------- --------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
March 31, 1996... 5,256,105 $ 26,281 $ 18,026,096 $ (187,500) $(15,247,045) $ 375,575 $ 2,993,407
Common stock issued
for cash in private
placements....... 200,000 1,000 424,000 -- -- -- 425,000
Common stock issued
in exchange for
series B preferred
shares of Vista
Laser Centers (VLC)
affiliates:
VLC-Pacific..... 500,000 2,500 485,350 -- -- -- 487,850
VLC-Northeast... 450,000 2,250 443,250 -- -- -- 445,500
VLC-Northwest... 500,000 2,500 492,000 -- -- -- 494,500
Exercise of
stock option by
Pharma Patch.... 250,000 1,250 623,750 -- -- -- 625,000
Common stock issued
for purchase of
equity in
VLC-Michigan,
VLC-Northeast,
VLC-Northwest,
VLC-Pacific and
VLC-Southwest... 520,000 2,600 512,200 -- -- -- 514,800
Adjustments for
investment in
VLC-Southwest... -- -- (33,750) -- -- -- (33,750)
Exercise of option
by Quintillion
B.V. in exchange
for note from
Micra Instruments 98,000 490 122,010 -- -- -- 122,500
Cancellation of
common stock
exchanged for:
Debt forgiveness
to VLC-Southwest (250,000) (1,250) (236,750) -- -- -- (238,000)
Exchange of
securities with
VLC-Pacific ... (500,000) (2,500) (313,908) -- -- -- (316,408)
Exchange of
securities with
VLC-Michigan... (200,000) (1,000) (227,600) -- -- -- (228,600)
Exchange of
securities with
VLC-Northwest.. (500,000) (2,500) (492,000) -- -- -- (494,500)
Issuance of
stock option to
non-employee.... -- -- 30,064 -- -- -- 30,064
Purchase of
warrants by
employee ....... -- -- 100 -- -- -- 100
Unrealized loss
on securities
available
for sale........ -- -- -- 187,500 -- -- 187,500
Foreign currency
adjustments..... -- -- -- -- -- (223,773) (223,773)
Adjustment for
European
operating
subsidiaries
to conform
reporting
periods......... -- -- -- -- 42,003 -- 42,003
Net loss for
the nine
months ended
Dec 31, 1996.... -- -- -- -- (5,758,104) -- (5,758,104)
--------- --------- ------------ ---------- ------------ ----------- ------------
Balance at
Dec 31, 1996.... 6,324,105 $ 31,621 $ 19,854,811 $ -0- $(20,963,145) $ 151,802 $ (924,911)
========= ========= ============ ========== ============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Vista
Technologies Inc., a Nevada corporation (the "Company" or "Vista") at December
31, 1996, and for the nine month and three month periods ended December 31,
1996 and 1995 have been prepared by the Company pursuant to the rules of the
Securities and Exchange Commission (the "Commission"). In the opinion of the
Company's management, such unaudited financial statements include all
adjustments necessary for a fair presentation of financial position, results
of operations and cash flows for the interim periods covered by such
statements. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Commission's rules.
Reference is made to Note 1 of the Notes to Consolidated Financial Statements
contained in Amendment No. 2 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1996 for a summary of significant accounting
policies utilized by the Company. It is suggested that the financial
statements at December 31, 1996 be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
latest Annual Report on Form 10-KSB.
Results of operations for the nine months and three months ended December 31,
1996 and 1995 may not necessarily be indicative of results for the full fiscal
year.
NOTE 2 -- PRINCIPLES OF CONSOLIDATION; FOREIGN CURRENCY TRANSLATION;
INTEREST IN CONSOLIDATED SUBSIDIARIES
(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%, and in which
the Company exercises 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% and in which the Company
has the ability to exercise significant influence, but in which the Company
may have 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, Sweden and the Netherlands have been
consolidated at December 31, 1996 using the subsidiaries' respective fiscal
quarters ended December 31, 1996 and have been consolidated at December 31,
1995 using their respective fiscal quarters ended September 30, 1995. Because
majority ownership was considered only temporary, the Company's investments in
Vista Laser Centers of Michigan, Inc. ("VLC-Michigan"), Vista Laser Centers of
the Northwest, Inc. ("VLC-Northwest") and Vista Laser Centers of the
Southwest, Inc. ("VLC-Southwest") were accounted for by the equity method
through September 30, 1996. Subsequent to September 30, 1996, the Company's
plans with respect to these entities changed, and majority ownership is no
longer considered temporary. Accordingly, these entities have been
consolidated as of December 31, 1996. See Note 10 below.
-6-
<PAGE>
NOTE 2 -- PRINCIPLES OF CONSOLIDATION; FOREIGN CURRENCY TRANSLATION;
INTEREST IN CONSOLIDATED SUBSIDIARIES (continued)
(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 an 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.
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
Nine Months Nine Months
Foreign December 31, 1996 Ended Ended
Subsidiary Currency Spot Rate Dec 31, 1996 Dec 31, 1995
- ---------- -------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Vista-UK Pounds Sterling n/a n/a $ 1.586
Vista-Italy Lira $ 0.001 $ 0.001 0.001
ConVista Gilders 0.574 0.588 0.63
Vista-Sweden Krona 0.146 0.15 0.15
</TABLE>
(c) Minority Interest
Minority interest represents the minority stockholders' proportionate share of
the equity in Vista-Italy, VLC-Michigan, VLC-Northwest and VLC-Southwest. At
December 31, 1996 the Company owned 73.57% of the capital stock of
Vista-Italy, 95.7% of the capital stock of VLC-Michigan, 100% of the capital
stock of VLC-Northwest and 94% of the capital stock of VLC-Southwest.
NOTE 3 -- 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.
NOTE 4 -- CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original maturity
of three months or less to be cash equivalents.
NOTE 5 -- 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.
-7-
<PAGE>
NOTE 6 -- 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.
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.
At December 31, 1996, the Company had sold all available-for-sale equity
securities. The amortized cost, gross unrealized holding gains, gross
unrealized holding losses and fair value for held-to-maturity securities by
major security type and class of security at December 31, 1996, were as
follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held-to-maturity:
8.75% Italian bonds .. $ 115,468 $ 2,838 $ -- $ 118,306
</TABLE>
The 8.75% Italian bonds mature in 1997.
NOTE 7 -- RECLASSIFICATION
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
-8-
<PAGE>
NOTE 8 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996 and March
31, 1996:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
------------ ------------
<S> <C> <C>
Excimer lasers and other technical equipment .. $ 3,196,394 $ 1,896,394
Office furniture and equipment ................ 274,195 67,385
----------- -----------
3,470,589 1,963,779
Less accumulated depreciation ................. (995,198) (743,981)
----------- -----------
$ 2,475,391 $ 1,219,798
=========== ===========
</TABLE>
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
(a) Employment Agreements
The Company has employment agreements with its executive officers, the terms
of which expire at various times through November 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.
(b) Exchange Agreement
In order to induce a stockholder to advance $100,000 under a deed of debenture
to MICRA Instruments Limited (a wholly owned subsidiary of Medical Development
Research, Inc.), the Company entered into an exchange agreement on June 28,
1995 with the stockholder. The stockholder is an affiliate of a former
director and chief executive officer of the Company who was serving in those
capacities at the time of the transaction. The exchange agreement provided
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 December 28, 1996, the stockholder exercised this option for $122,500
(total principal plus accrued interest on the debenture as of December 31,
1996) and the Company is obligated to issue 98,000 shares of its common stock
in exchange for an assignment to the Company of the MICRA debenture. The
Company's investment in the MICRA debenture was written-off as doubtful of
collection as of December 31, 1996.
-9-
<PAGE>
NOTE 9 -- COMMITMENTS AND CONTINGENCIES (continued)
(c) Insurance and Indemnification
Use of laser systems by health care professionals using laser equipment and
other laser vision correction ("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.
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.
(d) Equipment Obligations and Guarantees for an Affiliate of the Company
On November 15, 1996, the Company entered into an equipment lease for a VISX
20/20B excimer laser system with an initial value of $250,000, which
represents the minimum total future lease payments in the amount of $317,145
less interest of $92,145. The equipment was leased for the benefit of London
Place Eye Centre ("LPEC"), an affiliate of Dr. Donald G. Johnson, Chairman of
the Board and a director of the Company. LPEC has guaranteed the obligations
of the Company under this equipment lease. The equipment is to be used
exclusively by LPEC in British Columbia, and LPEC has agreed to make all
equipment lease payments. The Company will not own a beneficial interest in
the equipment or in proceeds from use of the equipment unless LPEC defaults in
its obligations to make equipment lease payments. The Company records as
offsetting income and expense all amounts paid by LPEC to the equipment lessor
under this obligation.
On October 19, 1996, the Company and LPEC executed a lease guarantee for an
equipment lease by VLC-Northwest of a VISX Star laser system with an initial
value of $525,000, which represents the minimum future lease payments of
$720,000 less interest of $247,500. The equipment was leased for the benefit
of LPEC. The equipment is to be used exclusively by LPEC in British Columbia,
and LPEC has agreed to make all equipment lease payments. The Company and
VLC-Northwest will not own a beneficial interest in the equipment or in
proceeds from use of the equipment unless LPEC defaults in its obligations to
make equipment lease payments. VLC-Northwest records as offsetting income and
expense all amounts paid by LPEC to the equipment lessor under this
obligation.
On March 29, 1996, the Company signed a lease guarantee for an equipment lease
by LPEC of a VISX Star laser system with an initial value of $450,000. The
Company does not own a beneficial interest in the equipment or in proceeds
from use of the equipment.
-10-
<PAGE>
NOTE 9 -- COMMITMENTS AND CONTINGENCIES (continued)
The Company entered into these equipment lease arrangements as an
accommodation to LPEC during the course of continuing negotiations for the
purchase of LPEC by the Company subject to obtaining additional financing
required to make such an acquisition. See Note 10(c).
(e) Facilities and Equipment Lease Guarantees for VLC-Northeast
The Company has executed guarantees of certain equipment lease and premises
lease obligations of VLC-Northeast, subject to the agreement of VLC-Northeast
to use its best efforts to obtain a release of such guarantees in the event of
a change in control of VLC-Northeast or should the Company successfully
complete a private placement offering of at least $2 million, failing which
VLC-Northeast will agree to indemnify the Company for any liabilities incurred
as a result of the guarantees. See Note 10 below. The equipment lease
guarantee executed on October 25, 1996 is for a VISX Star laser system with an
initial value of $809,000. The equipment is to be used exclusively by VLC-
Northeast in Toronto, Ontario, and VLC-Northeast is primarily obligated make
all equipment lease payments. The Company does not own a beneficial interest
in the equipment or in proceeds from use of the equipment. The premises lease
executed on March 21, 1996 is for a rental of approximately $4,152 per month
expiring on May 14, 2006.
NOTE 10 -- REGIONAL JOINT VENTURES
The Company's business strategy is to expand in North America by organizing
and sponsoring regional enterprises ("Regional Joint Ventures") in which the
Company will obtain a significant equity interest and long-term fee-based
consulting arrangements. As of December 31, 1996, the Company's investments
in Regional Joint Ventures, each of which was organized to establish, own and
manage laser vision correction centers, are summarized as follows:
(a) 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), a
development stage enterprise. Effective July 18, 1996, the Company also
acquired 100,000 VLC-Michigan Series A preferred shares from a third
party in exchange for 100,000 shares of the Company's common stock with
an estimated value of approximately $0.99 a share at the date of
issuance. The Company subsequently elected to convert all 300,000
shares of VLC-Michigan preferred stock into 300,000 shares of VLC-
Michigan common stock. VLC-Michigan abandoned a proposed initial public
offering in late 1996. During December 1996, negotiations for VLC-
Michigan to acquire an existing laser vision correction services
business based in Windsor, Ontario, and to enter into related agreements
with affiliates of the physician who owns the Windsor business, were
terminated. VLC-Michigan refunded stock subscriptions previously
received from affiliates of that physician. The Company subsequently
agreed to accept 200,000 shares of its common stock owned by VLC-
Michigan for cancellation, which have been returned to the Company's
possession, in exchange for the cancellation of 200,000 shares of VLC-
Michigan common stock then owned by the Company.
-11-
<PAGE>
NOTE 10 -- REGIONAL JOINT VENTURES (continued)
As a result of these transactions, the Company owned 100,000 shares of
VLC-Michigan common stock, representing 95.2% of the VLC-Michigan
outstanding capital stock, as of December 31, 1996.
During the period from March 1996 through October 1996, there were
various advances made by the Company to VLC-Michigan for VLC-Michigan
initial public offering expenses plus approximately $510,800 of advances
to finance equipment deposits and operating expenses of the businesses
that VLC-Michigan proposed to acquire and develop. In November 1996,
the amount of $100,000 in such cash advances was refunded to the
Company. The Company is currently negotiating to obtain an accounting
and/or refund of $410,800 of such advances as part of a proposed release
and settlement of the obligations of the Company and VLC-Michigan, on
the one hand, and affiliates of the physician who owns the Windsor
business, on the other hand. As of December 31, 1996, the $410,800
receivable has been written down to an estimated realizable value of
$125,000.
(b) Investment in Vista Laser Centers of the Southwest, Inc.
In March, 1996, the Company issued 250,000 shares of its common stock in
exchange for a subscription to 350,000 shares of 5% Series B convertible
preferred stock in Vista Laser Centers of the Southwest, Inc.
(VLC-Southwest), a development stage enterprise. Effective July 18,
1996, the Company also acquired rights to 100,000 VLC-Southwest Series A
preferred shares from a third party in exchange for 100,000 shares of
the Company's common stock with an estimated value of approximately
$0.99 a share at the date of issuance. The Company subsequently elected
to convert all of its rights to 450,000 shares of VLC-Southwest
preferred stock into 450,000 shares of VLC-Southwest common stock and
affiliates of VLC-Southwest released the right to vote such shares by
proxy. VLC-Southwest abandoned a proposed initial public offering in
late 1996.
On October 1, 1996, the Company and VLC-Southwest agreed that the
Company's account receivable of $383,634 for advances to VLC-Southwest
would be extinguished in exchange for the surrender of 250,000 shares of
the Company's common stock then held by VLC-Southwest. This increased
the Company's investment in VLC-Southwest by $145,634. The agreement
further provides that additional advances by the Company to VLC-
Southwest after October 1, 1996 will be made in exchange for the
Company's investment in additional common stock of VLC-Southwest based
upon a share price value of $3.00 per share of VLC-Southwest common
stock. As of December 31, 1996, the Company had advanced an additional
$141,500 to VLC-Southwest as additional investment in VLC-Southwest
common stock under this agreement. The agreement will remain in effect
as to additional advances until the earlier of completion by VLC-
Southwest of a private placement offering of its securities to third
parties or termination of that offering no later than March 31, 1997
(unless extended by VLC-Southwest to a date not later than May 30,
1997).
The Company has also agreed to purchase up to $1,020,000 units of VLC-
Southwest's pending private placement offering not later than five
business days after VLC-Southwest receives and accepts at least
$1,020,000 in subscriptions to the pending private placement offering of
units from third parties or March 31, 1997. Each unit offered at
$60,000 consists of 20,000 shares of VLC-Southwest Series A convertible
preferred stock and 20,000 VLC-Southwest Class C
-12-
<PAGE>
NOTE 10 -- REGIONAL JOINT VENTURES (continued)
redeemable common stock purchase warrants exercisable at $4.50 per
share. In the event that an initial public offering of securities by
VLC-Southwest is not successfully completed by December 31, 1997, each
third party investor in VLC-Southwest units will hold a put option
exercisable during a 60-day period expiring on March 1, 1998 to cause
the Company to purchase the VLC-Southwest units for $120,000 per unit,
payable at the Company's option in either cash, shares of the Company's
common stock (so long as the common stock is actively quoted and traded
in the public market), or a combination thereof. For this purpose, the
Company's common stock will be valued at the average per share closing
bid price of the Company's common stock during the 20 trading days
immediately preceding the last day of the put option term.
As of October 1, 1996, the Company agreed to purchase a $100,000 VLC-
Southwest note and 10,000 VLC-Southwest Class B warrants from Pharma
Patch PLC in exchange for a $100,000 note payable by the Company. The
Company also agreed to surrender the $100,000 VLC-Southwest note for
cancellation in exchange for 100,000 shares of VLC-Southwest common
stock effective October 1, 1996.
The Company signed a revised consulting services agreement with VLC-
Southwest in November 1996. In exchange for access to the Company's
consulting services and use of the Company's service mark for Vista
laser centers, VLC-Southwest will pay a monthly consulting fee equal to
5% of its laser vision correction service revenues to the Company and
will also pay a fee equal to 3% of such VLC-Southwest revenues for
marketing promotions once the Company commences a multi-region marketing
program. The consulting services agreement is for an initial term of
ten years, or expires on June 30, 1997 if there has not been a private
placement for gross proceeds to VLC-Southwest of at least $1,000,000,
and provides VLC-Southwest with exclusive rights to establish and
operate laser vision correction service centers at locations within
Arizona, Utah, Colorado, El Paso County in Texas and the City of Las
Vegas, Nevada; the exclusive geographic rights of VLC-Southwest are
subject to the establishment and maintenance of eight centers in those
areas according to an agreed schedule in additional to an existing
center operated by VLC-Southwest in Scottsdale, Arizona.
As a result of these transactions, the Company owned 550,000 shares of
VLC-Southwest common stock, representing 94% of the VLC-Southwest
outstanding capital stock as of December 31, 1996, before giving effect
to shares the Company may acquire as a result of additional advances by
the Company to VLC-Southwest after October 1, 1996 or other contractual
obligations of the Company.
Dr. J. Charles Casebeer, a director of the Company, is the Chairman of
the Board and a director of VLC-Southwest.
(c) Investment in Vista Laser Centers of the Northwest, Inc.
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), a
development stage enterprise. Effective July 18, 1996, the Company also
acquired 100,000 VLC-North Series A preferred shares from a third party
in exchange for 120,000 shares of the Company's common stock with an
estimated value of approximately $0.99 a share
-13-
<PAGE>
NOTE 10 -- REGIONAL JOINT VENTURES (continued)
at the date of issuance. The Company subsequently elected to convert
its 100,000 shares of VLC-Northwest Series A preferred stock into
100,000 shares of VLC-Northwest common stock.
During October 1996, VLC-Northwest and LPEC, an affiliate of Dr. Donald
G. Johnson, terminated negotiations that contemplated the possible
future acquisition by VLC-Northwest of an existing laser vision
correction services business from LPEC. Dr. Johnson is the Chairman of
the Board and a director of the Company. VLC-Northwest refunded Dr.
Johnson's original cash investment in VLC-Northwest due to the
termination of these negotiations. The Company caused 500,000 shares of
its common stock held by VLC-Northwest, currently in the Company's
possession, to be surrendered in exchange for cancellation of the
Company's investment in 500,000 shares of VLC-Northwest Series B
convertible preferred stock.
As a result of these transactions, the Company owned 100,000 shares of
VLC-Northwest common stock, representing 100% of the VLC-Northwest
outstanding capital stock as of December 31, 1996. At December 31,
1996, the Company has written down the value of its investment in VLC-
Northwest to $16,900.
In November 1996, the Company received repayment of $189,016 for prior
advances to VLC-Northwest (of which $11,011 is payable to VLC-Northwest
as credit for overpayment). During January 1997, the Company paid
$4,936 to London Place Eye Centre (LPEC), an affiliate of Dr. Donald G.
Johnson, in reimbursement of funds advanced by LPEC for the account of
VLC-Northwest.
(d) Investment in Vista Laser Centers of the Pacific, Inc.
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). Effective
July 18, 1996, the Company also acquired 100,000 VLC-Pacific Series A
preferred shares from a third party in exchange for 100,000 shares of
the Company's common stock with an estimated value of approximately
$0.99 a share at the date of issuance. The Company subsequently elected
to convert all its 600,000 shares of VLC-Pacific preferred stock into
600,000 shares of VLC-Pacific common stock.
To accommodate the request of VLC-Pacific in its efforts for a proposed
public offering of its securities, during December 1996 the Company and
VLC-Pacific mutually agreed: (i) to terminate a consulting services
agreement between the Company and VLC-Pacific; (ii) the Company accepted
500,000 shares of its common stock owned by VLC-Pacific for
cancellation, which have been returned to the Company's possession, in
exchange for the cancellation of 500,000 shares of VLC-Pacific common
stock then owned by the Company; and (iii) the Company agreed to accept
a 9% promissory note issued by VLC-Pacific in the principal amount of
$100,000 for the repurchase of the remaining 100,000 shares of VLC-
Pacific common stock then owned by the Company. VLC-Pacific also agreed
to issue a 9% promissory note in the principal amount of $160,838 to
evidence its obligations for repayment of advances in that amount by the
Company to VLC-Pacific. Each of the VLC-Pacific promissory notes are
due on the earlier of December 31, 1998 or ten days after successful
completion of an initial public offering by VLC-Pacific.
As a result of these transactions, the Company did not own an equity
interest in VLC-Pacific capital stock as of December 31, 1996.
-14-
<PAGE>
NOTE 10 -- REGIONAL JOINT VENTURES (continued)
(e) Investment in Vista Laser Centers of the Northeast
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 Metro Inc., currently doing business as Vista
Laser Centers of the Northeast (VLC-Northeast), a development stage
enterprise. Effective July 18, 1996, the Company also acquired 100,000
VLC-Northeast Series A preferred shares from a third party in exchange
for 120,000 shares of the Company's common stock with an estimated value
of approximately $0.99 a share at the date of issuance.
In January 1997, the Company, Pharma Patch PLC, VLC-Northeast and
certain members of VLC-Northeast operating management and their
affiliates entered into a settlement agreement to terminate all
relationships between the parties. The Company sold all of its equity
investment in VLC-Northeast for the sum of $1.00 and agreed to assign to
Cherry Development Corporation for the sum of $1.00 all prior advances
and loans by the Company to VLC-Northeast in the aggregate amount of
$511,460. The Company further agreed: (i) to pay $50,000 as a
settlement of prior obligations to VLC-Northeast; (ii) to pay VLC-
Northeast an amount equal to $75,000 plus $6,271 in interest accrued on
certain promissory notes previously issued by VLC-Northeast to Pharma
Patch (and secured by a pledge of certain shares of Company common stock
owned by VLC-Northeast), against the receipt from Pharma Patch of
releases in favor of the Company and of all collateral security claims
to shares of the Company's common stock owned by VLC-Northeast; (iii) to
advance $50,000 to an escrow fund for use by VLC-Northeast under
prescribed conditions for expenses relating to its future capital-
raising expenses, which advances are to be repaid to the Company in the
event VLC-Northeast completes additional debt or equity financings in
the aggregate amount of at least $500,000; and (iv) to pay $275,000 (of
which $200,000 is to be deposited into an escrow account) from proceeds
of any private placement offering of at least $2 million by the Company.
VLC-Northeast has agreed to release its license to use the Company's
service marks, to change the name of VLC-Northeast and signage to
eliminate use of the "Vista" name by VLC-Northeast (subject to a non-
assignable license to VLC-Northeast for use of certain promotional and
marketing materials of the Company within the greater Toronto, Ontario
area so long as such materials do not use the word "Vista" or the
Company's associated logo), and to return for cancellation 450,000
shares of the Company's common stock currently owned by VLC-Northeast at
the time all escrow funds have been deposited by the Company. Of the
$200,000 in funds to be deposited into an escrow account, $50,000 is to
be released to VLC-Northeast upon completion of actions necessary for
termination of its use of the name "Vista" and the Company's service
marks by July 1, 1997, and the remaining $150,000 is to be released to
VLC-Northeast at the rate of $25,000 per month, except that any
undisbursed escrow funds are to be refunded to the Company in the
-15-
<PAGE>
NOTE 10 -- REGIONAL JOINT VENTURES (continued)
event VLC-Northeast completes additional debt or equity financings in
the aggregate amount of at least $500,000.
The Company has paid $150,000 under the settlement and will be obligated
to deposit an additional $306,271 from proceeds of any private placement
offering of at least $2 million by the Company. The Company has also
agreed to remain obligated as a guarantor of certain equipment lease and
premises lease obligations of VLC-Northeast (see Note 9 above), subject
to the agreement of VLC-Northeast to use its best efforts to obtain a
release of such guarantees in the event of a change in control of VLC-
Northeast or should the Company successfully complete a private
placement offering of at least $2 million, failing which VLC-Northeast
will agree to indemnify the Company for any liabilities incurred as a
result of the guarantees.
As a result of these transactions, the Company did not own an equity
interest in VLC-Northeast capital stock and has written off its
investments in VLC-Northeast as of December 31, 1996.
In assigning values at the times of issuance to the Company's common stock
issued to Regional Joint Ventures and to a third party, Refractive
Services-800, Inc., originally issued to acquire Series A preferred shares in
the Regional Joint Ventures, the Company gave consideration to certain
independent appraisals obtained on the value for the consideration received
from the Regional Joint Ventures in exchange for such common stock, the
estimated market value of Vista's common stock based upon recent private
placements, the quoted price of Vista's common stock in the over-the-counter
market, and the voting and other restrictions on the issued stock.
The Company currently controls all of the board of directors of VLC-Michigan
and VLC-Northwest and is represented on the Board of Directors of VLC-
Southwest by virtue of the Company's controlling stock ownership. The Company
currently has no representation on the board of directors of VLC-Pacific or
VLC-Northeast.
NOTE 11 -- UNKNOWN EFFECT OF INABILITY TO OBTAIN NASDAQ STOCK MARKET LISTINGS
The Company's previously-announced strategy of obtaining independent financing
for its Regional Joint Venture affiliates through proposed initial public
offerings of their securities has been altered, at least temporarily. The
primary reason for altering this strategy has been the unanticipated inability
of two Regional Joint Ventures to obtain a listing of their securities on The
Nasdaq SmallCap Market, primarily because of prior relationships between the
Company, on the one hand, and its former financial advisor, EC/American Ltd.
("EC/American") and persons associated with EC/American or introduced to the
Company by EC/American, on the other hand.
VLC-Michigan submitted an application in May 1996 to list its securities on
The Nasdaq SmallCap Market covered by a proposed initial public offering of
VLC-Michigan securities, and VLC-Pacific submitted a similar application to
The Nasdaq SmallCap Market in August 1996.
The staff of The Nasdaq Stock Market denied the application of VLC-Michigan in
August 1996 on several grounds, including (i) the then uncertain business
prospects for VLC-Michigan, (ii) the Company's past association with
EC/American and two of its individual consultants; and (iii) an ongoing
investigation by the Securities and Exchange Commission into trading in the
securities of U.S. Shoe Corporation that included inquires directed to the
activities of Jac. J. Lam, a European consultant to various foreign investors
introduced to the Company by EC/American, activities of EC/American and/or
persons and entities associated with Mr. Lam and/or EC/American. Mr. Lam also
served as a director of VLC-Michigan and the Company and was a former Chief
-16-
<PAGE>
NOTE 11 -- UNKNOWN EFFECT OF INABILITY TO OBTAIN NASDAQ STOCK MARKET LISTINGS
(continued)
Executive Officer of the Company. (The Company has been advised that
EC/American has ceased operations; the Company no longer has any relationships
with Mr. Lam [except that certain of his clients continue to own shares of the
Company's common stock] or any person formerly associated with EC/American.)
VLC-Michigan filed an appeal from The Nasdaq Stock Market's staff decision
based in part on the complete termination of all relationships between the
Company and VLC-Michigan, on the one hand, and Mr. Lam and EC/American and its
affiliates, on the other hand (except for continued ownership of the Company's
common stock by certain clients of Mr. Lam). That appeal was denied in
October 1996 by a Nasdaq Stock Market review panel in a written decision
finding that, while VLC-Michigan had resolved issues concerning its then
business prospects, VLC-Michigan would not be approved for listing at that
time because of the past association of VLC-Michigan and the Company with
EC/American, Mr. Lam and the two individuals associated with EC/American.
Counsel for VLC-Michigan was informed that the application could be
resubmitted at a future date after VLC-Michigan and the Company had
demonstrated their ability to operate without being influenced by EC/American
and persons associated with EC/American.
Although no formal action was taken on the application submitted by VLC-
Pacific, counsel for VLC-Pacific and the Company was informed by The Nasdaq
Stock Market staff in November 1996 that VLC-Pacific would not be approved for
listing for essentially the same reasons articulated by the review panel in
denying the appeal filed by VLC-Michigan. Counsel was further advised that
the VLC-Pacific application could be resubmitted at a future date after VLC-
Pacific and the Company had demonstrated their ability to operate without
being influenced by EC/American and persons associated with EC/American.
As a result of these actions, the Company does not believe it is practicable
for any Regional Joint Venture associated with the Company to plan on
processing a proposed public offering of its securities within the immediately
foreseeable future.
In addition, the Company's prior relationships with EC/American and Mr. Lam,
or the fact that shares in the Company are owned by certain clients of Mr.
Lam, may render it impractical for the Company to seek a listing of its own
securities on The Nasdaq SmallCap Market within the immediate future. In this
regard, the Company notes that certain clients of Mr. Lam also own shares in
Atlantic Central Enterprises Ltd. (the successor-in-interest to Pharma Patch
PLC), which currently is the Company's largest single shareholder, and either
or both of Atlantic Central Enterprises Ltd. and Pharma Patch PLC may have
existing or prior associations with an individual formerly associated with
EC/American. TO THE EXTENT THAT THESE CIRCUMSTANCES RENDER IT MORE DIFFICULT
OR IMPOSSIBLE FOR THE COMPANY TO OBTAIN A LISTING OF ITS SECURITIES ON THE
NASDAQ STOCK MARKET OR A NATIONAL SECURITIES EXCHANGE IN THE FUTURE, THE
ABILITY OF THE COMPANY TO OBTAIN ADDITIONAL PUBLIC OR PRIVATE FINANCING MAY BE
MATERIALLY ADVERSELY AFFECTED.
NOTE 12 -- COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
(a) Common Stock.
On October 15, 1996, Pharma Patch PLC exercised its rights to purchase
50,000 shares of the Company's common stock at a total option exercise price
of $125,000 ($2.50 per share).
-17-
<PAGE>
NOTE 12 -- COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS (continued)
(b) Class E Warrants.
On December 6, 1996, the Company issued 30,000 Class E Warrants as part
of a bridge note financing. Each Class E Warrant represents the right to
purchase one share of the Company's common stock with an exercise price of
$2.625 per share at any time until December 31, 2001, unless earlier called
for redemption by the Company. The Company has the option to call the Class E
Warrants 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
over-the-counter market or on a national securities exchange and the closing
sale price is $5.00 per share for at least 20 consecutive trading days on the
last date before the warrants are called for redemption. No Class E Warrants
have been exercised to date. See Note 14.
(c) Class G Warrants.
On November 18, 1996, the Company issued 100,000 Class G nontransferable
Warrants to an executive employee of the Company at purchase price of $100.
Each Class G Warrant represents the right to purchase one share of the
Company's common stock at an exercise price of $2.625 per share at any time
until December 31, 2001, unless earlier called for redemption. The Company
has the option to call all Class G Warrants for redemption at a nominal price
of $100 if the executive's employment is terminated as a result of death,
disability or for cause under the terms of his employment agreement. No Class
G Warrants have been exercised to date.
(d) Non-Employee Stock Option.
On July 3, 1996, the Company granted a consultant a stock option under
the Company's 1994 Stock Option Plan to purchase a total of 50,000 shares of
common stock at an exercise price of $3.00 per share. The option may be fully
exercised at any time prior to its expiration on either the earlier of July 3,
2001 or termination on or after June 30, 1997 of a services agreement between
the Company and the consultant. The Company recorded a compensation expense
of $30,063 for the value of this option. See Note 13.
NOTE 13 -- STOCK OPTION PLANS
A summary of stock option activity under the Company's 1994 Stock Option
Plan is as follows:
<TABLE>
<CAPTION>
Outstanding Options
---------------------- Price
Reserved Granted Per
Shares Shares Share
--------- --------- ------
<S> <C> <C> <C>
Balance, March 31, 1996 ......... 1,900,000 1,567,000
Reserved ...................... 600,000 --
Granted ....................... -- 1,150,000 $2.625
to
$3.00
Cancelled ..................... -- (398,000)
--------- ---------
Balance, December 31, 1996 ...... 2,500,000 2,319,000
========= =========
</TABLE>
To date, no options have been exercised under the 1994 Plan.
-18-
<PAGE>
NOTE 14 -- ISSUANCE OF BRIDGE NOTE AND WARRANTS
On December 6, 1996, the Company sold $300,000 in principal amount of 12%
promissory notes and 30,000 Class E common stock purchase warrants for a cash
consideration of $300,000. All of these securities were sold to an
accredited investor in a private placement offering. The 12% promissory notes
mature on the earlier of June 30, 1997 or receipt by the Company of at least
$5 million in proceeds from a pending private placement offering of
convertible preferred stock through a placement agent (see Note 17 below).
Each Class E warrant represents the right to purchase one share of the
Company's common stock at an exercise price of $2.625 per share at any time
until December 31, 2001, unless earlier called for redemption.
NOTE 15 -- SECURED LOAN FROM RELATED PARTY AND SALE OF
MARKETABLE SECURITIES
In August 1996, the Company borrowed $800,000 from Pharma Patch PLC, a
principal shareholder of the Company, in exchange for an 8% secured promissory
note (the "8% Secured Note"). Principal and interest on the 8% Secured Note
were payable on December 31, 1996, or earlier in the event the Company elected
to sell any portion of its interest in 200,000 shares of Technical Chemicals
and Products, Inc. common stock (the "TCPI Shares") registered for resale
under the federal securities laws. The TCPI Shares were pledged as collateral
by the Company to secure its obligations under the 8% Secured Note. The
Company sold all of its TCPI Shares in late November 1996 and December 1996
and fully discharged the 8% Secured Note to Pharma Patch in December 1996 from
a portion of the net proceeds of sale. Murray D. Watson, an executive officer
and director of the Company, is a director and chief executive officer of
Pharma Patch and is the beneficial owner of equity securities in Pharma Patch.
Kenneth G. Howling, an executive officer of the Company, serves as an
executive officer of Pharma Patch and is the beneficial owner of equity
securities in Pharma Patch. The Company has been advised that shareholders
of Pharma Patch in January 1997 approved a restructuring plan of Pharma Patch
into Atlantic Central Enterprises, Ltd., a Bermuda company with securities
publicly traded in the U.S. over-the-counter market under the trading symbol
"ALCNF".
NOTE 16 -- RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere or in footnotes to the
Company's consolidated financial statements filed with its Report on Form 10-
KSB for the fiscal year ended March 31, 1996 include the following:
Effective November 1, 1996, the Company hired a new chief operating
officer who was granted a five-year option to purchase 500,000 shares of
common stock under the Company's 1994 Stock Option Plan exercisable at
$2.75 per share and purchased for the sum of $100 a total of 100,000
Class G nontransferable common stock purchase Warrants exercisable until
December 31, 2001, unless earlier called for redemption, at an exercise
price of $2.625 per share.
On October 22, 1996, the Company granted to its President and chief
executive officer a five-year option to purchase 600,000 shares of
common stock under the Company's 1994 Stock Option Plan exercisable at
$2.625 per share.
The exercise price of options and warrants were equal to or above the
fair market value of the common stock at the date of grant.
On December 5, 1996, the Company agreed to reimburse Pharma Patch PLC, a
principal stockholder of the Company, for advances in the amount of
$265,308 made for the Company's account to VLC-Northeast. As discussed
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<PAGE>
NOTE 16 -- RELATED PARTY TRANSACTIONS (continued)
in Note 10 above, the Company has paid VLC-Northeast an amount equal to
$75,000 of such advances plus accrued interest. The remaining advances
made by Pharma Patch to VLC-Northeast for the Company's account in the
amount of $190,308 represent a portion of advances and loans sold by the
Company to Cherry Development Corporation for the sum of $1.00 as part
of a settlement agreement among the Company, Pharma Patch PLC, VLC-
Northeast and certain members of VLC-Northeast operating management and
their affiliates discussed in Note 10 above.
As of December 31, 1996, the Company has outstanding accrued expenses
payable to Pharma Patch PLC for allocations of executive officer
salaries, office and travel expenses for two executive officers of the
Company in the aggregate amount of $150,000. The total amounts
incurred by the Company for such Pharma Patch expenses for the nine
months ended December 31, 1996 was $293,000.
NOTE 17 -- SUBSEQUENT EVENTS
On January 8, 1997, the Company announced that it intends, with the assistance
of a placement agent, and subject to market and other conditions, to raise up
to $10 million in a private placement of a new series of convertible preferred
stock to accredited individual and institutional investors pursuant to
Regulation D under the Securities Act of 1933. There can be no assurance that
the Company will be successful in efforts to obtain additional financing.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
The Company commenced business operations in February 1994 and acquired
controlling equity interests in European subsidiaries during 1994. In mid-
1995, Vista developed a strategic plan to sponsor and invest in Regional Joint
Ventures to conduct additional businesses engaged in providing access to laser
vision correction ("LVC") equipment and related services ("LVC Services") in
regional markets of North America.
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 received approximately $7,437,500 from the sale of 1,197,500 shares of
common stock and 1,225,000 warrants (including $750,000 for a note receivable
collected in April and May 1996), approximately $278,000 from the sale of
convertible debt instruments, and had issued an additional 3,692,756 shares of
common stock and 259,600 warrants in connection with the acquisition of other
assets and investments. During the nine months ended December 31, 1996, Vista
also received approximately $1,050,000 from the sale of 450,000 shares of
common stock, $300,000 from the sale of units of 9% Promissory Notes and
common stock purchase warrants, and issued an additional 2,068,000 shares of
common stock in connection with the acquisition of other assets and
investments.
At December 31, 1996, the Company had an accumulated deficit of
$21,005,000. The Company's net loss for the most recent nine months ended
December 31, 1996 was $5,758,000 and its net loss for the fiscal year ended
March 31, 1996 was $3,815,000.
The Company's operating management anticipates Vista will continue to
incur losses for the immediate near term due to the Company's current level of
fixed expenses for general and administrative expenses, depreciation and
significant costs associated with efforts to establish Regional Joint
Ventures. Losses are expected to continue until such time as revenues
increase to a level necessary to absorb fixed costs. No assurances can be
given as to whether or when revenue increases may be achieved. Revenue
increases will be dependent, among other things, in part upon expanding use of
the Company's services by physicians, entering into agreements with
physicians, general public acceptance of laser surgery to correct refractive
disorders and competitive factors.
Management's strategy since mid-1995 has been to expand its
participation in a developing market for LVC Services in the United States.
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. The Company therefore has designed and is implementing a program
to organize and sponsor U.S. and Canadian Regional Joint Ventures in alliance
with prominent physicians that will offer advantages of equity incentives and
management participation or control to skilled and prominent ophthalmologists
experienced in a variety of LVC treatments, procedures and post-operative
care.
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<PAGE>
The Company plans to continue to seek additional capital through the
private placement and/or public sale of its equity securities and use of
equipment lease financing 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: NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO
NINE MONTHS ENDED DECEMBER 31, 1995
REVENUES: During the nine months ended December 31, 1996 (the "1996
Period"), consolidated revenues from operations were $2,580,000, an increase
of 83% compared to $1,406,000 in consolidated revenues for the nine months
ended December 31, 1995 (the "1995 Period"). Consolidated revenues in the
1996 Period principally included $1,078,000 attributable to the operations of
Vista-Italy, approximately a 47% increase compared to $732,000 in the 1995
Period, and $1,382,000 from the operations of Vista-Sweden, an increase of
approximately 99% over $696,000 in the 1995 Year. These increases are
attributable primarily to approximately a 41% increase in the number of laser
vision corrective procedures performed in Europe as indicated in the chart
below.
For the nine month period ended December 31, 1995, the Company's
consolidated operating results included the period from January 1995 through
September 1995 for its European subsidiaries to eliminate a three month delay
in obtaining European financial statements. A decision was made by the
Company's management in 1996 to bring the operating report periods for its
European subsidiaries current with the parent corporation. This resulted in a
change in reporting periods for European subsidiaries included in the
consolidated financial statements so that their nine month period from April
1996 through December 1996 included in the 1996 Period is being compared to
European operations for the nine month period from January through September
1995 included in the Company's consolidated results for the 1995 Period. The
extra quarter's net results of European operations from January through March
1996 is accounted for in the Company's consolidated financial statements at
December 31, 1996 as an adjustment to equity.
Consolidated revenues for the three months ended December 31, 1996 of
$1.117,000 represents an increase of $429,000 compared to consolidated
revenues of $688,000 for the immediately preceding quarter ended September 30,
1996, and an increase of $645,000 compared to consolidated revenues of
$472,000 in the quarter ended December 31, 1995 reported for the prior fiscal
year.
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The following chart summarizes certain information as to the number of
LVC surgical procedures performed at Vista's European centers for the periods
indicated.
<TABLE>
<CAPTION>
9 Months ended December 31,
----------------------------
1996 1995
------ ------
<S> <C> <C>
Italy (3 centers in 1995 period and
4 centers in most of 1996 period)......... 1,155 1,017
Sweden (2 centers in most of 1995 period
and all of 1996 period) .................. 825 392
------ ------
Totals ......................... 1,980 1,409
====== ======
</TABLE>
OPERATING EXPENSES: Costs and expenses of operations for the 1996
Period were $5,126,000 an increase of 29.5% compared to costs and expenses of
operations of $3,956,000 in the 1995 Period. Costs and expenses in the 1996
Period consisted of $4,875,000 in general and administrative expenses, a 29%
increase compared to the 1995 Period of $3,788,000, and $251,000 in
depreciation and amortization, an $84,000 increase compared to the 1995
Period. General and administrative expenses for the 1996 Period included
$920,000 for Vista-Italy, $1,190,000 for Vista-Sweden, $206,000 for VLC-
Southwest and $17,000 for VLC-Northwest. Costs and expenses of operations
were reduced in part by the absence of costs of operations in England closed
in June 1995. Operating expenses at the parent Company level are attributable
primarily to marketing, audit and legal expenses of $917,000, the write-off of
$462,000 in advances to Regional Joint ventures, and salary expenses of
$452,000. Travel expenses increased to $166,000 primarily as a result of
activities relating to expansion efforts directed to development of Regional
Joint Ventures.
The Company's European subsidiaries sustained losses from operations in
the 1996 Period that were significantly reduced compared to the 1995 Period.
Cash flow from operations in the 1996 Period were cash neutral at both Vista-
Italy and Vista-Sweden. 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
general and administrative expenses in the 1996 Period included approximately
$2,595,000 of general and administrative expenses at the Vista parent
corporate level which is an increase of 43% compared to approximately
$1,811,000 of general and administrative expenses at the Vista parent
corporate level in the prior 1995 Period.
OTHER EXPENSES AND INCOME: Other net expenses in the 1996 Period
totalled $3,229,000, an increase of $2,986,000 compared to $243,000 in other
net expenses in the prior 1995 Period. The increase is primarily due to a
loss on the sale of securities of $1,132,000 and a loss of $1,953,000 of
equity investees. Interest expense increased from $81,000 in the prior 1995
Period to $143,000 in the 1996 Period due primarily to interest expenses
associated with additional laser equipment leases.
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<PAGE>
NET LOSS: Net loss for the 1996 Period was $5,758,000, representing a
net loss of $0.82 per common share, compared to a net loss in the 1995 Period
of $2,728,000, or $1.81 per common share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements include cash requirements
to support activities of VLC-Southwest, expansion activities related to the
western United States, working capital for management and administration, and
in the future, anticipated requirements to finance additional sales and
marketing activities. Subject to the availability of additional 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 programs of increasing the number of LVC centers, expanding LVC
Services and supporting the activities of Regional Joint Ventures.
PRESENT STATUS
As of December 31, 1996, the Company had $1,067,000 in cash and a
consolidated working capital deficit of $1,664,000. Consolidated working
capital decreased by $1,771,000 from consolidated working capital of $107,000
at March 31, 1996. Consolidated working capital during the nine months ended
December 31, 1996 was increased primarily by $1,050,000 in cash received from
the sale of common stock and $1,529,000 in net proceeds from the sale of
marketable securities, offset by $2,609,000 of cash used in operating
activities.
Although the Company's European operating subsidiaries appear to have
achieved neutral cash flow levels of operations, the Company'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. Management is actively pursuing
strategies to raise additional capital, increase the Company's revenues and
reduce its negative cash flow. Based on current operations, management
believes that its cash resources at December 31, 1996 are sufficient to fund
the Company's existing operations through approximately March 31, 1996.
There can be no assurance that the Company will be able to obtain
additional funding when needed, or that such funding, if available, will be
obtainable on reasonable terms. Any such additional funding may result in
significant dilution to existing stockholders. If adequate funds are not
available, the Company may be required to accept unfavorable alternatives,
including (i) the delay, reduction or elimination of its expansion, capital
expenditures, marketing and advertising and other operating expenses, (ii)
arrangements with collaborative partners that may require the Company to
relinquish material interests in its operating subsidiaries that it would not
otherwise relinquish, or (iii) a merger of the Company or a sale of the
Company or its assets.
EXPANSION PLANS
The Company's strategic plan is to expand its laser vision correction
center network and locations as quickly as possible within the limits of
available financial resources and prudent operating and financial policies.
This growth strategy includes: (i) rapidly increasing market penetration,
principally in the United States, through expansion of the number of locations
at which LVC equipment and services are offered by the Company's subsidiaries,
(ii) continuing to promote development of alliances with experienced
ophthalmologists and optometrists with the goal of maximizing excimer laser
usage; (iii) actively training additional physicians in advanced LVC
procedures; and (iv) developing marketing and advertising programs targeted to
specific regional markets and key demographic groups within those markets.
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<PAGE>
The Company and its Regional Joint Ventures plan to select strategically
located sites for additional expansion, each of which will be equipped with
state-of-the-art laser equipment systems permitted for commercial use in the
state or province in which such equipment is located, as well as diagnostic,
pre-operative and post-operative facilities. The Company or its corporate
affiliate will own or lease and maintain the LVC equipment at each site, will
lease real estate facilities for each location, and will offer physicians
billing, accounting, administrative, marketing and management services, as
well as access to a trained support staff and necessary LVC equipment and
supplies, so that health care professionals may concentrate their efforts on
patient care.
The current cost of an excimer laser ranges from approximately $475,000
to $525,000, plus sales tax. For laser equipment purchased from VISX,
Incorporated or Summit Technology, Inc., which currently offer the only laser
equipment approved to date for commercial use in the United States, 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 current 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, the Company believes that most ophthalmologists interested in
LVC surgery will not be able or willing to purchase a laser, seek financing
for the purchase and/or arrange for required maintenance of the laser
equipment.
Vista's European subsidiaries currently own or lease and maintain five
excimer lasers, and at present the Company's Regional Joint Ventures in the
United States and Canada collectively lease and maintain four excimer lasers.
Of the four lasers in the United States and Canada, one is in active use, one
is in storage and two are used exclusively by LPEC, an affiliate of Dr. Donald
G. Johnson in which the Company currently has no beneficial interest. See
Note 9(d) of the Notes to Unaudited Consolidated Financial Statements
elsewhere in this Report. Expenditures for additional excimer laser equipment
to support the Company's program of expanding LVC Services offered by Vista
and its corporate affiliates may be significant. To date, the Company has
been able to provide a deposit of approximately $50,000 per laser and has not
experienced difficulty in arranging for equipment financing of the balance of
the purchase price, either from the equipment manufacturer or a third party,
by means of a capital equipment lease or an installment note secured by the
equipment. Due to current demand for and the cost of excimer lasers, the
Company believes that the resale value of an excimer laser has facilitated
obtaining equipment financing for a substantial portion of the equipment
price, especially when the third party financing source has reason to believe
the laser will be utilized on a consistent basis by experienced professionals.
The Company intends to continue to rely upon such third party financing
techniques to finance a substantial portion of additional equipment
acquisitions, as well as raising additional capital through future offerings
of equity securities by the Company. In addition, Regional Joint Ventures
sponsored by Vista each may raise additional capital through either the
private placement and/or initial public offerings of their securities to
enhance their ability to obtain additional equipment to expand operations in
their region. See, however, Note 11 of the Notes to Unaudited Consolidated
Financial Statements at December 31, 1996 earlier in this Report. There can
be no assurance that additional equipment financing will continue to be
available to the Company or that either Vista or any of its Regional Joint
Ventures will be successful in obtaining additional equity capital from
private and/or public offerings of their securities.
-25-
<PAGE>
The Company is currently seeking additional private placement equity
capital in an amount of at least $5 million up to $10 million. Although it
has identified a source through which a financing is being offered, the
Company has not received any binding commitments to obtain such financing.
Subject to its ability to obtain additional private placement capital, as to
which there can be no assurance, Vista currently projects that additional
capital expenditures for investment in equipment and facilities of its
Regional Joint Ventures in North American during the six months ending June
30, 1997 will be as much as $6,600,000. Additional projected requirements
during that period for the implementation of sales and marketing programs are
approximately $400,000 and Vista anticipates it will also seek to expand its
administrative and management personnel and systems at an projected expense of
approximately $600,000 for that period. The Company's management anticipates
that substantial additional public and/or private financings in excess of the
above amounts will be required after June 30, 1997, in amounts not yet
determined, to finance continued growth of its laser vision correction center
network and that purchase money equipment financing and/or leasing
arrangements will be utilized to the extent available, if any, to leverage the
amount of additional equipment available to expand the Company's operations.
Vista's actual future capital requirements will depend on numerous factors,
including, but not limited to, progress in acquiring additional laser
equipment and facilities for LVC centers, the ability of the Company and
Regional Joint Ventures to establish additional affiliations with vision care
professionals, the availability, amount and terms of additional equipment
lease and/or installment purchase financing, competing technological and
market developments, and the cost of marketing and advertising programs. The
Company is currently unable to state the amount or potential source of
additional financing.
Because of the Company's potential long-term capital requirements, it
may undertake additional equity offerings whenever conditions are favorable,
even if it does not have an immediate need for additional capital at that
time. There can be no assurance that Vista will be able to obtain additional
funding when needed, or that such funding, if available, will be obtainable on
reasonable terms. Any such additional funding may result in significant
dilution to existing stockholders of Vista. If adequate funds are not
available, Vista may be required to accept unfavorable alternatives, including
(i) the delay, reduction or elimination of its planned expansion, capital
expenditures, marketing and advertising and other operating programs, or (ii)
arrangements with collaborative partners that may require Vista to relinquish
material interests in its operating subsidiaries that it would not otherwise
relinquish.
U.S. DOLLAR PRESENTATION AND FOREIGN CURRENCY FLUCTUATIONS
Except as otherwise stated in this Report, all monetary amounts have
been presented in U.S. dollars.
The Company's European operating subsidiaries in Italy and Sweden
currently represent a significant portion of the Company's revenues and
expenses that are collected and paid in foreign currencies. The Company
publishes its consolidated financial statements in U.S. dollars after
translating transactions in foreign currencies into U.S. dollars. In periods
when the U.S. dollar depreciates against the relevant foreign currencies,
reported earnings attributable to transactions in foreign currencies may be
materially enhanced. In periods when the U.S. dollar appreciates against the
relevant foreign currencies, however, reported earnings attributable to
transactions in foreign currencies may be materially reduced. Fluctuations in
the exchange rate between foreign currencies and the U.S. dollar may also
affect the book value of Vista's assets and the amount of its stockholders'
equity.
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<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
The following changes occurred during the nine months ended December 31,
1996 in the outstanding shares of the Company's common stock:
250,000 SHARES ISSUED UPON EXERCISE OF PHARMA PATCH STOCK OPTION
As part of certain agreement and financing transactions between the
Company and Pharma Patch PLC in March 1996, Vista granted Pharma Patch PLC an
option exercisable at any time on or before September 30, 1996 (subsequently
extended by mutual agreement to October 15, 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 PLC exercised 200,000 shares subject to the Six
Month Option at an exercise price of $500,000 paid to the Company in cash. On
October 15, 1996, Pharma Patch PLC exercised the remaining 50,000 shares
subject to the Six Month Option at an exercise price of $125,000.
200,000 SHARES ISSUED FOR CASH IN REGULATION S TRANSACTIONS
On June 13, 1996, the Company 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 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.
On August 14, 1996, the Company 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, Paget Trading Ltd. The quoted closing market price for the
Company's common stock on August 9, 1996, the date of the agreement, was
$2.875 per share. No fees or commissions to third parties were paid in
connection with this offering.
520,000 SHARES ISSUED IN REGULATION S TRANSACTION TO ACQUIRE SERIES A
PREFERRED SHARES OF REGIONAL JOINT VENTURES
From July 1995 through June 1996, a foreign corporate investor named
Refractive Services-800, Inc. invested $520,000 in cash in five Regional Joint
Ventures sponsored by the Company. 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 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).
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<PAGE>
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 issued a total
of 520,000 shares of Vista common stock with an estimated value of
approximately $0.99 a share at date of issuance.
1,450,000 SHARES ISSUED AND 1,450,000 SHARES CANCELLED IN CONNECTION WITH
OTHER TRANSACTIONS RELATING TO REGIONAL JOINT VENTURES
VISTA LASER CENTERS OF MICHIGAN, INC.
The Company elected to convert all 300,000 shares of VLC-Michigan
preferred stock owned by the Company as of November 15, 1996 into 300,000
shares of VLC-Michigan common stock. During December 1996, negotiations for
VLC-Michigan to acquire an existing laser vision correction services business
based in Windsor, Ontario, and to enter into related agreements with
affiliates of the physician who owns the Windsor business, were terminated.
VLC-Michigan refunded stock subscriptions previously received from affiliates
of that physician. The Company subsequently agreed to accept 200,000 shares
of its common stock owned by VLC-Michigan for cancellation, which have been
returned to the Company's possession, in exchange for the cancellation of
200,000 shares of VLC-Michigan common stock then owned by the Company. As a
result of these transactions, at December 31, 1996 the Company owned 100,000
shares of VLC-Michigan common stock, representing 95.2% of VLC-Michigan's
outstanding capital stock, and no shares of the Company's capital stock were
retained by VLC-Michigan.
VISTA LASER CENTERS OF THE SOUTHWEST, INC.
As of October 1, 1996, the Company elected to convert all of its rights
to 450,000 shares of VLC-Southwest preferred stock into 450,000 shares of VLC-
Southwest common stock. On October 1, 1996, the Company and VLC-Southwest
agreed that the Company's account receivable of $383,634 for advances to VLC-
Southwest would be extinguished in exchange for the surrender of 250,000
shares of the Company's common stock then held by VLC-Southwest.
As of October 1, 1996, the Company agreed to purchase a $100,000 VLC-
Southwest note and 10,000 VLC-Southwest Class B warrants from Pharma Patch PLC
in exchange for a $100,000 note payable by the Company. The Company also
agreed to surrender the $100,000 VLC-Southwest note for cancellation in
exchange for 100,000 shares of VLC-Southwest common stock effective October 1,
1996.
As a result of these transactions, at December 31, 1996 the Company
owned 550,000 shares of VLC-Southwest common stock, representing 94% of VLC-
Southwest's outstanding capital stock, and no shares of the Company's capital
stock have been retained by VLC-Southwest.
VISTA LASER CENTERS OF THE NORTHWEST, INC.
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
VLC-Northwest. The Company subsequently elected to convert 100,000 shares of
VLC-Northwest Series A preferred stock into 100,000 shares of VLC-Northwest
common stock. During October 1996, VLC-Northwest and an affiliate of Dr.
Donald G. Johnson terminated negotiations that contemplated the possible
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<PAGE>
future acquisition by VLC-Northwest of an existing laser vision correction
services business from an affiliate of Dr. Johnson. VLC-Northwest refunded
Dr. Johnson's original cash investment in VLC-Northwest due to the termination
of these negotiations. The Company caused 500,000 shares of its common stock
held by VLC-Northwest, currently in the Company's possession, to be
surrendered in exchange for cancellation of the Company's investment in
500,000 shares of VLC-Northwest Series B convertible preferred stock.
As a result of these transactions, at December 31, 1996 the Company
owned 100,000 shares of VLC-Northwest common stock, representing 100% of VLC-
Northwest's outstanding capital stock, and no shares of the Company's capital
stock have been retained by VLC-Northwest.
VISTA LASER CENTERS OF THE PACIFIC, INC.
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
VLC-Pacific. The Company subsequently elected to convert all its 600,000
shares of VLC-Pacific preferred stock into 600,000 shares of VLC-Pacific
common stock. To accommodate the request of VLC-Pacific in its efforts for a
proposed public offering of its securities, during December 1996 the Company
and VLC-Pacific mutually agreed to terminate relationships between the Company
and VLC-Pacific. As a part of this agreement, the Company accepted 500,000
shares of its common stock then owned by VLC-Pacific for cancellation, which
have been returned to the Company's possession, in exchange for the
cancellation of 500,000 shares of VLC-Pacific common stock then owned by the
Company and the Company agreed to accept a 9% promissory note issued by VLC-
Pacific in the principal amount of $100,000 for the repurchase of the
remaining 100,000 shares of VLC-Pacific common stock then owned by the
Company. As a result of these transactions, at December 31, 1996 the Company
did not own any shares of VLC-Pacific capital stock and no shares of the
Company's capital stock have been retained by VLC-Pacific.
VISTA LASER CENTERS OF THE NORTHEAST.
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
VLC-Northeast. In January 1997, the Company, Pharma Patch PLC, VLC-Northeast
and certain members of VLC-Northeast operating management and their affiliates
entered into a settlement agreement to terminate all relationships between the
parties. As a part of this settlement, the Company sold all of its equity
investment in VLC-Northeast for the sum of $1.00. As a result of these
transactions, at December 31, 1996 the Company did not own any shares of VLC-
Northeast capital stock VLC-Northeast retained ownership of 450,000 shares of
the Company's common stock.
An additional provision of the VLC-Northeast settlement agreement
requires VLC-Northeast to return for cancellation the 450,000 shares of the
Company's common stock currently owned by VLC-Northeast at the time certain
escrow funds required by the settlement agreement have been deposited into
escrow by the Company. The Company has paid $150,000 under the settlement
and will be obligated to deposit an additional $306,271 from proceeds of any
private placement offering of at least $2 million by the Company. Should the
Company fail to perform these obligations, VLC-Northeast is entitled to retain
ownership of the 450,000 shares of the Company's common stock.
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<PAGE>
98,000 SHARES ISSUABLE PURSUANT TO AN EXCHANGE AGREEMENT
In order to induce a stockholder (Quintillion B.V.) to advance $100,000
under a deed of debenture to MICRA Instruments Limited, a wholly owned
subsidiary of Medical Development Research, Inc. ("MDRI"), the Company entered
into an exchange agreement on June 28, 1995 with Quintillion. Quintillion is
an affiliate of a former director and chief executive officer of the Company,
Jac. J. Lam, who was serving in those capacities at the time of the
transaction. At the time of the transaction, the Company was obligated to
advance funds for working capital requirements of MDRI and its subsidiaries
under a reorganization agreement with MDRI and certain management stockholders
of MDRI. The reorganization agreement was subsequently terminated and
abandoned by the Company in July 1995.
The exchange agreement provided Quintillion with the option of
exchanging the unpaid principal and interest of the MICRA debenture for fully
paid and nonassessable shares of the Company's common stock issuable under
Regulation S adopted under the Securities Act of 1933 at a conversion price of
$1.25 per share at any time prior to repayment of the debenture by MICRA. As
of December 28, 1996, the stockholder exercised this option for $122,500
(total principal plus accrued interest on the debenture as of December 31,
1996) and the Company is obligated to issue 98,000 shares of its common stock
in exchange for an assignment to the Company of the MICRA debenture. The
Company's investment in the MICRA debenture was written-off as doubtful of
collection as of December 31, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1997 annual meeting of the Company's stockholders was held on
February 4, 1997. Matters voted on at the annual meeting included (i) the
annual election of four directors to the Company's Board of Directors; (ii) a
proposal to approve an increase in the number of shares of Common Stock
subject to the Company's 1994 Stock Option Plan to a total of 2,500,000
shares; and (iii) a proposal to approve the adoption of the Company's 1996
Stock Compensation Plan covering up to 250,000 shares of the Company's Common
Stock. All of such matters were described in the Company's proxy statement
dated January 10, 1997, definitive copies of which were filed with the
Securities and Exchange Commission. The results of voting on matters presented
to the meeting were as follows:
(i) Incumbent directors Dr. J. Charles Casebeer, Dr. Donald G. Johnson,
Thomas A. Schultz and Murray D. Watson were re-elected as directors of
the Company, each to serve for a term of one year until the next
annual meeting of stockholders and until their successors are elected
and shall qualify.
(ii) The proposal to approve an increase in the number of shares of Common
Stock subject to the Company's 1994 Stock Option Plan to a total of
2,500,000 shares was adopted and approved by a vote of 3,613,211
shares in favor, 6,039 shares against and no shares abstaining.
(ii) The proposal to approve the adoption of the Company's 1996 Stock
Compensation Plan covering up to 250,000 shares of the Company's
Common Stock was adopted and approved by a vote of 3,612,211 shares in
favor, 6,039 shares against and 1,000 shares abstaining.
-30-
<PAGE>
ITEM 5. OTHER EVENTS.
UNKNOWN EFFECT OF INABILITY TO OBTAIN NASDAQ STOCK MARKET LISTINGS
The Company's previously-announced strategy of obtaining independent
financing for its Regional Joint Venture affiliates through proposed initial
public offerings of their securities has been altered, at least temporarily.
The primary reason for altering this strategy has been the unanticipated
inability of two Regional Joint Ventures to obtain a listing of their
securities on The Nasdaq SmallCap Market, primarily because of prior
relationships between the Company, on the one hand, and its former financial
advisor, EC/American Ltd. ("EC/American") and persons associated with
EC/American or introduced to the Company by EC/American, on the other hand.
VLC-Michigan submitted an application in May 1996 to list its
securities on The Nasdaq SmallCap Market covered by a proposed initial public
offering of VLC-Michigan securities, and VLC-Pacific submitted a similar
application to The Nasdaq SmallCap Market in August 1996.
The staff of The Nasdaq Stock Market denied the application of VLC-
Michigan in August 1996 on several grounds, including (i) the then uncertain
business prospects for VLC-Michigan, (ii) the Company's past association with
EC/American and two of its individual consultants; and (iii) an ongoing
investigation by the Securities and Exchange Commission into trading in the
securities of U.S. Shoe Corporation that included inquires directed to the
activities of Jac. J. Lam, a European consultant to various foreign investors
introduced to the Company by EC/American, activities of EC/American and/or
persons and entities associated with Mr. Lam and/or EC/American. Mr. Lam also
served as a director of VLC-Michigan and the Company and was a former Chief
Executive Officer of the Company. (The Company has been advised that
EC/American has ceased operations; the Company no longer has any
relationships with Mr. Lam [except that certain of his clients continue to own
shares of the Company's common stock] or any person formerly associated with
EC/American.)
VLC-Michigan filed an appeal from The Nasdaq Stock Market's staff
decision based in part on the complete termination of all relationships
between the Company and VLC-Michigan, on the one hand, and Mr. Lam and
EC/American and its affiliates, on the other hand (except for continued
ownership of the Company's common stock by certain clients of Mr. Lam). That
appeal was denied in October 1996 by a Nasdaq Stock Market review panel in a
written decision finding that, while VLC-Michigan had resolved issues
concerning its then business prospects, VLC-Michigan would not be approved for
listing at that time because of the past association of VLC-Michigan and the
Company with EC/American, Mr. Lam and the two individuals associated with
EC/American. Counsel for VLC-Michigan was informed that the application could
be resubmitted at a future date after VLC-Michigan and the Company had
demonstrated their ability to operate without being influenced by EC/American
and persons associated with EC/American.
Although no formal action was taken on the application submitted by
VLC-Pacific, counsel for VLC-Pacific and the Company was informed by The
Nasdaq Stock Market staff in November 1996 that VLC-Pacific would not be
approved for listing for essentially the same reasons articulated by the
review panel in denying the appeal filed by VLC-Michigan. Counsel was further
advised that the VLC-Pacific application could be resubmitted at a future date
after VLC-Pacific and the Company had demonstrated their ability to operate
without being influenced by EC/American and persons associated with
EC/American.
As a result of these actions, the Company does not believe it is
practicable for any Regional Joint Venture associated with the Company to plan
on processing a proposed public offering of its securities within the
immediately foreseeable future.
-31-
<PAGE>
In addition, the Company's prior relationships with EC/American and
Mr. Lam, or the fact that shares in the Company are owned by certain clients
of Mr. Lam, may render it impractical for the Company to seek a listing of its
own securities on The Nasdaq SmallCap Market within the immediate future. In
this regard, the Company notes that certain clients of Mr. Lam also own shares
in Atlantic Central Enterprises Ltd. (the successor-in-interest to Pharma
Patch PLC), which currently is the Company's largest single shareholder, and
either or both of Atlantic Central Enterprises Ltd. and Pharma Patch PLC may
have existing or prior associations with an individual formerly associated
with EC/American. TO THE EXTENT THAT THESE CIRCUMSTANCES RENDER IT MORE
DIFFICULT OR IMPOSSIBLE FOR THE COMPANY TO OBTAIN A LISTING OF ITS SECURITIES
ON THE NASDAQ STOCK MARKET OR A NATIONAL SECURITIES EXCHANGE IN THE FUTURE,
THE ABILITY OF THE COMPANY TO OBTAIN ADDITIONAL PUBLIC OR PRIVATE FINANCING
MAY BE MATERIALLY ADVERSELY AFFECTED.
CHANGE IN NAMES OF REGIONAL JOINT VENTURES
During August 1996, the Company was notified that a third party with
business operations relating primarily to eyeglasses has alleged that use of
the name "Vista Laser Centers" by VLC-Southwest infringes certain trademark
rights held by the third party. Although the Company does not believe that
use of the Vista Laser Centers name by its Regional Joint Ventures infringes
upon the trademark rights of any third party, the Company desires to avoid
litigation of this issue and is currently evaluating other names for its
Regional Joint Ventures. It is anticipated that a new common name for VLC-
Southwest and other Regional Joint Ventures affiliated with the Company will
be selected and implemented within the next six months.
$800,000 LOAN FROM PHARMA PATCH PLC.
In August 1996, the Company borrowed $800,000 from Pharma Patch PLC, a
principal shareholder of the Company, in exchange for an 8% secured promissory
note (the "8% Secured Note"). Principal and interest on the 8% Secured Note
were payable on December 31, 1996, or earlier in the event the Company elected
to sell any portion of its interest in 200,000 shares of Technical Chemicals
and Products, Inc. common stock (the "TCPI Shares") registered for resale
under the federal securities laws. The TCPI Shares were pledged as collateral
by the Company to secure its obligations under the 8% Secured Note. The
Company sold all of its TCPI Shares in late November 1996 and December 1996
and fully discharged the 8% Secured Note to Pharma Patch in December 1996 from
a portion of the net proceeds of sale.
Murray D. Watson, an executive officer and director of the Company, is
a director and chief executive officer of Pharma Patch and is the beneficial
owner of equity securities in Pharma Patch. Kenneth G. Howling, an executive
officer of the Company, serves as an executive officer of Pharma Patch and is
the beneficial owner of equity securities in Pharma Patch. The Company has
been advised that shareholders of Pharma Patch in January 1997 approved a
restructuring plan of Pharma Patch into Atlantic Central Enterprises, Ltd., a
Bermuda company with securities publicly traded in U.S. over-the-counter
market under the trading symbol "ALCNF".
ISSUANCE OF BRIDGE NOTE AND WARRANTS
On December 6, 1996, the Company sold $300,000 in principal amount of
12% promissory notes and 30,000 Class E common stock purchase warrants for a
cash consideration of $300,000. All of these securities were sold to one
accredited investor in a private placement offering. No fees or commissions
to third parties were paid in connection with this offering.
The 12% promissory notes mature on the earlier of June 30, 1997 or
receipt by the Company of at least $5 million in proceeds from a pending
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<PAGE>
private placement offering of convertible preferred stock through a placement
agent. Each Class E Warrant represents the right to purchase one share of the
Company's common stock at an exercise price of $2.625 per share at any time
until December 31, 2001, unless earlier called for redemption by the Company.
The Company has the option to call the Class E Warrants for redemption if the
common stock issuable on exercise of the warrants have been registered for
sale under the Securities Act of 1933 and if the Company's common stock is
trading in the over-the-counter market or on a national securities exchange
and the closing sale price is $5.00 per share for at least 20 consecutive
trading days on the last date before the Class E warrants are called for
redemption.
CHANGES IN RELATIONSHIPS AND CERTAIN AGREEMENTS WITH REGIONAL JOINT VENTURES.
Reference is made to Note 10 of the Notes to Consolidated Financial
Statements at December 31, 1996 included earlier in this Report and to Item 2
of this Part II for certain information relating to changes in relationships
and certain agreements between the Company and its Regional Joint Ventures.
EMPLOYMENT AGREEMENT WITH EXECUTIVE OFFICER
The Company has entered into a written employment agreement dated as
of November 1, 1996 with Allen J. Simon, who was elected the Company's
Executive Vice President and Chief Operating Officer on November 11, 1996.
The employment agreement with Mr. Simon is for a term of 36 months from
November 1, 1996 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 $175,000, participation in group benefit and
health insurance programs, payment of insurance premiums for long-term
disability and life insurance, and an amount not exceeding 7 1/2% of his base
salary for personal benefit expenses relating to Mr. Simon and his family
members as he shall determine. For fiscal years commencing in April 1997, Mr.
Simon 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. He also received a $25,000 signing bonus in November
1996 and will be entitled to a cash bonus of $50,000 payable on May 1, 1997 in
lieu of a performance bonus for the fiscal year ending March 31, 1997.
Mr. Simon's employment agreement further provides he is entitled to
severance benefits if his employment is involuntarily or constructively
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,
and (ii) continuation of insurance benefits for life, health, dental and
long-term disability for a period of 12 months after employment termination.
In the event of such involuntary or constructive termination, Mr. Simon is
required to remain available for up to ten hours per week as a consultant to
the Company at the rate of $150 per hour and his consulting status will
require continued vesting of his outstanding stock options in accordance with
their terms for a period of 12 months after full employment termination. Mr.
Simon 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 an executive officer of the Company. The employment agreement contains
confidentiality and non-competition provisions in favor of the Company. Mr.
Simon's employment agreement was approved by the Board of Directors on
November 11, 1996.
Pursuant to the employment agreement, on November 18, 1996, the
Company sold 100,000 Class G nontransferable Warrants to Mr. Simon for the
payment of $100. Each Class G Warrant represents the right to purchase one
share of the Company's common stock with an exercise price of $2.625 per share
at any time until December 31, 2001, unless earlier called for redemption.
The Company has the option to call all Class G Warrants for redemption at a
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<PAGE>
nominal price of $100 if Mr. Simon's employment is terminated as a result of
death, disability or for cause under the terms of his employment agreement.
In addition, Mr. Simon was granted a five-year option on November 11,
1996 to purchase 500,000 shares of common stock under the Company's 1994 Stock
Option Plan exercisable at $2.75 per share. The closing bid price for the
Company's common stock on November 11, 1996 was $2.75 per share. The stock
option becomes exercisable in 12 equal installment per calendar quarter
commencing three months after the date of grant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS: The following exhibits are filed with this Report or are
incorporated herein by reference:
# Indicates exhibit filed with this Report
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ---------------------------------------------------
<S> <C>
# 10.1.3a Amendment to Stock Option Agreement dated February 15, 1996
between Registrant and Trident Management, corporate designee of
Murray D. Watson, changing vesting to installments over a 36 month
period.
# 10.1.5a Amendment to Stock Option Agreement dated February 15, 1996
between Registrant and Thomas A. Schultz changing vesting to
installments over a 36 month period.
# 10.1.12 Stock Option Agreement dated October 22, 1996 between the
Registrant and Thomas A. Schultz covering 600,000 shares of common
stock vesting in installments over a 36 month period.
# 10.1.13 Stock Option Agreement dated November 12, 1996 between the
Registrant and Allen J. Simon covering 500,000 shares of common
stock vesting in installments over a 36 month period.
# 10.3.6 Indemnification Agreement dated November 12, 1996 between the
Registrant and Allen J. Simon.
# 10.41 Employment Agreement dated November 1, 1996 between the Registrant
and Allen J. Simon.
# 10.42 Form of Nontransferable Class G Common Stock Purchase Warrants
exercisable at $2.625 per share and expiring on December 31, 2001.
# 10.43 Form of 12% Promissory Notes due June 30, 1997.
# 10.44 Form of Redeemable Class E Common Stock Purchase Warrants
exercisable at $2.625 per share and expiring on December 31, 2001.
# 10.45 Agreement dated January 6, 1997 among the Registrant, Pharma Patch
PLC, RS-800, INC., Vista Laser Centers of the Northeast, Inc., Dr.
Sheldon Herzig, Cherry Sharrer and Cherry Development Corporation.
# 27 Financial Data Schedule at December 31, 1996.
</TABLE>
-34-
<PAGE>
(b) REPORTS ON FORM 8-K:
The Company did not file any Reports on Form 8-K during the fiscal
quarter ended December 31, 1996.
The Company filed a Report on Form 8-K dated January 8, 1997
indicating that the Company intended, with the assistance of a placement
agent, and subject to market and other conditions, to raise up to $10 million
in a private placement of a new series of convertible preferred stock to
accredited individual and institutional investors pursuant to Regulation D
under the Securities Act of 1933. If the offering is successful, as to which
there can be no assurance, net proceeds of the offering are planned to be used
by the Company to help finance its North American expansion of laser vision
correction centers, and for marketing and other working capital purposes.
The Report on Form 8-K dated January 8, 1997 further noted that the
securities to be offered will not have been registered under the Securities
Act of 1933 or applicable state securities laws at the time of the private
placement and may not be offered or sold in the United States absent
registration under the Securities Act and applicable state securities laws or
available exemptions from registration. The statements made in the Report on
Form 8-K dated January 8, 1997 contain certain forward looking statements
within the meaning of section 27a of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve a number of risks
and uncertainties, including the risk that the Company will be unable to
complete the proposed private placement. Actual events or results may differ
from the Company's expectations.
SIGNATURES
Pursuant to the requirements of Section 13 of 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.
Date: March 3, 1997
VISTA TECHNOLOGIES INC.
---------------------------------
(Registrant)
By: /s/ Thomas A. Schultz
-----------------------------
Thomas A. Schultz, President and
Chief Executive Officer
By: /s/ Kenneth G. Howling
-----------------------------
Kenneth G. Howling,
Vice President of Finance, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
-35-
VISTA TECHNOLOGIES INC.
AMENDMENT to STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Original Date of Grant: February 15, 1996
WHEREAS, VISTA TECHNOLOGIES INC., a Nevada corporation (the
"Company"), previously granted to TRIDENT MANAGEMENT INC. (the "Optionee"),
pursuant to the 1994 Stock Option Plan of the Company (the "Plan"), a stock
option (the "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 terms and conditions set forth in the Option agreement
and the Plan; and
WHEREAS, the shares subject to such Option were to be exercisable
either during the last 30 days of the five-year term of the Option, or
alternatively, from and after any date on which the Company's Common Stock
Price equalled or exceeded $10.00 per share; and
WHEREAS, the vesting terms of such option were established on a
mistake of fact as to the accounting treatment to be accorded such Options;
and
WHEREAS, to conform the Options to the Company's standard form of
stock options and qualify for the accounting treatment intended by the
Company's Board of Directors, the parties hereto agree to amend Section 1 of
the Option agreement relating to vesting terms and conditions:
NOW, therefore, the parties agree that Section 1 of the Option
agreement is hereby amended in its entirety as of February 15, 1996 to read as
follows:
1. VESTING. SUBJECT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT AND THE PLAN, THE SHARES SUBJECT THIS OPTION
SHALL BE EXERCISABLE AS FOLLOWS:
(A) THE FIRST TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1996; AND
(B) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1996; AND
(C) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1996; AND
(D) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1997; AND
(E) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1997; AND<PAGE>
(F) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1997; AND
(G) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1997; AND
(H) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1998; AND
(I) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1998; AND
(J) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1998; AND
(K) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1998; AND
(L) THE REMAINING TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1999;
PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THIS OPTION BE
EXERCISABLE LATER THAN THE EXPIRATION DATE.
VISTA TECHNOLOGIES INC.
[CORPORATE SEAL]
By: ________________________
Thomas A. Schultz, President
By: __________________________
William M. Curtis, Secretary
ACCEPTED AND APPROVED BY THE OPTIONEE:
TRIDENT MANAGEMENT INC.
By: _____________________________ Date: August 15, 1996
Murray D. Watson
- 2 -
VISTA TECHNOLOGIES INC.
AMENDMENT to STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Original Date of Grant: February 15, 1996
WHEREAS, VISTA TECHNOLOGIES INC., a Nevada corporation (the
"Company"), previously granted to THOMAS A. SCHULTZ (the "Optionee"), pursuant
to the 1994 Stock Option Plan of the Company (the "Plan"), a stock option (the
"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
terms and conditions set forth in the Option agreement and the Plan; and
WHEREAS, the shares subject to such Option were to be exercisable
either during the last 30 days of the five-year term of the Option, or
alternatively, from and after any date on which the Company's Common Stock
Price equalled or exceeded $10.00 per share; and
WHEREAS, the vesting terms of such option were established on a
mistake of fact as to the accounting treatment to be accorded such Options;
and
WHEREAS, to conform the Options to the Company's standard form of
stock options and qualify for the accounting treatment intended by the
Company's Board of Directors, the parties hereto agree to amend Section 1 of
the Option agreement relating to vesting terms and conditions:
NOW, therefore, the parties agree that Section 1 of the Option
agreement is hereby amended in its entirety as of February 15, 1996 to read as
follows:
1. VESTING. SUBJECT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT AND THE PLAN, THE SHARES SUBJECT THIS OPTION
SHALL BE EXERCISABLE AS FOLLOWS:
(A) THE FIRST TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1996; AND
(B) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1996; AND
(C) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1996; AND
(D) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1997; AND
(E) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1997; AND
<PAGE>
(F) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1997; AND
(G) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1997; AND
(H) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1998; AND
(I) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER MAY 15, 1998; AND
(J) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER AUGUST 15, 1998; AND
(K) THE NEXT TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER NOVEMBER 15, 1998; AND
(L) THE REMAINING TWELVE THOUSAND FIVE HUNDRED (12,500) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN
WHOLE OR IN PART, FROM AND AFTER FEBRUARY 15, 1999;
PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THIS OPTION BE
EXERCISABLE LATER THAN THE EXPIRATION DATE.
VISTA TECHNOLOGIES INC.
[CORPORATE SEAL]
By: ________________________
Murray D. Watson,
Vice Chairman of the Board
By: _____________________________
William M. Curtis, Secretary
ACCEPTED AND APPROVED BY THE OPTIONEE:
__________________________________ Date: August 15, 1996
Thomas A. Schultz
-2-
VISTA TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Date of Grant: October 22, 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 SIX
HUNDRED THOUSAND (600,000) shares of Common Stock of the Company at a price of
TWO DOLLARS SIXTY-TWO AND ONE-HALF CENTS ($2.625) 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 OCTOBER 22, 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:
(A) THE FIRST FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JANUARY 22,
1997; AND
(B) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER APRIL 22,
1997; AND
(C) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JULY 22,
1997; AND
(D) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER OCTOBER 22,
1997; AND
(E) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JANUARY 22,
1998; AND
(F) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER APRIL 22,
1998; AND
(G) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JULY 22,
1998; AND
(H) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER OCTOBER 22,
1998; AND
(I) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JANUARY 22,
1999; AND
<PAGE>
(J) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER APRIL 22,
1999; AND
(K) THE NEXT FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION MAY BE
EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER JULY 22,
1999; AND
(L) THE REMAINING FIFTY THOUSAND (50,000) SHARES COVERED BY THIS OPTION
MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN PART, FROM AND AFTER
OCTOBER 22, 1999;
PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THIS OPTION BE EXERCISABLE LATER
THAN THE EXPIRATION DATE.
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
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.
-2-
<PAGE>
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.
(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.
(f) NOTWITHSTANDING ANYTHING TO THE CONTRARY OTHERWISE CONTAINED
ABOVE, THE EXERCISABILITY OF THIS OPTION SHALL BE SUBJECT TO THE CONDITION
THAT STOCKHOLDERS OF THE COMPANY SHALL HAVE APPROVED AND RATIFIED AN INCREASE
IN THE NUMBER OF SHARES SUBJECT TO THE 1994 STOCK OPTION PLAN PRIOR TO
FEBRUARY 6, 1997 SO THAT THE SHARES SUBJECT TO THIS OPTION SHALL HAVE BEEN
DULY RESERVED FOR THE PLAN.
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/ Allen J. Simon
---------------------
Allen J. Simon,
Executive Vice President
By: /s/ William M. Curtis
-------------------------------
William M. Curtis, Secretary
-3-
VISTA TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
UNDER 1994 STOCK OPTION PLAN
______________________________________
Date of Grant: November 16, 1996
VISTA TECHNOLOGIES INC., a Nevada corporation (the "Company"), hereby
grants to ALLEN J. SIMON (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 FIVE HUNDRED
THOUSAND (500,000) shares of Common Stock of the Company at a price of TWO
DOLLARS SEVENTY-FIVE CENTS ($2.75) 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 NOVEMBER 16, 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:
(A) THE FIRST FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER FEBRUARY 16, 1997; AND
(B) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER MAY 16, 1997; AND
(C) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SEVEN (41,667) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER AUGUST 16, 1997; AND
(D) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER NOVEMBER 16, 1997; AND
(E) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER FEBRUARY 16, 1998; AND
(F) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SEVEN (41,667) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER MAY 16, 1998; AND
(G) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER AUGUST 16, 1998; AND
(H) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER NOVEMBER 16, 1998; AND
(I) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SEVEN (41,667) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER FEBRUARY 16, 1999; AND
<PAGE>
(J) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER MAY 16, 1999; AND
(K) THE NEXT FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SIX (41,666) SHARES
COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE OR IN
PART, FROM AND AFTER AUGUST 16, 1999; AND
(L) THE REMAINING FORTY-ONE THOUSAND SIX HUNDRED SIXTY-SEVEN (41,667)
SHARES COVERED BY THIS OPTION MAY BE EXERCISED AT ANY TIME, IN WHOLE
OR IN PART, FROM AND AFTER NOVEMBER 22, 1999;
PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THIS OPTION BE EXERCISABLE LATER
THAN THE EXPIRATION DATE.
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
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 of the Optionee's
Employment Agreement with the Company dated November 1, 1996, in the event a
Termination Without Cause or Constructive Discharge as defined in Sections
6(c) and 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 or Constructive Discharge (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 in accordance with the terms and conditions of the
Optionee's Employment Agreement and subject to the provision that the Optionee
shall comply with obligations to render consulting services for such twelve
month period as provided by Section 6(f) of the Employment Agreement.
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
-2-
<PAGE>
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.
(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.
(f) NOTWITHSTANDING ANYTHING TO THE CONTRARY OTHERWISE CONTAINED
ABOVE, THE EXERCISABILITY OF THIS OPTION SHALL BE SUBJECT TO THE CONDITION
THAT STOCKHOLDERS OF THE COMPANY SHALL HAVE APPROVED AND RATIFIED AN INCREASE
IN THE NUMBER OF SHARES SUBJECT TO THE 1994 STOCK OPTION PLAN PRIOR TO
FEBRUARY 6, 1997 SO THAT THE SHARES SUBJECT TO THIS OPTION SHALL HAVE BEEN
DULY RESERVED FOR THE PLAN.
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
-3-
INDEMNIFICATION AGREEMENT
This Agreement dated November 12, 1996 by and between VISTA
TECHNOLOGIES INC., a Nevada corporation (the "Company") and ALLEN J. SIMON
(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
<PAGE>
right to defense of such action or proceeding on behalf of such Indemnified
Party), it being understood, however, that the Company shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time, which firm shall be
designated by agreement of all indemnified parties and, if no agreement is
reached by the indemnified parties within 15 days of the filing of the
relevant complaint, by the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without its written
consent (which shall not be unreasonably withheld), but if any such action or
proceeding is settled with its written consent, the Company agrees to
indemnify and hold harmless the Indemnified Party from and against any loss,
claim, damage, or liability (to the extent stated above) by reason of such
settlement or judgment.
3. In order to provide for just and equitable contribution, if a
claim for indemnification hereunder is found unenforceable in a final judgment
by a court of competent jurisdiction (not subject to further appeal), even
though the express provisions hereof provide for indemnification in such case,
then the Company shall contribute to the losses, claims, damages, judgments,
liability or costs to which the Indemnified Parties may be subject in
accordance with the relative benefits received by, and the relative fault of,
the Company in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, judgments, liabilities, or costs.
4. These indemnification provisions shall (i) remain operative and in
full force and effect regardless of any termination of the relationship
between the Company and the Indemnified Party; (ii) inure to the benefit of
any successors, assigns, heirs or personal representative of the Indemnified
Party; and (iii) be in addition to any other rights that the Indemnified Party
may have.
IN WITNESS WHEREAS, this Agreement has been executed by the parties
hereto on the date first written above.
"Company" VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
-----------------------------
Thomas A. Schultz, President
By Order of the Board of Directors
"Indemnified Party" /s/ Allen J. Simon 11/18/96
---------------------------------
ALLEN J. SIMON
2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement') dated as of November 1, 1996,
between VISTA TECHNOLOGIES INC., a Nevada corporation with its principal place
of business in the United States at 167 S. San Antonio Road, Suite 9, Los
Altos, CA 94022 (herein called the "Company") and Allen J. Simon (herein
called the "Employee") residing at 3030 Washington St., San Francisco, CA
94115
1. EMPLOYMENT. The Company hereby employs Employee as the Company's
Executive Vice President and Chief Operating Officer reporting to the
Company's Chief Executive Officer. Employee will be responsible for management
and supervision of the Company's operations for the term of this Agreement,
and the Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of November 1,
1996 (the "Employment Date") and shall continue in effect for a term of 36
months, unless previously terminated in accordance with the provisions of
Section 6 of this Agreement. Thereafter, this Agreement shall be automatically
renewed on a year-to-year basis unless either party shall provide the other
with notice in writing of the termination of this Agreement at least 60 days'
prior to the expiration of this Agreement at the end of its original term or
any renewal thereof. For purposes of this Agreement, the "term of this
Agreement" shall refer to the initial term and all renewal terms hereof. In
the event of termination by the Company prior to the expiration of this
Agreement at the end of its original term or any renewal thereof, the Company
shall pay the Employee severance pay and benefits required by Section 6(e) of
this Agreement unless termination by the Company is for a reason specified in
Sections 6(a), 6(b) or 6(c) hereunder
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a salary and fringe benefits as
follows;
(a) CASH COMPENSATION: The Company shall pay the Employee a base
salary during the term of this Agreement, payable monthly, at the rate
of $175,000 per year per
____________________________________________________________________________
1
<PAGE>
annum. In lieu of an annual bonus for the current fiscal year ending
March 31, 1997, Employee will receive a payment of $50,000 on May 1,
1997. Thereafter Employee will be eligible to receive an fiscal annual
performance bonus of up to 100% of base salary based upon achievement
of reasonable and achievable Company goals as determined and approved
in good faith by the Board of Directors to be paid no later than 90
days from the end of such year. Employee shall be eligible for annual
performance appraisal and merit increase. Company may, but is not
obligated to, increase Employee's salary as Company deems appropriate.
(b) Stock Options: The Company shall grant the Employee Incentive
Stock Options under the Vista Technologies Inc. 1994 Stock Option Plan
to purchase 500,000 common shares of the Company at $2.625 per share
which shall vest in equal quarterly increments over a period of 12
quarters from the Employment Date as set forth in the Stock Option
Agreement.
(c) MEDICAL, INSURANCE, AND OTHER BENEFITS: The Employee shall at
his option be entitled to participate with other employees of the
Company in all group fringe benefit plans or other group arrangements
authorized and adopted from time to time. Employee shall also receive
such other benefits including vacation, holidays, and sick leave, as
Company generally provides to its employees holding similar positions
as that of Employee. The Company agrees to make available to Employee
Company-paid medical and long-term disability plans, and will make the
annual payments for Employee's life insurance policy #1A22073200
provided by Pacific Mutual Insurance.
(d) CAFETERIA PLAN: The Company agrees to reimburse Employee an
amount equal to no more than seven and one half per cent (7 1/2%) of
base salary in any year for personal benefit expenses related to
Employee and his family as determined by Employee at his sole
discretion. Cafeteria Plan benefits shall not be accumulated and
carried over from one year to the next, and shall be forfeited to the
extent not used within any calendar year.
(e) EXPENSES: The Company shall either pay directly or reimburse
Employee for reasonable travel, entertainment and other business
expenses incurred by Employee in the performance of his duties
hereunder; provided that the incurring
____________________________________________________________________________
2
<PAGE>
of such expenses shall be subject to such policies as shall be
established by the Board of Directors of the Company from time to
time, and Employee shall submit to the Company such documentation to
substantiate such expenses as the Company shall reasonably request.
(f) INITIAL EMPLOYMENT BONUS: Company will pay Employee a cash bonus
of $25,000 on or before December 15, 1996. In addition, the Company
shall grant Employee upon effective date of the Agreement 100,000
Class G Common Stock Purchase Warrants for Company common shares
exercisable at a price of $2.625 per share in exchange for $100. The
Company has the right to repurchase these warrants for $100 should
Employee be Terminated by the Company for any reason other than in
paragraphs 6(a), 6(b), and 6(d) hereof.
Nothing herein shall be deemed to preclude the Company from awarding
additional compensation or benefits to Employee during the term of this
Agreement, upon approval of Company's Board of Directors, whether in the form
of raises, bonuses, additional fringe benefits, or otherwise.
4. DUTIES. During the term of this Agreement, the Employee hereby
promises to perform and discharge faithfully the duties which may be assigned
to him from time to time by the President of the Company in connection with
the conduct of its business so long as such duties are reasonably related to
the Employee's duties Executive Vice President and Chief Operating Officer of
the Company. Employee will be responsible for all domestic and foreign
operations of the Company and will have all relevant executives and their
respective subordinates report to him with the exception of the Chief
Financial Officer and his subordinates. Employee is employed to actively serve
on a full-time basis as an executive officer of the Company reporting directly
to its President.
5. EXTENT OF SERVICES; OTHER INTERESTS. During the term of this
Agreement, the Employee shall devote all of his working time, attention and
energies which is reasonably required for the performance of his duties and
the business of the Company and shall travel as reasonably required to
discharge the duties of his position with the Company as assigned by its Board
of Directors. The Employee shall not during the term of this Agreement be
engaged in any other business activities that are, or could
____________________________________________________________________________
3
<PAGE>
potentially be, in competition with the business activities of the Company
whether or not such business activities are pursued for gain, profit or other
pecuniary advantage. Subject to the foregoing, the Employee may engage in
investment, business, professional and continuing education activities so long
as such activities do not substantially interfere with the performance of his
duties as the Executive Vice President and Chief Operating Officer of the
Company.
6. TERMINATION. Payment of severance described in this Section 6 shall
be paid no later than ten (10) days after becoming due.
(a) DEATH: In the event of Employee's death during the term hereof,
this Agreement shall terminate immediately and, except as expressly
set forth in this paragraph, the Company shall have no further
liability hereunder to Employee or his estate. The Company shall
continue to pay to Employee's estate his salary and continued stock
option vesting for a period of one (1) month from and after the date
of death during the term of this Agreement.
(b) PERMANENT DISABILITY. In the event that Employee becomes totally
disabled during the term hereof and such total disability continues
for a period in excess of ninety (90) days, whether consecutive or in
the aggregate during any 12 month period, at the end of such period of
disability the Employee shall be considered as permanently disabled
and this Agreement shall terminate immediately and, except as
expressly set forth in this paragraph, the Company shall have no
further liability hereunder to Employee. The Company shall continue to
pay to Employee his salary and continue stock option vesting for the
period of disability and a period of two (2) months from and after the
date of total disability commencing with the expiration of the first
90 day period of such disability as severance pay hereunder.
Employee shall be considered as totally disabled if, and when because
of injury, illness or physical or mental disability, he is prevented
from effectively performing the duties of his employment. The
determination of total disability shall be made by the Board of
Directors of the Company, but said decision shall not be unreasonable
or arbitrary and shall be supported by the opinion (at the Company's
expense) of at least one licensed physician unless Employee shall
____________________________________________________________________________
4
<PAGE>
without justification fail to submit to the necessary physical or
mental examinations. It is understood that Employee's occasional
sickness of short duration shall not result in Employee being
considered totally disabled, and Employee shall continue to be
compensated hereunder during such periods of occasional sickness so
long as they shall not exceed twelve (12) days In a calendar year.
(c) INVOLUNTARY TERMINATION FOR CAUSE. The Company may terminate this
Agreement for cause. For the purposes of this Agreement, a termination
for "cause" shall mean a termination resulting from a good faith and
reasonable determination by the Company's Board of Directors that
Employee (i) has committed a felony or act of moral turpitude which
would materially injure the Company or its reputation or, (ii) has
intentionally or willfully and repeatedly breached his duties
hereunder in a material respect and, if curable, has failed to cure
the same within thirty (30) days after receiving written notice of
such breach from the Board of the Company. Such notice must be given
to Employee following each claimed breach, whether or not curable. In
the event of termination for cause, the Company shall have no further
liability hereunder to Employee from and after the date of such
termination.
(d) TERMINATION WITHOUT CAUSE. Termination of Employee for any reason
other than in paragraphs 6(a), 6(b), and 6(c) hereof shall be
considered Termination Without Cause. In addition, Employee's
resignation from the employ of the Company shall be deemed Termination
Without Cause ("Constructive Discharge") if resulting from: 1) a
reduction of more than 25% of monthly base salary in cash compensation
(excluding performance bonuses) or other benefits other than as a
result of a decrease in compensation payable to Employee and to all
other executive officers of Company on the basis of Company's
financial performance; 2) a change in reporting relationship to the
Company President or a significant reduction in the nature or scope of
Employee's responsibilities, authorities, powers, functions or duties
as an Executive Vice President and Chief Operating Officer of the
Company; 3) a requirement imposed by Company that Employee relocate to
an office that is more than 25 miles from the Company's current
headquarters; 4) failure of Company materially to perform its
obligations pursuant to this Agreement. If Employee continues his
employment with the Company after a Constructive Discharge event
occurs, that continuation
____________________________________________________________________________
5
<PAGE>
shall not constitute a waiver of Employee's fight to treat such event
as an event of Termination Without Cause unless (i) his employment
under adjusted terms of employment after the Constructive Discharge
Event shall continue for more than 12 months after such Constructive
Discharge Event or (ii) his employment is subsequently terminated for
cause under paragraph 6(c) above. Any waiver of a Constructive
Discharge Event as a result of continued employment for more than 12
months thereafter shall not, however, be deemed a waiver as to any
other Constructive Discharge Event which may subsequently occur.
(e) SALARY AND BENEFIT CONTINUATION UPON TERMINATION WITHOUT CAUSE.
Upon the termination of Employee's employment with the Company for any
reason whatsoever prior to the expiration of the original term or any
annual renewal of the term of this Agreement, except for (i)
termination upon death as set forth in paragraph 6(a) hereof; (ii)
termination upon permanent disability as set forth in paragraph 6(b)
hereof; (iii) termination for cause pursuant to paragraph 6(c) hereof;
or (iv) Employee's voluntarily electing not to continue in the
employment of the Company under conditions other than those set forth
in paragraph 6(d) hereof; then the Company within thirty (30) days
after such termination, and in lieu of all other obligations of the
Company hereunder, shall: 1) pay to Employee an lump-sum payment equal
to his then base salary for a period equal to twelve (12) months; 2)
will provide Employee, at Company's cost, with employment benefits
consisting of life, health, dental and long-term disability insurance
for a period of 12 months after termination; and 3) enter into a
Post-termination Consulting Agreement as defined below in paragraph
6(f) hereof. Thereafter, any continuation of benefits under the
Consolidated Omnibus Budget Reconciliation Act (COBRA) will be at
Employee's cost.
(f) POST-TERMINATION CONSULTING AGREEMENT. Upon the Termination
Without Cause, Employee will hold himself available to provide
consulting services to the Company for a period terminating one year
after the Termination Date (the "Consulting Period"). Employee will
provide the consulting services only upon the request of the Company's
Chief Executive Officer and for no more than ten hours per week (any
period shorter than one week will include a proportionate number of
hours) at such times and places as are mutually convenient to Employee
and the Company. However, Employee will perform those services at
times and places that do not reasonably conflict with his
responsibilities to his
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6
<PAGE>
then current employer. Employee will perform services as an
independent contractor with the customary and usual independence
associated therewith, and he will not be deemed an employee or agent
of the Company or have the authority to bind, or to enter into any
contract on behalf of, the Company, unless expressly authorized in
writing to do so. The Company will pay Employee a consulting fee of
$150.00 per hour for each hour actually worked at the Company's
request. The Company's Board of Directors has determined that Employee
will be providing "substantial services" to the Company during the
Consulting Period such that any option held by Employee on the
Termination Date, if not fully vested at the time, will continue to
vest during the Consulting Period according to its terms. Any option
held by Employee at the Termination Date will remain exercisable for
the current term of the option during the Consulting Period even
though the employment of Employee will terminate on the Termination
Date.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee recognizes
and acknowledges that the Company's trade secrets and proprietary processes as
they may exist from time to time are valuable, special and unique assets of
the Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not during
or after the term of his employment, disclose such secrets or processes to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, nor shall the Employee make use of any such secrets or
processes for his own purposes or for the benefit of any person, firm,
corporation, or other entity (except the Company) under any circumstances
during or after the term of his employment; provided that after the term of
his employment these restrictions shall not apply to such secrets and
processes which are then, or from tine to time thereafter, in the public
domain (provided that he was not responsible, directly or indirectly, for
permitting such secrets or processes to enter the public domain without the
Company's consent).
8. COVENANT NOT TO COMPETE OR INTERFERE. The Employee agrees that during
the term of this Agreement or for a period of one ( 1 ) year after the date of
Termination under this Agreement, whichever occurs first; (a) Employee shall
not intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise between the
____________________________________________________________________________
7
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Company and any customer, supplier, lessor or employee of the Company or any
of its subsidiaries and (b) Employee shall not as a sole proprietor or
otherwise for his own account or as a partner, employee, officer, director,
manager, agent, distributor, consultant, marketing representative, associate,
investor or otherwise (except as to a less than 5% interest in a public
company listed on the Nasdaq, a national, or a regional exchange), directly or
indirectly, own, purchase, organize or take preparatory steps for the
organization of, finance, work for, provide services to, advise, acquire,
lease, operate, manage or invest in or permit his name to be used or employed
in connection with any business which engages in providing equipment and/or
support services for corrective eye surgery in competition with the Company
(the "Business"). Employee further agrees that the covenants and other
provisions of this paragraph shall cover his activities in the whole of North
America, Europe and Asia (the "Territory"). The parties hereto agree that the
covenants contained in this paragraph (b) shall be construed as if the
covenants are divided into separate and distinct covenants in respect of each
of the products and services of the Business, each capacity in which the party
is prohibited from competing, and each part of the world in which such
competition is prohibited from taking place. The territorial restrictions
contained in this paragraph (b) are properly required for the adequate
protection of the Business and in the event any covenant or other provision
contained this paragraph (b) shall be deemed to be illegal, unenforceable, or
unreasonable by a court or other tribunal of competent jurisdiction. With
respect to any part of the Territory or otherwise, such covenant or provision
shall not be affected with respect to any other part of the Territory or
otherwise, and each of the parties hereto agrees and submits to the reduction
of said territorial restriction or other provisions to such an area or
otherwise, as said court shall deem reasonable. The parties further agree that
if any provision of this Agreement is found to be unenforceable, it shall not
affect the enforceability of the remaining provisions and the court shall
enforce all remaining provisions to the extent permitted by law
9. INVENTIONS. The Employee hereby sells, transfers, and assigns to the
Company, or to any person or entity designated by the Company, at of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures, and improvements, whether patented or unpatented, and
copyrightable material made or conceived by the Employee, solely or jointly
during the term hereof which relate to methods, apparatus, formulae, designs,
products, processes or devices, sold, leased, used, or under consideration or
development by the Company, or which otherwise relate to or pertain to
____________________________________________________________________________
8
<PAGE>
the business, functions, or operations of the Company. The Employee agrees to
communicate promptly and to disclose to the Company, in such form as the
Employee may be required to do so, all information, details, and data
pertaining to the aforementioned inventions, ideas, disclosures, and
improvements and to execute and deliver to the Company such formal transfers
and assignments and such other papers and documents as may be required of the
Employee to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and, as to copyrightable
material, to obtain copyright thereof.
For the purposes of this Agreement, an invention shall be deemed to have been
made during the term of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice by the Company,
and Employee agrees that any patent application filed within one (1 ) year
after termination of this employment shall be presumed to relate to an
invention which was made during the term of Employee's employment unless
Employee can provide satisfactory evidence to the contrary.
10. INJUNCTIVE RELIEF. The parties hereto acknowledge that (a) the
covenants and restrictions set forth in Sections 8, 9 and 10 of this Agreement
are necessary, fundamental and required for the protection of the business of
the Company, (b) such covenants and restrictions are material inducements to
investors to enter into agreements to invest in the Company, and (c) a breach
of any of such covenants and restrictions by Employee will result in
irreparable harm and damages to the Company which cannot be adequately
compensated by a monetary award. Accordingly, in the event of breach or
threatened breach of such provisions by Employee, Employee expressly agrees
that the Company shall be entitled to the immediate remedy of a temporary
restraining order, preliminary injunction or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin the Employee from breaching any such covenant or provision
or to specifically enforce the provisions hereof. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
11. INSURANCE. The Company, at its election and for its benefit, may
insure the Employee against accidental loss or death and the Employee shall
submit to such
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9
<PAGE>
physical examination and supply such information as may be required in
connection therewith.
12. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to his last known residence in the case of the Employee or to
its last known principal office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed by a waiver of
any subsequent breach.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
15. ASSIGNMENT. The rights and obligations of the parities under this
Agreement shall inure to the benefit of and shall be binding upon the
successors of such parties.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, modification,
extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first written above.
EMPLOYEE: /s/ Allen J. Simon
------------------------
Allen J. Simon
COMPANY: VISTA TECHNOLOGIES INC.
By: /s/ Thomas A. Schultz
------------------------------------
Thomas A. Schultz, President & CEO
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10
NOTICE -- THIS IS A VALUABLE SECURITY No. G-01
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"). ACCORDINGLY, NO TRANSFER OF THESE
SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION
UNDER THE ACT.
VISTA TECHNOLOGIES INC.
(Incorporated under the laws of the State of Nevada)
CLASS G COMMON STOCK NON-TRANSFERABLE PURCHASE WARRANTS
100,000 SHARES OF COMMON STOCK
Void After DECEMBER 31, 2001 (the "Expiration Date")
This is to certify that, for value received, receipt of which is
hereby acknowledged, ALLEN J. SIMON (hereinafter called the "holder"), is
entitled to purchase from VISTA TECHNOLOGIES INC., a Nevada corporation
(hereinafter called the "Company"), at the Warrant Price of TWO DOLLARS SIXTY-
TWO AND ONE-HALF CENTS ($2.625) per share, subject to adjustment as
hereinafter provided (hereinafter called the "Warrant Price"), at any time
after the date this Warrant was issued and on or before 5:00 P.M. New York
City time on December 31, 2001 unless earlier called for redemption in
accordance with Section 1 below, and then on the first business day prior to
the date fixed for redemption hereunder (the last such date upon which this
Warrant may be exercised in either event being herein called the "Expiration
Date"), up to ONE HUNDRED THOUSAND (100,000) fully paid and non-assessable
shares of Common Stock of the Company (hereinafter called "Common Stock"),
subject to the terms and conditions hereof, including such adjustments as may
be required under the terms hereof.
This Warrant was originally issued as part of an authorized class of
Class G common stock purchase warrants issuable to employees of, and/or
consultants to, the Company. The class of warrants so issued are called the
"Warrants"; this Warrant represents part of such issue and is herein called
"this Warrant."
NEITHER THIS WARRANT NOR ANY INTEREST HEREIN MAY BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED BY THE REGISTERED HOLDER OF THIS WARRANT
PRIOR TO THE EXERCISE THEREOF WITHOUT THE PRIOR WRITTEN CONSENT OF EITHER THE
BOARD OF DIRECTORS OR THE CHIEF EXECUTIVE OFFICER OR THE COMPANY.
This Warrant may be exercised by the holder as hereinabove provided as
to the whole or any part of the shares of Common Stock covered hereby, by
surrender of this Warrant at the principal office of any transfer agent for
the Common Stock, or, if the Company shall not have any transfer agent for the
Common Stock, at the principal office of the Company (any such transfer agent,
or the Company acting hereunder, being hereinafter called the "Warrant
Agent"), with the statement of election to subscribe attached hereto duly
executed and upon payment to the Company of the Warrant Price for shares so
purchased IN CASH OR BY CERTIFIED CHECK OR BANK DRAFT OR BY TENDER OF WARRANTS
AS PROVIDED BY SECTION 4 BELOW. Thereupon (except that if, upon such date,
the stock transfer books of the Company shall be closed, then upon the next
succeeding date on which such transfer books are open), this Warrant shall be
deemed to have been exercised and the person exercising the same to have
become a holder of record of shares of Common Stock (or of the other
securities or property to which such person is entitled upon such exercise)
purchased hereunder for all purposes, and certificates for such shares so
purchased shall be delivered to the purchaser within a reasonable time (not
exceeding 5 business days, except while the transfer books of the Company are
closed) after this Warrant shall have been exercised as set forth hereinabove.
If this Warrant shall be exercised in respect of a part only of the shares of
Common Stock covered hereby, the holder shall be entitled to receive a similar
warrant of like tenor and date covering the number of shares in respect of
which this Warrant shall not have been exercised.
<PAGE>
The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
The rights of the holder of this Warrant shall be subject to the
following terms and conditions:
SECTION 1. REDEMPTION RELATING TO TERMINATION OF EMPLOYMENT OF
REGISTERED HOLDER.
1.1. Subject to the provisions of this Warrant, on not less than
ten (10) days notice given at any time after the termination of employment of
the registered holder of this Warrant under the provisions of either
paragraphs 6(a), 6(b) or 6(d) of that certain Employment Agreement dated as of
November 1, 1996 between the Company and Allen J. Simon, all of this Warrant
may be redeemed, at the option of the Company, at a redemption price of
$100.00 (the "Redemption Price").
1.2. In the event the conditions set forth in Section 1.1 are
met, and the Company shall desire to exercise its right so to redeem this
Warrant, the Company shall mail a notice of redemption to the registered
holders of this Warrant to be redeemed, first class, postage prepaid, not
later than the tenth (10th) day before the date fixed for redemption, at his
last address as shall appear on the records of the Company. Any notice mailed
in the manner provided herein shall be conclusively presumed to have been duly
given whether or not the registered holder receives such notice. The date
fixed for the redemption of the Warrants shall be the "Redemption Date." Any
right to exercise this Warrant shall terminate immediately upon the election
of the Company to redeem this Warrant. Thereafter, the only obligations of
the Company hereunder shall be to pay the registered holder of the Warrant the
Redemption Price on or before the Redemption Date.
SECTION 2. INVESTMENT INTENT
2.1. The holder of this Warrant, by acceptance hereof, represents
and warrants that this Warrant has been acquired by said holder for his own
account for investment, and acknowledges that any proposed sale, assignment or
transfer of this Warrant or the shares of Common Stock issuable upon exercise
hereof is prohibited unless such sale, assignment or transfer in the opinion
of counsel for the Company will not require the prior registration of such
securities under the Securities Act of 1933, as amended ("Securities Act").
2.2. The holder of this Warrants agrees to give written notice to
the Company before exercising or selling this Warrant of such holder's
intention to do so, describing briefly the manner of any proposed sale of this
Warrant or such holder's intention as to the disposition to be made of shares
of Common Stock issuable upon such proposed exercise hereof. Promptly upon
receiving such written notice, the Company shall present copies thereof to
counsel for the Company for such counsel's opinion. If in the opinion of such
counsel the proposed exercise or sale may be effected without registration
under the Securities Act of this Warrant or the shares of Common Stock
issuable on the exercise hereof, the Company, as promptly as practicable,
shall notify such holder of such opinion, whereupon such holder shall be
entitled to sell this Warrant, or to exercise this Warrant in accordance with
its terms and dispose of the shares received upon such exercise, all in
accordance with the terms of the notice delivered by such holder to the
Company. If in the opinion of such counsel the proposed exercise or sale
described in said written notice given by the holder of this Warrant may not
be effected without registration of this Warrant or the shares of Common Stock
issuable on the exercise hereof, the Company shall promptly give written
notice of such opinion to the holder of this Warrant. The holder of this
Warrant agrees that, if the proposed exercise or sale by such holder cannot,
in the opinion of such counsel, be effected without such registration, the
holder will not so exercise or sell this Warrant or the shares of Common Stock
issuable upon the exercise hereof.
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<PAGE>
SECTION 3. CERTAIN ADJUSTMENTS AND NOTICE
3.1. 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 with or without par value, (i) the
number of shares of Common Stock which immediately prior to such change the
holder of this Warrant shall have been entitled to purchase pursuant to this
Warrant shall be increased or decreased in direct proportion to the increase
or decrease, respectively, in the number of shares of Common Stock outstanding
immediately prior to such change, and (ii) the Warrant Price in effect
immediately prior to such change shall be increased or decreased, as the case
may be, in inverse proportion to such increase or decrease in the number of
such shares outstanding immediately prior to such change; in any such event,
the rights of the holder of this Warrant to an adjustment in the number of
shares of Common Stock purchasable on exercise of this Warrant as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of this Warrant becomes entitled to purchase
hereafter.
3.2. In case of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation, or in case of
any sale, transfer or other disposition to another corporation of all or
substantially all the property, assets, business and goodwill of the Company
as an entirety, as the case may be, the holder of this Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, that appropriate provision shall
be made so that such holder shall thereafter be entitled to purchase) the kind
and amount of shares of stock and other securities and property receivable,
upon such capital reorganization, reclassification of capital stock,
consideration, merger, sale, transfer or other disposition, by a holder of the
number of shares of Common Stock which this Warrant entitled the holder
thereof to purchase immediately prior to such capital reorganization, reclas-
sification of capital stock, consolidation, merger, sale, transfer or other
disposition; and in any such case appropriate adjustments (as determined in
good faith by the Board of Directors of the Company or of such other
corporation, as the case may be) shall be made in the application of the
provisions herein set forth with respect to rights and interests thereafter of
the holder of this Warrant, to the end that the provisions set forth herein
(including the specified changes in and other adjustments of the Warrant
Price) shall thereafter be applicable, as near as reasonably may be, in
relation to any shares or other property thereafter purchasable upon the
exercise of this Warrant.
3.3. In case the Company shall hereafter at any time declare a
dividend upon shares of Common Stock payable otherwise than out of retained
earnings or otherwise than in shares of Common Stock or in stock or
obligations directly or indirectly convertible into or exchangeable for Common
Stock, the holder of this Warrant shall, upon exercise of this Warrant in
whole or in part, be entitled to receive, in addition to the number of shares
of Common Stock deliverable upon such exercise against payment of the Warrant
Price therefor, but without further consideration, the cash, stock or other
securities or property which the holder of this Warrant would have received as
dividends (otherwise than out of such retained earnings and otherwise than in
shares of Common Stock or in such convertible or exchangeable stock or
obligations) if continuously since the date set forth at the foot of this
Warrant such holder (i) had been the holder of record of the number of shares
of Common Stock deliverable upon such exercise and (ii) had retained all
dividends in stock or other securities (other than shares of Common Stock or
such convertible or exchangeable stock or obligations) paid or payable in
respect of said number of shares of Common Stock or in respect of any such
stock or other securities so paid or payable as such dividends. For purposes
of this Section 4.3, a dividend payable otherwise than in cash shall be
considered to be payable out of retained earnings only to the extent of the
fair value of such dividend as determined by the Board of Directors of the
Company.
3.4. No certificates for fractional shares of Common Stock shall
be issued upon the exercise of this Warrant, but in lieu thereof the Company
shall, upon exercise in full of this Warrant, purchase out of funds legally
available therefor any such fractional interest for an amount in cash equal to
the current market value
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<PAGE>
of such fractional interest calculated to the nearest cent, computed on the
basis of the high bid prices, as reported in the public market on the most
recent day prior to the date of such exercise for which such bid prices shall
have been so reported. If there have been no reported bid prices within ten
days prior to exercise, the current market value shall be fixed in a manner
determined in good faith by the Board of Directors of the Company.
3.5. Whenever the Warrant Price is adjusted, as herein provided,
the Company shall forthwith file with the Warrant Agent a statement signed by
the President or any one of the Vice Presidents of the Company and by its
Treasurer or an Assistant Treasurer, stating the adjusted Warrant Price
determined as herein provided. Such statement shall show in details the facts
requiring such adjustment, including a statement of the consideration received
by the Company for any additional securities issued. Whenever the Warrant
Price is adjusted, the Company will forthwith cause a notice stating the
adjustment and the Warrant Price to be mailed to the registered holder of this
Warrant at the address of such holder shown on the books of the Company.
SECTION 4. "CASHLESS EXERCISE" -- HOLDER'S OPTION OF EXERCISE FOR CASH OR BY
TENDER OF WARRANTS
4.1. EXERCISE FOR CASH. This Warrant may be exercised by the
holder as to the whole or any part of the shares of Common Stock covered
hereby, by surrender of this Warrant to the Company, with the statement of
election to subscribe attached hereto duly executed and with payment to the
Company of the Warrant Price for shares so purchased in cash or by certified
check or bank draft payable to the order of the Company.
4.2. EXERCISE BY TENDER OF WARRANTS FOR CANCELLATION AND
EXCHANGE.
4.2.1. DEFINITION OF FAIR MARKET VALUE. For the purposes of this
Section 4.2, the "Fair Market Value" of a share of Common Stock as of any date
shall mean the following: If the Common Stock is publicly traded, the Fair
Market Value per share of the Common Stock shall be determined by reference to
the average of the closing prices in the over-the-counter market or on any
securities exchange during the 10 consecutive trading days on which the Common
Stock is traded immediately preceding the date upon which the Company has
received the statement of election to subscribe attached hereto, duly
executed, with a designation of the number of Tendered Warrants (as defined
below). In the event there shall be no closing price for the Common Stock on
any one or more of such days, then the price for such day shall be the closing
bid price as quoted in the over-the-counter market or by such securities
exchange; or
4.2.2. PAYMENT WITH TENDERED WARRANTS. In lieu of payment of the
Warrant Price in cash, this Warrant may be exercised by the holder, at its
option, as to part of the shares of Common Stock covered hereby by surrender
of this Warrant to the Company with the statement of election to subscribe
attached hereto duly executed and by tendering a portion of such Warrants for
cancellation in payment of the Warrant Price. Upon the election of the holder
of this Warrant to pay the Warrant Price by tendering Warrants for
cancellation in exchange for payment of the Warrant Price, the holder shall
designate on the statement of election to subscribe attached hereto that
number of Warrants which the holder is tendering for cancellation in exchange
for the exercise of this Warrant (herein called the "Tendered Warrants"). The
number of shares of Common Stock issuable upon any such exercise of this
Warrant by the tender for cancellation of Tendered Warrants shall be
determined by the following formula:
FIRST, subtract the Warrant Price per share of Common Stock then in
effect hereunder from the Fair Market Value per share of Common Stock
as defined above (the difference, assuming it shall be a positive
figure, is herein called the "In-the-Money Spread");
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<PAGE>
SECOND, multiply the In-the-Money Spread per share of Common Stock by
the number of Tendered Warrants (the product of such multiplication is
herein called the "Tendered Value");
THIRD, divide the Tendered Value by the Warrant Price then in effect
-- the result of such calculation shall be the number of shares of
Common Stock issuable upon the exercise of other Warrants in exchange
for the surrender for cancellation of the Tendered Warrants.
(As an example, if the Fair Market Value is $6.5625 per share of Common Stock
and the Warrant Price then in effect is $2.625, the In-the-Money Spread would
be $3.9375; if the number of Tendered Warrants in this example were 10,000
Tendered Warrants, the total Tendered Value would be $39,375 resulting from
multiplying $3.9375 by 10,000; when the Tendered Value of $39,375 is then
divided by the $2.625 Warrant Price, the result is 15,000 shares of Common
Stock purchasable under other Warrants then exercised hereunder by the
surrender for cancellation of 10,000 Tendered Warrants.)
SECTION 5. MISCELLANEOUS
5.1. The issue of any stock or other certificate upon the
exercise of this Warrant shall be made without charge to the registered holder
hereof for any tax in respect of the issue of such certificate. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a
name other than that of the registered holder of this Warrant, and the Company
shall not be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
5.2. If this Warrant shall be lost, stolen, mutilated or
destroyed, the Company may instruct the Warrant Agent, on such terms as to
indemnify or otherwise as the Company may in its discretion impose, to issue a
new Warrant of like denomination, tenor and date as the Warrant so lost,
stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable
by anyone.
5.3. The Company and any Warrant Agent may deem and treat the
registered holder of this Warrant as the absolute owner of this Warrant for
all purposes and shall not be affected by any notice to the contrary.
5.4. This Warrant shall not entitle the holder to any rights of a
stockholder of the Company, either at law or in equity, including, without
limitation, the right to vote, to receive dividends and other distributions,
to exercise any preemptive rights or to receive any notice of meetings of
stockholders or of any other proceedings of the Company.
5.5. This Warrant shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, VISTA TECHNOLOGIES INC. has caused this Warrant to
be signed in its corporate name by its duly authorized officer as of the day
and year written below.
Dated: __________________
VISTA TECHNOLOGIES INC.
Attest:
By ________________________________
President
________________________________
Secretary
-5-
<PAGE>
ELECTION TO SUBSCRIBE
Date:_________________, 199__
To: VISTA TECHNOLOGIES INC.: The undersigned hereby subscribes for __________
of the shares of Common Stock covered by the within Warrant and tenders
payment herewith in the amount of $_______________ in accordance with the
terms thereof by either (i) payment of said sum in cash, or (ii) the tender
for cancellation of __________ additional Warrants hereunder in accordance
with the provisions of Section 4.2 of this Warrant.
Deliver Stock Certificates(s)
[ ] [ ]
Issue Certificate(s) for said Stock by mail against counter-receipt
TO: TO:
_________________________________ ______________________________________
(Name) (Name)
_________________________________ ______________________________________
(Taxpayer Identification Number) (Street and Number)
_________________________________ ______________________________________
(Street and Number) City State ZIP Code
_________________________________
City State ZIP Code
and if said number of shares shall not be all of the shares covered by the
within Warrant, that a new Warrant for the balance of the shares remaining be
registered in the name of, and delivered, to the registered holder of this
Warrant certificate.
__________________________________ ______________________________________
(Signature of Registered Holder) Signature Guaranteed
-6-
_____________, 1996 $________________
Los Altos, California
VISTA TECHNOLOGIES INC.
12% Secured Promissory Note
Due June 30, 1997
(or Earlier Upon Completion of Certain Events defined herein)
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS
AMENDED (THE "ACTS"). ACCORDINGLY, NO TRANSFER OF THIS NOTE OR
ANY INTEREST HEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACTS UNLESS THE ISSUER HAS
RECEIVED A SATISFACTORY OPINION OF COUNSEL THAT SUCH TRANSFER
DOES NOT REQUIRE REGISTRATION UNDER THE ACTS.
VISTA TECHNOLOGIES INC., a Nevada corporation (herein called the
"Company"), for value received, hereby promises to pay to
________________________________ (the "Payee"), or order, at the principal
office of the Company in the State of California not later than on the 30th
day of June, 1997 or within five (5) business days after an Accelerating Event
as defined below (the earliest of such dates being herein called the "Maturity
Date") the principal sum of _________________________ THOUSAND DOLLARS
($___,000.00) in United States funds, together with interest on the unpaid
principal amount of this Bridge Note from the date hereof.
1. BRIDGE NOTES. This note is one of a duly authorized issue of not
more than one million dollars ($1,000,000) in 12% Secured Promissory Notes
(herein called the "Bridge Notes") made by the Company and originally issued
by the Company pursuant to a private placement of securities in 1996. All of
the Bridge Notes are issuable substantially in the form of this Bridge Note.
2. ACCELERATION OF MATURITY DATE. The Maturity Date of this Bridge
Note shall be automatically accelerated, and all principal and interest on
this Bridge Note shall be immediately due and payable, of the fifth business
day after receipt by the Company of at least $5 million in gross proceeds as a
result of the sale of its Series A convertible preferred stock pursuant to
financing arrangements negotiated with Paramount Capital Incorporated.
3. INTEREST. Interest on the unpaid principal of this Bridge Note
from the date hereof shall be payable at the rate of twelve percent (12%) per
annum, interest payable in arrears on the Maturity Date of this Bridge Note
and to accrue until this Note is paid in full. Interest shall also be
payable on any earlier date fixed for optional prepayment by the Company.
<PAGE>
4. COLLATERAL SECURITY. The principal and interest of the Bridge
Notes are secured by the pledge as collateral of all of the assets of the
Company pursuant to the terms of that certain Security Agreement dated
November 11, 1996 executed by the Company for the benefit of the holders of
the Bridge Notes, a copy of which has been delivered to the Payee by the
Company.
5. OPTIONAL PREPAYMENT. The Company, at its option and without
prior notice, may at any time prepay all or any portion of the principal and
interest of the Bridge Notes at the time outstanding, in each case at the
principal amount so being prepaid plus all unpaid interest accrued thereon to
the date fixed for prepayment, without any premium or other penalty for such
prepayment.
6. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. The Payee and any
other holder of this Bridge Note, by acceptance hereof, represents and
warrants that this Bridge Note has been acquired by said holder for its own
account for investment, and acknowledges that any proposed sale, assignment or
transfer of this Bridge Note is prohibited unless such sale, assignment or
transfer in the opinion of counsel for the Company will not require the prior
registration of this Bridge Note under the Securities Act of 1933, as amended,
or the qualification of this Bridge Note under the Trust Indenture Act of
1939, as amended.
5. DEFAULT AND ACCELERATION. If one or more of the following events
(herein called "Events of Default") shall happen, that is to say:
(a) If default be made in the punctual payment of the principal of, or
interest on, this Bridge Note, as the same shall become due and
payable, whether at the Maturity Date or a date fixed for optional or
mandatory prepayment of this Bridge Note or any portion thereof in
accordance with its terms, and such default shall continue for three
(3) business days after the Company has received written notice of
default from the registered holder of this Bridge Note; or
(b) If (i) any court of competent jurisdiction shall enter a decree or
order not vacated or stayed within 30 days from the date of entry
thereof (A) appointing a trustee or receiver of the Company or of any
substantial part of the property of the Company, or (B) approving a
petition for, or effecting, an arrangement in bankruptcy of, or a
reorganization pursuant to any bankruptcy act of, the Company, or any
other judicial modification or alteration of the rights of the holders
of this Bridge Note or of other creditors of the Company, or (ii) the
Company shall itself file any such petition or take or consent to any
other action seeking any such judicial order or shall make an
assignment for the benefit of its creditors or shall admit in writing
its inability to pay its debts generally as they become due.
then all of the unpaid principal and interest of this Bridge Note shall become
immediately due and payable upon demand made by the holder of this Bridge Note
if any one or more Events of Default shall occur and be continuing at the time
of such demand.
2
<PAGE>
6. COSTS OF COLLECTION. The Company covenants that, if default be
made in any payment of the principal of or interest on this Bridge Note, the
Company will pay the holder of this Bridge Note such further amount as shall
be sufficient to cover the costs and expenses of collection, including without
limitation reasonable attorneys' fees of such holder and all other costs
incurred for court filings, witnesses, preparation, prosecution and
enforcement of collection.
7. OTHER PROVISIONS.
7.1. This Bridge Note is issued upon the express condition, to
which the Payee and each successive holder expressly assents and by receiving
the same agrees, that no recourse under or upon any obligation, covenant or
agreement of this Bridge Note, or for the payment of the principal of or the
interest on, this Bridge Note, or for any claim based on this Bridge Note, or
otherwise in respect thereof, shall be had against any incorporator or any
past, present or future stockholder, officer or director, as such, of either
Company or of any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by any assessment or penalty or
otherwise howsoever, all such individual liability being hereby expressly
waived and released as a condition of and as part of the consideration for the
execution and issue of this Bridge Note; provided, however, that nothing
herein shall prevent enforcement of the liability, if any, of any stockholder
or subscriber to capital stock upon or in respect of capital stock not fully
paid.
7.2. Any notice or demand which by any provision of this Bridge
Note is required or provided to be given or served to or upon the Company
shall be deemed to have been sufficiently given or served for all purposes by
being sent as registered or certified mail, postage prepaid, addressed to the
Company at its principal office in the State of California, marked for the
attention of its Chief Executive Officer.
7.3. No course of dealing between the Company and the holder of
this Bridge Note or any delay on the part of the holder in exercising any
rights under this Bridge Note shall operate as a waiver of any rights of any
holder of this Bridge Note.
7.4. This Bridge Note shall be governed by the laws of the State
of California.
IN WITNESS WHEREOF, the Company has caused this Bridge Note to be
signed in its corporate name by an officer thereunder duly authorized, and to
be dated as of the day and year first above written.
VISTA TECHNOLOGIES INC.
By:
----------------------------
President
3
NOTICE -- THIS IS A VALUABLE SECURITY No. E-____
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"). ACCORDINGLY, NO TRANSFER OF THESE
SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION
UNDER THE ACT.
VISTA TECHNOLOGIES INC.
(Incorporated under the laws of the State of Nevada)
CLASS E REDEEMABLE COMMON STOCK PURCHASE WARRANTS
__________________ SHARES OF COMMON STOCK
Void After DECEMBER 31, 2001 or Earlier if Called for Redemption (the
"Expiration Date")
This is to certify that, for value received, receipt of which is
hereby acknowledged,
________________________________________________________________, or assigns
(hereinafter called the "holder"), is entitled to purchase from VISTA
TECHNOLOGIES INC., a Nevada corporation (hereinafter called the "Company"), at
the Warrant Price of TWO DOLLARS SIXTY-TWO AND ONE-HALF CENTS ($2.625) per
share, subject to adjustment as hereinafter provided (hereinafter called the
"Warrant Price"), at any time after the date this Warrant was issued and on or
before 5:00 P.M. New York City time on December 31, 2001 unless earlier called
for redemption in accordance with Section 1 below, and then on the first
business day prior to the date fixed for redemption hereunder (the last such
date upon which this Warrant may be exercised in either event being herein
called the "Expiration Date"), up to
______________________________________________ (_________) fully paid and non-
assessable shares of Common Stock of the Company (hereinafter called "Common
Stock"), subject to the terms and conditions hereof, including such
adjustments as may be required under the terms hereof.
This Warrant was originally issued in consideration of either (i) the
issuance and sale by the Company of its 12% Secured Promissory Notes due not
later than June 30, 1997 (the "Bridge Notes") at a ratio of 10,000 Warrants
for every $100,000 in Bridge Notes or (ii) warrants issued to employees of,
and/or consultants to, the Company. The class of warrants so issued are
called the "Warrants"; this Warrant represents part of such issue and is
herein called "this Warrant."
This Warrant may be exercised by the holder as hereinabove provided as
to the whole or any part of the shares of Common Stock covered hereby, by
surrender of this Warrant at the principal office of any transfer agent for
the Common Stock, or, if the Company shall not have any transfer agent for the
Common Stock, at the principal office of the Company (any such transfer agent,
or the Company acting hereunder, being hereinafter called the "Warrant
Agent"), with the statement of election to subscribe attached hereto duly
executed and upon payment to the Company of the Warrant Price for shares so
purchased in cash or by certified check or bank draft. Thereupon (except that
if, upon such date, the stock transfer books of the Company shall be closed,
then upon the next succeeding date on which such transfer books are open),
this Warrant shall be deemed to have been exercised and the person exercising
the same to have become a holder of record of shares of Common Stock (or of
the other securities or property to which such person is entitled upon such
exercise) purchased hereunder for all purposes, and certificates for such
shares so purchased shall be delivered to the purchaser within a reasonable
time (not exceeding 5 business days, except while the transfer books of the
Company are closed) after this Warrant shall have been exercised as set forth
hereinabove. If this Warrant shall be exercised in respect of a part only of
the shares of Common Stock covered hereby, the holder shall be entitled to
receive a similar warrant of like tenor and date covering the number of shares
in respect of which this Warrant shall not have been exercised.
<PAGE>
The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
The rights of the holder of this Warrant shall be subject to the
following terms and conditions:
SECTION 1. REDEMPTION.
1.1. Subject to the provisions of this Warrant, on not less than
thirty (30) days notice given at any time after all of the Bridge Notes have
been paid in full, this Warrant may be redeemed, at the option of the Company,
at a redemption price of $0.05 per Warrant (the "Redemption Price"), provided
that (i) the shares of Common Stock issuable upon exercise of the Warrants
have been effectively registered under the Securities Act of 1933, as amended,
and (ii) the closing sale price of the Common Stock in the public over-the-
counter market or on any national securities exchange shall be at least $5.00
per share, subject to adjustment as set forth in Section 1.2 below (the
"Target Price"), or more, for at least 20 consecutive trading days ending on
the last business day immediately prior to the date the Warrants are called
for redemption.
1.2. If the shares of the Company's Common Stock are subdivided
or combined into a greater or smaller number of shares of Common Stock such
that an adjustment of the Warrant Price is required by this Warrant, the
Target Price shall be proportionally adjusted by the ratio which the total
number of shares of Common Stock outstanding immediately prior to such event
bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
1.3. In the event the conditions set forth in Section 1.1 are
met, and the Company shall desire to exercise its right so to redeem this
Warrant, the Company shall mail a notice of redemption to the registered
holders of this Warrant to be redeemed, first class, postage prepaid, not
later than the thirtieth (30th) day before the date fixed for redemption, at
its last address as shall appear on the records of the Company. Any notice
mailed in the manner provided herein shall be conclusively presumed to have
been duly given whether or not the registered holder receives such notice.
1.4. The notice of redemption shall specify the (i) the
redemption price, (ii) the date fixed for redemption, (iii) the place where
this Warrant certificate shall be delivered and the redemption price paid, and
(iv) that the right to exercise this Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
"Redemption Date." No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a holder (a) to whom notice was not mailed or (b)
whose notice was defective. An affidavit of the Secretary or an Assistant
Secretary of the Company that notice of redemption has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
1.5. Any right to exercise this Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, the holder of this Warrant shall have
no further rights except to receive, upon surrender of the Warrant, the
Redemption Price.
1.6. From and after the date specified for redemption, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the registered
holder thereof of one or more Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such registered holder a sum in cash
equal to the redemption price of each such Warrant. From and after the date
fixed for redemption and upon the deposit or setting aside by the Company of a
sum sufficient to redeem all the Warrants called for redemption, such Warrants
shall expire and become void and all rights hereunder, except the right to
receive payment of the Redemption Price, shall cease.
-2-
<PAGE>
SECTION 2. INVESTMENT INTENT
2.1. The holder of this Warrant, by acceptance hereof, represents
and warrants that this Warrant has been acquired by said holder for its own
account for investment, and acknowledges that any proposed sale, assignment or
transfer of this Warrant or the shares of Common Stock issuable upon exercise
hereof is prohibited unless such sale, assignment or transfer in the opinion
of counsel for the Company will not require the prior registration of such
securities under the Securities Act of 1933, as amended ("Securities Act").
2.2. The holder of this Warrants agrees to give written notice to
the Company before exercising or selling this Warrant of such holder's
intention to do so, describing briefly the manner of any proposed sale of this
Warrant or such holder's intention as to the disposition to be made of shares
of Common Stock issuable upon such proposed exercise hereof. Promptly upon
receiving such written notice, the Company shall present copies thereof to
counsel for the Company for such counsel's opinion. If in the opinion of such
counsel the proposed exercise or sale may be effected without registration
under the Securities Act of this Warrant or the shares of Common Stock
issuable on the exercise hereof, the Company, as promptly as practicable,
shall notify such holder of such opinion, whereupon such holder shall be
entitled to sell this Warrant, or to exercise this Warrant in accordance with
its terms and dispose of the shares received upon such exercise, all in
accordance with the terms of the notice delivered by such holder to the
Company. If in the opinion of such counsel the proposed exercise or sale
described in said written notice given by the holder of this Warrant may not
be effected without registration of this Warrant or the shares of Common Stock
issuable on the exercise hereof, the Company shall promptly give written
notice of such opinion to the holder of this Warrant. The holder of this
Warrant agrees that, if the proposed exercise or sale by such holder cannot,
in the opinion of such counsel, be effected without such registration, the
holder will not so exercise or sell this Warrant or the shares of Common Stock
issuable upon the exercise hereof.
SECTION 3. CERTAIN ADJUSTMENTS AND NOTICE
3.1. 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 with or without par value, (i) the
number of shares of Common Stock which immediately prior to such change the
holder of this Warrant shall have been entitled to purchase pursuant to this
Warrant shall be increased or decreased in direct proportion to the increase
or decrease, respectively, in the number of shares of Common Stock outstanding
immediately prior to such change, and (ii) the Warrant Price in effect
immediately prior to such change shall be increased or decreased, as the case
may be, in inverse proportion to such increase or decrease in the number of
such shares outstanding immediately prior to such change; in any such event,
the rights of the holder of this Warrant to an adjustment in the number of
shares of Common Stock purchasable on exercise of this Warrant as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of this Warrant becomes entitled to purchase
hereafter.
3.2. In case of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation, or in case of
any sale, transfer or other disposition to another corporation of all or
substantially all the property, assets, business and goodwill of the Company
as an entirety, as the case may be, the holder of this Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, that appropriate provision shall
be made so that such holder shall thereafter be entitled to purchase) the kind
and amount of shares of stock and other securities and property receivable,
upon such capital reorganization, reclassification of capital stock,
consideration, merger, sale, transfer or other disposition, by a holder of the
number of shares of Common Stock which this Warrant entitled the holder
thereof to purchase immediately prior to such capital reorganization, reclas-
sification of capital stock, consolidation, merger, sale, transfer or other
disposition; and in any such case appropriate adjustments (as determined in
good faith by the Board of Directors of the
-3-
<PAGE>
Company or of such other corporation, as the case may be) shall be made in the
application of the provisions herein set forth with respect to rights and
interests thereafter of the holder of this Warrant, to the end that the
provisions set forth herein (including the specified changes in and other
adjustments of the Warrant Price) shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter pur-
chasable upon the exercise of this Warrant.
3.3. In case the Company shall hereafter at any time declare a
dividend upon shares of Common Stock payable otherwise than out of retained
earnings or otherwise than in shares of Common Stock or in stock or
obligations directly or indirectly convertible into or exchangeable for Common
Stock, the holder of this Warrant shall, upon exercise of this Warrant in
whole or in part, be entitled to receive, in addition to the number of shares
of Common Stock deliverable upon such exercise against payment of the Warrant
Price therefor, but without further consideration, the cash, stock or other
securities or property which the holder of this Warrant would have received as
dividends (otherwise than out of such retained earnings and otherwise than in
shares of Common Stock or in such convertible or exchangeable stock or
obligations) if continuously since the date set forth at the foot of this
Warrant such holder (i) had been the holder of record of the number of shares
of Common Stock deliverable upon such exercise and (ii) had retained all
dividends in stock or other securities (other than shares of Common Stock or
such convertible or exchangeable stock or obligations) paid or payable in
respect of said number of shares of Common Stock or in respect of any such
stock or other securities so paid or payable as such dividends. For purposes
of this Section 4.3, a dividend payable otherwise than in cash shall be
considered to be payable out of retained earnings only to the extent of the
fair value of such dividend as determined by the Board of Directors of the
Company.
3.4. No certificates for fractional shares of Common Stock shall
be issued upon the exercise of this Warrant, but in lieu thereof the Company
shall, upon exercise in full of this Warrant, purchase out of funds legally
available therefor any such fractional interest for an amount in cash equal to
the current market value of such fractional interest calculated to the nearest
cent, computed on the basis of the high bid prices, as reported in the public
market on the most recent day prior to the date of such exercise for which
such bid prices shall have been so reported. If there have been no reported
bid prices within ten days prior to exercise, the current market value shall
be fixed in a manner determined in good faith by the Board of Directors of the
Company.
3.5. Whenever the Warrant Price is adjusted, as herein provided,
the Company shall forthwith file with the Warrant Agent a statement signed by
the President or any one of the Vice Presidents of the Company and by its
Treasurer or an Assistant Treasurer, stating the adjusted Warrant Price
determined as herein provided. Such statement shall show in details the facts
requiring such adjustment, including a statement of the consideration received
by the Company for any additional securities issued. Whenever the Warrant
Price is adjusted, the Company will forthwith cause a notice stating the
adjustment and the Warrant Price to be mailed to the registered holder of this
Warrant at the address of such holder shown on the books of the Company.
SECTION 4. MISCELLANEOUS
4.1. The issue of any stock or other certificate upon the
exercise of this Warrant shall be made without charge to the registered holder
hereof for any tax in respect of the issue of such certificate. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a
name other than that of the registered holder of this Warrant, and the Company
shall not be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
-4-
<PAGE>
4.2. This Warrant and all rights hereunder or any portion thereof
are transferable on the books of the Company, upon surrender of this Warrant,
with the form of assignment attached hereto duly executed by the registered
holder hereof or by his attorney duly authorized in writing, to the Warrant
agent at its principal office hereinabove referred to, and thereupon there
shall be issued in the name of the transferee or transferees, in exchange for
this Warrant, a new Warrant or Warrants of like tenor and date, representing
in the aggregate the right to subscribe for and purpose the number of shares,
or such portion thereof as shall be so transferred, which may be subscribed
for and purchased hereunder and if there shall be any balance of such shares
not so transferred, which may be subscribed for and purchased hereunder and if
there shall be any balance of such shares not so transferred, there shall be
issued in the name of the registered holder of this Warrant, a new Warrant or
Warrants of like tenor and date representing in the aggregate the right to
subscribe for and purchase the balance of the number of shares which may be
subscribed for and purchased hereunder.
4.3. If this Warrant shall be lost, stolen, mutilated or
destroyed, the Company may instruct the Warrant Agent, on such terms as to
indemnify or otherwise as the Company may in its discretion impose, to issue a
new Warrant of like denomination, tenor and date as the Warrant so lost,
stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable
by anyone.
4.4. The Company and any Warrant Agent may deem and treat the
registered holder of this Warrant as the absolute owner of this Warrant for
all purposes and shall not be affected by any notice to the contrary.
4.5. This Warrant shall not entitle the holder to any rights of a
stockholder of the Company, either at law or in equity, including, without
limitation, the right to vote, to receive dividends and other distributions,
to exercise any preemptive rights or to receive any notice of meetings of
stockholders or of any other proceedings of the Company.
4.6. This Warrant shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, VISTA TECHNOLOGIES INC. has caused this Warrant to
be signed in its corporate name by its duly authorized officer as of the day
and year written below.
Dated: _______________
VISTA TECHNOLOGIES INC.
By ________________________________
President
Attest:
________________________________
(Assistant) Secretary
-5-
<PAGE>
TRANSFER OF CLASS E WARRANT
For value received ____________________________________________ hereby sells,
assigns and transfers unto ________________________, the right to purchase
_______________ of the shares of Common Stock of VISTA TECHNOLOGIES INC., a
Nevada corporation, which rights are represented by the within Warrant, and
does hereby irrevocably constitute and appoint _____________________ attorney
to transfer said rights on the books of the within named Company, with full
power of substitution in the premises.
Dated: ___________________, 199__
________________________________
(Signature)
________________________________
Signature Guarantee
************************************************************************
ELECTION TO SUBSCRIBE
Date:_________________, 199__
To: VISTA TECHNOLOGIES INC.: The undersigned hereby subscribes for __________
of the shares of Common Stock covered by the within Warrant and tenders
payment herewith in the amount of $_______________ in accordance with the
terms thereof:
Deliver Stock Certificates(s)
[ ] [ ]
Issue Certificate(s) for said Stock by mail against counter-receipt
TO: TO:
_________________________________ ______________________________________
(Name) (Name)
_________________________________ ______________________________________
(Taxpayer Identification Number) (Street and Number)
_________________________________ ______________________________________
(Street and Number) City State ZIP Code
_________________________________
City State ZIP Code
and if said number of shares shall not be all of the shares covered by the
within Warrant, that a new Warrant for the balance of the shares remaining be
registered in the name of, and delivered, to the registered holder of this
Warrant certificate.
__________________________________ ______________________________________
(Signature of Registered Holder) Signature Guaranteed
-6-
AGREEMENT
THIS AGREEMENT executed as of the 6th day of January, 1997 BETWEEN:
VISTA TECHNOLOGIES, INC., PHARMAPATCH,
plc and RS-800, INC.
(hereinafter collectively referred to as "Vista")
- AND -
VISTA LASER CENTRES OF THE NORTHEAST INC.
(hereinafter referred to as "Northeast")
- AND -
CHERRY DEVELOPMENT CORPORATION, CHERRY
SHARRER AND DR. SHELDON HERZIG
(hereinafter collectively referred to as the
"Northeast Parties")
WHEREAS Northeast and the Northeast Parties desire and Vista
desires to terminate their relationship;
AND WHEREAS Northeast desires to transfer Vista Stock to Vista in
accordance with this agreement;
AND WHEREAS Vista desires to relinquish its interest in Northeast
and forgive any and all indebtedness;
NOW THEREFORE IN CONSIDERATION OF the mutual covenants contained
herein, (the receipt and sufficiency whereof being hereby mutually
acknowledged by all parties hereto) the parties agree as follows:
1. In consideration of Northeast releasing Vista of the operation
funding guarantee, Vista hereby transfers, conveys and assigns all right,
title and interest to its stock or ownership in Northeast. Vista does hereby
forever releases and hold Vista harmless from any liability or claim of
ownership. Northeast and the Northeast Parties similarly hereby jointly and
severally release and hold Vista and Vista's directors, officers, employees
and shareholders harmless from any liability or claim arising from Vista's
involvement with Northeast. Northeast will purchase Vista's equity interest
in Northeast in consideration of one dollar (the receipt and sufficiency of
which is hereby acknowledged). Vista shall forthwith cause its nominees to
resign from the Board of Directors and as officers of Northeast. Northeast
and its
<PAGE>
Page 2
management shareholders shall provide these individuals with releases and
indemnities from personal liability in connection with such positions.
Northeast shall forthwith change its corporate name to delete "Vista" from its
corporate name.
2. Vista hereby assigns to Cherry Development Corporation on behalf
of such nominee as it may designate all of its outstanding capital
contributions, advances and loans made by Vista to Northeast and/or its
subsidiary, in consideration of one dollar (the receipt and sufficiency of
which is hereby acknowledged).
3. Upon execution hereof, Vista agrees to pay to Northeast the entire
principal amount outstanding under the 12% collateralized notes, together with
interest (the "Notes") issued to private investors, by Northeast (the "Note
Investors"), being $75,000, plus interest, against the receipt from each
investor of a full and final release of each of Vista and their respective
officers, directors, employees and shareholders from any and all liability in
connection therewith and the release by the Note Investors of all claims to
the Vista Shares (as defined in section 8) held as collateral for the Notes.
Northeast agrees to register any and all discharges under the PPSA necessary
in order to reflect the foregoing.
4. Upon execution hereof, Vista agrees to pay a lump sum payment in
the amount of $50,000 to Northeast to assist it in carrying on its business
activities. In addition to the foregoing, Vista agrees to pay $75,000 to
Northeast and $200,000 (the "Escrow Funds") to Grubner, Krauss, Barristers and
Solicitors (the "Escrow Agents") upon Vista completing its financing with
Paramount Capital or any other investor or lender, in a minimum aggregate
gross amount of $2 million dollars, which it contemplates doing on or before
January 20, 1997. (The parties acknowledge and agree that any equipment
leasing will not be considered part of any such Vista financing for purposes
of calculating the minimum aggregate gross amount of $2 million dollars). The
$200,000 being remitted to the Escrow Agents shall be held by the Escrow
Agents and remitted by the Escrow Agents upon the following terms and
conditions:
a. The Escrow Agents shall remit directly to Northeast's premises
lessor and equipment lessors to the extent that Escrow Funds are available, on
the first day of each month commencing in February, the amount of $25,000 to
assist Northeast in defraying the aforesaid expenses. The Escrow Agents agree
to provide confirmation of such payment to Vista forthwith following
remittance thereof.
b. The Escrow Agents shall release $50,000 to Northeast upon
Northeast delivering to the Escrow Agents, a final release of Northeast's
license of the Vista name as contemplated by paragraph 5 hereof.
Provided however that the Escrow Agents shall remit to Vista any amounts not
already advanced to Northeast pursuant to the terms hereof (with any interest
earned on such Escrow Funds which has not already been advanced to Northeast
pursuant to the terms hereof) at such time as Northeast has completed one or
more
<PAGE>
Page 3
financings in the aggregate gross minimum amount of $500,000 by way of debt or
equity. Northeast agrees to use reasonable best efforts to complete such
financings as soon as possible. In addition, the Escrow Agents shall remit to
Vista any Escrow Funds not already advanced to Northeast pursuant to the terms
hereof, upon:
(i) a direct or indirect change in control of Northeast; or
(ii) the bankruptcy or commercial insolvency of Northeast;
(iii) Dr. Herzig opening, operating, being involved with, affiliated
with, lending his name to or becoming otherwise related to any of the
Corporations or firms listed on Schedule "A" attached or their successors,
save and except for Dr. Herzig continuing any previously established patient
referral relationships with 20/20 (now owned by TLC Laser Centers) and Clear
Vision.
Provided further, that the Escrow Agents shall return to Vista the $50,000
referred to in paragraph (b) hereof (without set-off), if Northeast fails to
deliver a release to the license agreement by the 1st day of July, 1997.
Provided further that upon execution hereof Vista shall deliver an irrevocable
direction to Paramount Capital directing Paramount Capital to remit to the
Escrow Agents and to Northeast the amounts payable pursuant to this paragraph
forthwith following it or its nominee having available the moneys it
contemplates raising on behalf of, or in connection with its offering or its
investment or its financing of Vista, in the aggregate minimum amount of $2
million dollars. Vista shall forthwith cause Paramount Capital to acknowledge
receipt of the aforesaid irrevocable direction and Paramount Capital's
agreement to be bound for by the terms thereof.
5. Northeast will agree to cease using the "Vista" name and
associated trademarks in connection with its business operations and shall
take the necessary steps to change the signage at its Toronto clinic on or
before July 1, 1997 and acknowledges that such name and trademark are the sole
property of Vista to utilize the name and trademarks as aforesaid. Northeast
acknowledges that in the event of bankruptcy or a material breach of the
provisions hereof the license shall terminate. Vista will be permitted to
advise creditors of Northeast, other than the equipment lessor and the
premises lessor, that it is no longer associated with Northeast.
6. Vista will agree to forthwith cease using the name of Dr. Sheldon
Herzig and the reference to the Toronto clinic in its advertisements and
investor materials. Vista will allow Northeast's representatives to speak
with a representative of Paramount Capital to ensure that it is understood
that neither Northeast nor Dr. Herzig is associated with Vista. Northeast
agrees that a representative of Vista may participate in such meeting or
discussion.
7. Vista will remain as guarantor under the premises lease respecting
the Northeast Toronto clinic located at the Collonade and under the equipment
<PAGE>
Page 4
lease for the equipment located at that clinic, provided that Northeast shall
use reasonable best efforts to amend such leases to provide that at such time
as Northeast raises capital in the amount of $2 million or more or in the
event of a direct or indirect change in control of Northeast, Vista's
guarantee on such leases shall be unconditionally released (For purposes of
this agreement "control" shall have the meaning set out in section 1(5) of the
Ontario Business Corporations Act. Cherry Sharrer, Dr. Sheldon Herzig and
Cherry Development Corporation represent and warrant that Northeast is
presently jointly controlled by Cherry Development Corporation and Shefa
Enterprises Limited and the parties agree that a direct or indirect change in
control of either Cherry Development Corporation or Shefa Enterprises Limited,
other than a change in favour of Cherry Sharrer or Sheldon Herzig, shall be
considered a change in control of Northeast. In the event that despite the
exercise of such reasonable best efforts, the lessors under such leases are
unwilling to make such amendments, Northeast will provide a secured indemnity
to hold Vista harmless under such guarantees at such time as it raises capital
in the amount of $2 million or more or in the event of a direct or indirect
change in control of Northeast. Northeast shall also agree to provide Vista
with the right to assume the leases in the event of an unremedied default, and
following 15 days written notice thereof to Northeast, and shall agree to
provide immediate written notice of any defaults thereunder and shall agree
not to move such equipment outside the Metropolitan Toronto clinic without the
prior consent of Vista. Vista's guarantee hereunder shall only operate for
the initial term of such leases and shall not continue upon renewal.
Northeast agrees to provide a quarterly statement to Vista to the effect that
there has been no direct or indirect change of control in Northeast or Cherry
Development Corporation or Shefa Enterprises Limited and that the lease is not
in default. Provided that following July 1, 1997, Northeast shall have no
obligation to provide any information other than in respect to the status of
the lease. Provided that Vista may confirm the status of the leases with the
lessors directly from time to time. So long as Vista has not been released
from such leases, Northeast shall not assign or sublet the equipment or the
premises under such leases without the consent of Vista, such consent not to
be unreasonably withheld or delayed.
8. The 450,000 shares of common stock in the capital of Vista (the
"Vista Shares") being the property of Northeast shall be assigned to Vista
forthwith following the deposit with the Escrow Agents of all funds
contemplated by paragraphs 4 and 9 hereof. The Vista Shares shall be assigned
to Vista free and clear of any encumbrances or liens. Upon the execution
hereof, Northeast agrees to deposit the Vista shares with the Escrow Agents to
ensure that they are not assigned or encumbered in contravention of this
agreement. Should Vista fail to advance the sums required pursuant to section
4 and 9 hereof, the Escrow Agents shall return the Vista Shares to Northeast.
9. Vista shall concurrently with the payments to the Escrow Agents of
the amounts referred to in paragraph 4 hereof, also remit to the Escrow Agents
the amount of $50,000 which shall be made available to Northeast, by the
Escrow Agents to assist Northeast in the preparation of documentation and the
raising of capital, whether by way of financing or equity.
<PAGE>
Page 5
It is understood that $25,000 of the amount shall be advanced to third party
professionals assisting in the raising of capital, at the inception of that
process and the balance of which shall be advanced only at such time as the
Escrow Agents are reasonably satisfied that sufficient investors have been
procured to make completion of the financing in the aggregate gross amount of
$500,000 a reasonable likelihood. At such time, the Escrow Agents shall
provide notice to Vista of such disbursement.
Northeast shall be obligated to repay this $50,000, without interest (except
in the event of default), to Vista upon the raising of capital, in aggregate,
of the gross amount of $500,000. Northeast agrees to provide a general
security agreement and promissory note and general security agreement shall be
subordinate to any and all third party financing.
The Escrow Agents shall provide Vista with a quarterly accounting of the
disbursement of escrow funds. In the event that there is a legitimate
material dispute with respect to the provisions hereof or the disbursements of
the Escrow Funds, the Escrow Agents are hereby irrevocably directed to deposit
such Escrow Funds with a Court of competent jurisdiction pending the
resolution of the dispute. In such event, the Escrow Agents shall deliver
written notice to all parties.
10. Vista does hereby release and hold Northeast and its shareholders
and officers harmless and forever discharged from any liability in connection
with any funds advanced or contributed to Northeast on any other agreement.
Northeast does hereby release and hold Vista and its directors, officers,
employees and shareholders harmless and forever discharged from any liability
in connection with any agreement or instrument entered into in furtherance of
Northeast's business. All other agreements including without limitation the
Option Agreement and the Consulting Agreement entered into between the parties
hereto shall automatically terminate and be of no further force and effect.
The parties shall exchange full and final releases and shall agree to keep the
terms of this agreement confidential, except as set forth above.
All amounts stated in the agreement are stated in United States currency. In
addition, each of Northeast and Vista and their respective principals agree
that they will take no steps to interfere with or frustrate the financing
efforts of the other and shall take no steps and make no comments to third
parties which would reasonably have this result or disparage the reputation of
the other.
11. The parties hereto acknowledge that any promotional or marketing
material, logos, designs, brochures, trademarks, stationary, advertising, or
any other material of a related nature shall, remain the property of Vista but
shall be licensed to Northeast (on a non-assignable basis) for a period of 21
years (with an automatic renewal every 21 years) within the Greater Toronto
Area (for purposes of this agreement Greater Toronto Area means all Canadian
territory within a radius of 100 kilometres of the Vista Eye Institute at 131
Bloor Street, Toronto. For greater certainty the parties acknowledge and
agree that the Greater Toronto Area does not include Windsor, Ontario). Such
licence shall
<PAGE>
Page 6
terminate upon the bankruptcy or insolvency of Northeast or upon a material
breach of this agreement by Northeast or the Northeast Parties. The parties
further acknowledge and agree that the copy and text of such promotional
materials may be used by both Vista and Northeast in their respective areas
provided that Vista's use of such copy and text will not include any reference
to Dr. Herzig and, subject to the licence agreement set out in section 1
hereof, Northeast's use of such copy and text shall not use the word "Vista"
or associated logo). Notwithstanding the foregoing, Vista shall be entitled
to provide such promotional material to potential investors within the Greater
Toronto Area as part of providing a prospectus or offering memorandum (and
associated materials) to such potential investors. In consideration of the
foregoing, Vista acknowledges that it shall not open or operate or be involved
with or affiliated with or otherwise related to a laser vision correction
center or any center that provides laser vision correction services under or
using the name "Vista" in any manner within the Greater Toronto Area for a
period of at least two years following execution of this agreement.
Notwithstanding the foregoing, such requirement that Vista not use the "Vista
" name within the Greater Toronto Area shall cease immediately upon:
(a) a direct or indirect change in control of Northeast;
(b) the bankruptcy or commercial insolvency of Northeast;
(c) a material breach by Northeast, Dr. Sheldon Herzig, Cherry Sharrer
or Cherry Development Corporation of any of the terms of this
agreement;
(d) Dr. Sheldon Herzig opening, operating, becoming involved with,
affiliated with, lending his name to or becoming otherwise related
to or with any of the corporations or firms listed on Schedule "A"
attached or their successors save and except for Dr. Herzig
continuing any previously established patient referral
relationships with 20/20 (now owned by TLC Laser Centers) and
Clear Vision; or
(e) Dr. Herzig's soliciting any physician, who as of the date of such
solicitation has entered into a written agreement with Vista for
some form of association with Vista, to leave or break his or her
association with Vista.
Notwithstanding a material breach of this agreement, Vista shall
continue to have the right to use the "Vista" name outside the Greater Toronto
Area.
12. This agreement may be executed in one or more counterparts and by
facsimile transmission. Each counterpart shall be deemed an original and all
counterparts shall constitute one and the same instrument. It shall not be
necessary that any single counterpart be executed by all parties, as long as
at least one counterpart is executed by each party.
13. This agreement shall be governed by and interpreted in accordance
<PAGE>
Page 7
with the laws of the province of Ontario, Canada.
14. The parties hereto agree to execute such further documents and
assurances as may be necessary to implement the terms and provisions of this
agreement. Time shall be of the essence of this agreement and of every part
hereof. This agreement shall be binding upon the parties hereto and any
successors, assigns, affiliated or related parties, and any subsidiaries
thereof (as all of those terms are defined in the Income Tax Act of Canada).
15. Should any party to this agreement be entitled to certain rights
or to take certain actions upon a "material breach" by one of the other
parties to this agreement, the party alleging such material breach shall not
be entitled to such rights or to take such actions until the issue has been
arbitrated and the arbitrator has determined that there has been a material
breach. The parties acknowledge and agree that should one party allege that
there has been a material breach by one of the other parties to this
agreement, the issue shall be determined by arbitration pursuant to the
Arbitration Act, Ontario. The arbitrator shall be appointed by a court of
competent jurisdiction. The costs of such arbitration shall be as awarded by
the arbitrator. The decision of the arbitrator shall be final and shall not
be subject to appeal.
16. Each party hereto acknowledges that he, she, or it understands the
provisions hereof and has been advised to obtain independent legal advice.
DATED as of the 7 day of January, 1997.
VISTA TECHNOLOGIES INC.
Per: /s/ Thomas A. Schultz c/s
-------------------------
PHARMA PATCH plc
Per: /s/ Murray D. Watson c/s
-------------------------
RS-800, INC.
Per: /s/ Thomas A. Schultz c/s
-------------------------
VISTA LASER CENTRES OF THE NORTHEAST
INC.
Per: /s/ Cherry Tabb Sharrer c/s
-------------------------
<PAGE>
Page 8
/s/ Sheldon Herzig
------------------------------
DR. SHELDON HERZIG
/s/ Cherry Tabb Sharrer
------------------------------
CHERRY SHARRER
CHERRY DEVELOPMENT CORPORATION
Per: /s/ Cherry Tabb Sharrer c/s
-------------------------
<PAGE>
SCHEDULE "A"
1. TLC Laser Centers
2. Summit Technology
3. Laser Vision Centers inc.
4. Sight Resources
5. Global Vision
6. Clear Vision
7. Vision Sculpting
8. Shooting Star Inc.
9. Beacon Eye Centers Inc.
10. Sterling Vision
11. LCA Vision
<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-31-1997
<PERIOD-START> Apr-01-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 9-MOS
<CASH> 1,067
<SECURITIES> 0
<RECEIVABLES> 378
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,588
<PP&E> 3,196
<DEPRECIATION> 274
<TOTAL-ASSETS> 5,163
<CURRENT-LIABILITIES> 3,252
<BONDS> 2,363
0
0
<COMMON> 32
<OTHER-SE> (892)
<TOTAL-LIABILITY-AND-EQUITY> 5,163
<SALES> 2,580
<TOTAL-REVENUES> 2,580
<CGS> 0
<TOTAL-COSTS> 5,126
<OTHER-EXPENSES> 1,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> (5,758)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,758)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,758)
<EPS-PRIMARY> (.82)
<EPS-DILUTED> (.82)
</TABLE>
