<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark one)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
--------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_______
Commission file number 0-11933
------------
LASERTECHNICS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 85-0294536
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
3208 Commander Drive
Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
(972) 407-6080
(Issuer's telephone number, including area code)
(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 Exchange Act 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
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
Shares of common stock outstanding on August 7, 1997: 44,917,004. Shares of non-
voting convertible common stock outstanding on August 7, 1997: 2,249,842.
Transitional Small Business Disclosure Format (Check One); Yes No X
----- ----
<PAGE>
LASERTECHNICS, INC.
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Consolidated Balance Sheets at June 30, 1997
and December 31, 1996.............................................3
Consolidated Statements of Operations for the six months ended
June 30, 1997 and 1996............................................5
Consolidated Statements of Operations for the three months ended
June 30, 1997 and 1996............................................6
Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1996............................................7
Notes to Condensed Consolidated Financial Statements................9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................12
PART II. OTHER INFORMATION..................................................19
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures....................................................................24
2
<PAGE>
PART 1. CONDENSED FINANCIAL INFORMATION
Item 1. Financial Statements
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets: $ 489,464 1,598,744
Cash and cash equivalents
Accounts receivable - trade, less allowance for doubtful
accounts of $239,448 in 1997 and $357,136 in 1996 3,991,017 3,196,943
Inventory 6,042,657 6,600,007
Prepaid expenses and other 597,033 998,445
------------ ------------
Total current assets 11,120,171 12,394,139
------------ ------------
Property, plant & equipment, net 3,240,599 3,334,277
Goodwill 131,491 172,510
Other assets 1,620,441 1,760,931
------------ ------------
Total assets $ 16,112,702 17,661,857
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to stockholders (note 3) $ 1,334,424 -
Other notes payable 700,000 775,292
Accounts payable 2,644,298 1,369,818
Accrued payroll and related expenses 446,132 495,112
Customer advances 189,964 436,249
Product warranty reserve 520,811 516,783
Capital lease obligations, current 198,327 225,676
Dividends payable 560,807 356,182
Other accrued liabilities 793,292 1,153,199
------------ ------------
Total current liabilities 7,388,055 5,328,311
------------ ------------
Convertible debentures (notes 4 and 7) 1,196,438 1,768,965
Capital lease obligations, noncurrent 825,142 927,411
Note payable - long term 1,400,000 1,400,000
4,694 149,387
Other ------------ ------------
Total liabilities $ 10,814,329 9,574,074
------------ ------------
(Continued)
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Stockholders' equity (notes 3, 4 and 7):
Convertible preferred stock, no par;
7,000,000 shares authorized in 1997 and
1996
Series A: $1.30 stated value; 1,153,846
shares outstanding in 1997 and 1996. $ 1,500,000 1,500,000
Series B: $1.42 stated value; 1,056,338
shares outstanding in 1997 and 1996. 1,500,000 1,500,000
Series C: $1.51 stated value; 708,530
shares outstanding in 1997 and 1996. 1,069,880 1,069,880
Series D: $10,000.00 stated value; 233 shares
outstanding in 1997 and 585 in 1996. 2,506,761 6,049,314
Series E: $10,000.00 stated value; 50 shares
outstanding in 1997 and none in 1996. 500,000 -
Common stock, $.01 par value, 56,750,000 shares authorized
in 1997 and 1996; 42,840,828 shares issued and
and outstanding in 1997 and 37,133,514 in 1996 428,408 371,335
Nonvoting convertible common stock, $.01 par value. 2,250,000
shares authorized in 1997 and 1996; 2,249,842
shares issued and outstanding in 1997 and 1996. Convertible
into common stock on a one share for one share basis. 22,499 22,499
Paid-in-Capital 52,176,655 47,753,080
Accumulated deficit (54,405,830) (50,178,325)
----------- ----------
Total stockholders' equity 5,298,373 8,087,783
----------- ----------
Total liabilities and stockholders' equity $16,112,702 17,661,857
=========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Sales $ 7,181,324 7,565,923
Cost of sales 4,057,005 4,830,876
------------- -------------
Gross Profit 3,124,319 2,735,047
Expenses:
Research and development 1,423,909 1,335,455
General and administrative 2,415,357 2,689,961
Selling and marketing 2,784,954 2,690,407
Loss on contract settlement - 1,000,000
------------- -------------
Operating expenses 6,624,220 7,715,823
------------- -------------
Loss from operations (3,499,901) (4,980,776)
------------- -------------
Other income (expense):
Interest income 14,318 29,410
Interest expense (392,724) (968,703)
Other 4,922 43,114
------------- -------------
Other expense, net (373,484) (896,179)
------------- -------------
Net loss (3,873,385) (5,876,955)
Preferred stock dividend requirements (354,122) (201,378)
Net loss applicable to common stock $ (4,227,507) (6,078,333)
============= =============
Net loss per share $ (0.10) (0.19)
============= =============
Shares of common stock used in computing
net loss per share (note 1) 42,665,226 32,127,285
============= =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Sales $ 2,591,537 3,454,222
Cost of sales 1,394,433 2,138,369
------------- -------------
Gross Profit 1,197,104 1,315,853
Expenses:
Research and development 670,658 592,830
General and administrative 1,412,856 1,451,146
Selling and marketing 1,316,365 1,502,407
Loss on contract settlement - 1,000,000
------------- -------------
Operating expenses 3,399,879 4,546,383
------------- -------------
Loss from operations (2,202,775) (3,230,530)
------------- -------------
Other income (expense):
Interest income 3,183 14,871
Interest expense (171,873) (677,718)
Other (11,307) 64,607
------------- -------------
Other expense, net (179,997) (598,240)
------------- -------------
Net loss (2,382,772) (3,828,770)
------------- -------------
Preferred stock dividend requirements (164,907) (101,195)
Net loss applicable to common stock $ (2,547,679) (3,929,965)
============= =============
Net loss per share $ (0.06) (0.12)
============= =============
Shares of common stock used in computing
net loss per share (note 1) 43,883,233 33,008,899
============= =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE>
LASERTECHNICS INC. CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- --------------
<S> <C> <C>
Cash flows from operating activities: $ (3,873,385) $ (5,876,955)
Net loss
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 349,232 300,701
Provision for losses on accounts receivable 7,727 128,883
Provision for product warranty reserve 203,342 216,719
Amortization of financing discount and issuance costs 143,007 494,241
Accrued interest on convertible debentures 86,178 -
Non-cash compensation 40,000
(Increase) decrease in:
Accounts receivable, net (801,801) (1,225,811)
Inventory 557,350 (2,154,550)
Prepaid expenses and other 401,412 (108,733)
Other assets 62,842 138,502
Increase (decrease) in:
Accounts payable 1,274,480 (246,040)
Customer advances (246,285) 10,292
Accrued payroll and related expenses (48,979) (211,497)
Product warranty reserve (199,314) (415,743)
Other current liabilities (359,905) 626,491
Other liabilities (144,693) (1,031,840)
------------- --------------
Net cash used by operating activities (2,548,792) (7,291,660)
Cash flows from investing activities:
Capital expenditures (214,535) (124,023)
------------- --------------
Cash flows from financing activities:
Borrowings under financing agreements 1,833,000 1,000,000
Principal payments on financing agreements (75,292) (200,000)
Proceeds from issuance of convertible debentures 500,000 5,500,000
Redemption of convertible debentures (600,000) -
Convertible debenture issuance costs - (385,000)
Redemption of convertible preferred stock (400,000)
Principal payments on capital lease obligations (129,618) (92,111)
Net proceeds from issuance of preferred and common stock 525,957 126,997
------------- --------------
Net cash provided by financing activities 1,654,047 5,949,886
Net increase (decrease) in cash and cash equivalents (1,109,280) (1,465,797)
Cash and cash equivalents, beginning of period 1,598,744 1,892,357
------------- --------------
Cash and cash equivalents, end of period $ 489,464 $ 426,560
============= ==============
(Continued)
See accompanying notes to condensed consolidated financial statements.
</TABLE>
7
<PAGE>
LASERTECHNICS INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Supplemental information:
Cash paid during the year for interest $ 121,508 87,018
============= =============
Conversions to stock:
Debentures, net of unamortized discount and expenses 337,667 2,835,719
Accrued interest 136,397 251,185
Accretion attributable to convertible preferred stock $ 149,497 -
============= =============
Conversion feature of debentures issued $ 150,000 1,610,000
============= =============
Conversion feature, detachable warrants and restricted common stock issued in
conjunction with notes payable to stockholders $ 498,576 -
============= =============
Borrowings under capital lease obligations $ - 194,064
============= =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
8
<PAGE>
LASERTECHNICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements are
unaudited and include the accounts of Lasertechnics, Inc. ("LASX"), the holding
company, LASX's wholly owned subsidiary Lasertechnics Marking Corporation
("LMC"), LASX's 96 percent owned subsidiary Sandia Imaging Systems Corporation
("Sandia"), and Sandia's wholly owned French subsidiary Sandia Imaging Systems
Europe SA ("Sandia Europe") collectively, (the "Company" or "Lasertechnics").
The Quantrad company, formerly a subsidiary of LASX, has been dissolved. All
significant intercompany accounts and transactions have been eliminated.
Information contained in the Company's condensed consolidated financial
statements and notes thereto should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto contained in
Lasertechnics' Annual Report on Form 10-KSB for the year ended December 31,
1996.
The Consolidated Balance Sheet at June 30, 1997 and December 31, 1996,
the Consolidated Statements of Operations for the three and six month periods
ended June 30, 1997 and 1996, and the Consolidated Statements of Cash Flows for
the six month periods ended June 30, 1997 and 1996 have been prepared by the
Company and are unaudited. In the opinion of the Company's management, all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position at June 30, 1997, results of operations
for the three and six month period ended June 30, 1997 and 1996, and changes in
cash flow for the six month periods ended June 30, 1997 and 1996 have been made.
Net loss per common share is based on weighted average common shares
outstanding and does not give effect to outstanding common stock options,
warrants and convertible debt because their inclusion would be anti-dilutive.
Net loss applicable to common stock is derived by adding to consolidated net
loss the accretion of conversion discounts and dividends recorded for the
Company's preferred stock series A, B, C, D and E.
Certain reclassifications have been made to prior year amounts in
order to present the consolidated financial position and results of operations
on a consistent basis.
2. ISSUANCE OF COMMON STOCK
During the quarter ended June 30, 1997, a total of 2,257,777 shares of
Lasertechnics common stock were issued pursuant to conversions and redemptions
of outstanding convertible debentures and preferred stock.
9
<PAGE>
3. NOTES PAYABLE TO STOCKHOLDER
During the first quarter of 1997, the Company obtained a commitment
for a working capital bridge loan of up to $1,000,000 from Wolfensohn Partners
L.P.("Wolfensohn"), the general partner of Wolfensohn Associates L.P., a
significant stockholder. On March 27, 1997, the Company made a $250,000 draw on
this commitment. In the second quarter the Company made additional draws
totaling $750,000 for a total amount payable to Wolfensohn under such bridge
loan commitment of $1,000,000. These unsecured notes bore interest at 12% per
annum. Interest and principal were due on demand, but if no demand was made,
principal and interest became due and payable on December 31, 1997. In the
event that the Company completed an equity financing of $5,000,000 or more on
or before December 31, 1997, then Wolfensohn had the right to convert the
outstanding principal and interest, or a portion thereof, into either the
Company's voting common stock, par value $0.01 per share (the "Common Stock"),
or non-voting convertible common stock, par value $0.01 per share, at the price
per share paid by the investors in such equity financing.
In connection with this loan, Wolfensohn also received five year warrants
to purchase a total of 135,303 shares of the Company's Common Stock. The
warrants were exercisable at prices from $0.65625 to $0.96875 or at an alternate
rate dependent upon either of the following events: (i) if the Company
completed an equity financing of $5,000,000 or more on or before December 31,
1997, the exercise price would equal the price per share at which shares of the
Common Stock are issued in such financing, or (ii) if such financing involves
convertible or exchangeable securities, the exercise price would equal the price
at which such securities could be converted into or exchanged for Common Stock.
In June 1997, the Wolfensohn bridge loan of $1,000,000 plus accrued
interest was converted into an advance under the terms of a new bridge loan
financing entered into between the Company, Wolfensohn and J.P. Morgan
Investment Corporation ("JPMIC") pursuant to a Note Purchase Agreement dated
June 25, 1997 (the "Note Purchase Agreement"). The Note Purchase Agreement
provided the Company with additional bridge financing, to be funded 60% by
Wolfensohn and 40% by JPMIC. Under the Note Purchase Agreement the Company
received additional funding of $833,000 on June 25, 1997, $125,000 on July 9,
1997, $225,000 on July 31, 1997 and $150,000 on August 7, 1997. The Note
Purchase Agreement provides for: (i) an interest rate of 10% per annum for
advances by Wolfensohn and 6.64% per annum for advances by JPMIC, with a final
maturity of December 31, 1997 for all advances; (ii) issuance to Wolfensohn and
JPMIC of an aggregate of 239,964 restricted shares of Common Stock; and (iii)
issuance to Wolfensohn and JPMIC of an aggregate of 466,600 Common Stock 3-year
warrants at a $0.70 strike price. The Company recorded a discount to equity of
approximately $498,000 related to the conversion feature of the outstanding
notes payable of $1,833,000 and to the warrants and restricted common stock.
Such discount is being accreted to interest expense. Advances under the Note
Purchase Agreement are secured by a pledge of all the capital stock of the
Company's LMC subsidiary held by the Company. There are no prepayment penalties
and the Company is obligated to apply 100% of any proceeds from the sale of
assets in excess of $1,000,000 to repayment of any notes issued pursuant to the
Note Purchase Agreement. The Company is also obligated to apply the entire
proceeds from the sale of the LMC headquarters if sold independently of the
disposition of LMC. If the Company does not repay the bridge loan principal and
accrued interest by December 31, 1997, the Company will issue Wolfensohn an
additional 5% in 3-year warrants and 1% in restricted Common Stock as a late
payment fee. The strike price of any such additional warrants would be at the
current market price at the time such warrants were issued. In addition, the
interest rate will increase by 5% per annum and the notes will be payable on
demand. This bridge loan is intended to be senior indebtedness of the Company.
10
<PAGE>
4. PREFERRED STOCK AND CONVERTIBLE DEBENTURE ISSUANCE
In May 1997, the Company redeemed $600,000 principal amount of its
March 1996 10% Convertible Debentures due March 1999 (the "1996 Debentures")
with the proceeds from the private placement of $500,000 principal amount of
Series B 10% Convertible Debenture due March 1999 (the "Series B Debenture")
with substantially identical terms as the 1996 Debentures and $100,000 in
proceeds from the private placement of $500,000 of Series E Convertible
Preferred Stock, par value $0.01, (the "Series E Preferred Stock"), with
substantially identical terms as the Series D Convertible Preferred Stock, par
value $0.01 (the "Series D Preferred Stock"), outstanding. In June 1997,
$400,000 of Series D Preferred Stock was redeemed by the Company with the
remaining proceeds from the issuance of the Series E Preferred Stock. In
connection with the issuance of the Series B Debenture, the Company recorded a
discount to equity of $150,000 related to the conversion feature of the debt.
Such discount is being accredited to interest expense.
5. CONTINGENCIES
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management of the
Company, after consultation with outside legal counsel, the ultimate disposition
of these matters will not have a material effect on the accompanying condensed
consolidated financial statements. See also Legal Proceedings, Part II, Item I.
6. SALE OF SUBSIDIARY
In April, 1997, the Company retained Southport Partners as financial
advisor to advise on strategic alternatives for LMC, including the possibility
of a disposition or strategic partnership of such subsidiary. The Company has
not, however, entered into a definitive agreement with respect to any such
transaction, and there can be no assurance that any such transaction will be
consummated.
7. SUBSEQUENT EVENT
In July 1997, the holders of the 1996 Debentures, Series B Debenture,
Series D Preferred stock and Series E Preferred Stock (the "Suspended
Securities") agreed to a ninety day suspension of conversion rights on 75% of
their holdings beginning July 14, 1997. From October 14, 1997 and thereafter,
holders of the Suspended Securities can exercise the suspended portion at a
cumulative rate of 20% per month. In exchange for the suspension agreement, the
holders received warrants equal to 25% of the aggregate value of the suspended
amount for an exercise price of $1.00 per share, and a reduction of the maximum
conversion price to $1.00 for the convertible debentures and $1.14 for the
convertible preferred stock, from $2.00 and $2.14 respectively. It is expected
that the suspension agreement with respect to the Series D and Series E
Preferred Stock will be effected by an exchange of the shares of such stock, on
a one-for-one basis, for shares of a new series of Convertible Preferred Stock,
Series F, $0.01 par value (the "Series F Preferred Stock").
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Separate Business Units. The summarized financial data of LMC and
Sandia as of and for the six-month period ended June 30, 1997, as presented
herein, do not necessarily reflect the financial position or results of
operations of LMC and Sandia if the two entities had no ownership or management
relationships.
<TABLE>
<CAPTION>
Consolidated
Marking (LMC) Imaging (Sandia) (LASX)
------------- ---------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Sales $ 3,702,261 3,479,063 7,181,324
Cost of sales 2,111,113 1,945,892 4,057,005
------------ ----------- ----------
Gross profit 1,591,148 1,533,171 3,124,319
Gross margin % 43% 44% 44%
Expenses:
Research and development $ 524,782 899,127 1,423,909
General and administrative 802,373 1,612,984 2,415,357
Selling and marketing 698,680 2,086,274 2,784,954
------------ ----------- ----------
Operating expenses 2,025,835 4,598,385 6,624,220
Loss from operations (434,687) (3,065,214) (3,499,901)
Other expense, net (105,007) (268,477) (373,484)
------------ ----------- ----------
Net loss before preferred dividends $ (539,694) (3,333,691) (3,873,385)
============ =========== ==========
Current assets $ 4,946,832 6,173,339 11,120,171
Non-current assets 2,250,444 2,742,087 4,992,531
------------ ----------- ----------
$ 7,197,276 8,915,426 16,112,702
============ =========== ==========
Current liabilities $ 3,935,875 3,452,180 7,388,055
Inter-co.(receivable) payable (14,093,588) 14,093,588 -
Long-term liabilities 2,021,580 1,404,694 3,426,274
Stockholders' equity 15,333,409 (10,035,036) 5,298,373
------------ ----------- ----------
$ 7,197,276 8,915,426 16,112,702
============ =========== ==========
</TABLE>
12
<PAGE>
Sales. Consolidated sales for the six months ended June 30, 1997 were
$7,181,324 compared to $7,565,923 for the same period in 1996, a decrease of
$384,599 or 5%. Imaging segment sales increased $400,129, or 13%, over the same
period last year primarily due to increased unit sales of plastic card printers
and related consumables and parts. Marking segment sales decreased $784,728, or
17%, primarily due to a 48% decrease in foreign sales and a 32% decrease in
after-market sales primarily because of a one time upgrade project in 1996 at
Anheuser-Busch and a delay in the re-introduction of the BlazerJet/TM/ marking
system. The Company's net accounts receivable increased $794,074, or 25%, at
June 30, 1997 compared to December 31, 1996. This increase is primarily the
result of a longer than normal delay in the collection of a contract at the
Imaging unit. The delay is the result of the prime contractor requiring more
time to complete the installation of the entire card printing systems, however,
the Company has fulfilled substantially all of its obligations under this
contract. This receivable is considered collectible.
Cost of Sales. Consolidated cost of sales for the six months ended June
30, 1997 was $4,057,005 compared to $4,830,876 for the same period in 1996, a
decrease of $773,871, or 16%. Gross margin was approximately 44% for the six
months ended June 30, 1997 and 36% for the same period in 1996. The lower
margins in the six months ended June 30, 1996 were primarily due to competitive
pricing and increased product costs of custom applications for plastic card
printers in the Imaging business.
Inventory. The Company's inventory decreased $557,350, or 8%, from
$6,600,007 at December 31, 1996 to $6,042,657 at June 30, 1997. Marking segment
inventory increased approximately $66,000 as a result of purchasing parts for
systems on order. Imaging segment inventory decreased $623,596 since December
31, 1996, resulting from delivery of card printer systems in the first quarter
which were in inventory at December 31, 1996.
Research and Development. Consolidated research and development expenses
were $1,423,909 for the six months ended June 30, 1997 compared to $1,335,455
for the same period in 1996, an increase of $88,454 or 7%. The increase
primarily relates to costs of approximately $131,000 associated with updating
the Blazer 6000CE/TM/ and the BlazerJet/TM/ marking system that were offset by
lower costs in the Imaging segment, which recorded greater development costs in
1996 related to specific custom products that have since been completed.
General and Administrative. Consolidated general and administrative
expenses were $2,415,357 for the six months ended June 30, 1997 compared to
$2,689,961 for the same period in 1996, a net decrease of $274,604 or 10%. This
decrease was primarily due to reductions in personnel costs of approximately
$87,000 in the Marking segment, plus reductions in personnel costs, travel and
consulting in the Sandia segment totaling approximately $186,000.
Selling and Marketing. Consolidated selling and marketing expenses were
$2,784,954 for the six months ended June 30, 1997 compared to $2,690,407 for the
same period in 1996, an increase of 94,547 or 3%. Imaging segment's net
increases were approximately $357,000 because of increases in marketing expenses
related to DataGlyphs(TM) of approximately $309,000, Asia marketing efforts of
approximately
13
<PAGE>
$96,000, and increases in sales and marketing expenses of approximately $221,000
related to the Imaging business. These increases were partially offset by
decreases in selling expenses and support personnel and related expenses in
Sandia's Europe operation of approximately $269,000. Sales and marketing
expenses in the Marking segment decreased approximately $263,000 primarily due
to lower personnel and related travel and trade show expenses because management
has delayed the replacement of personnel lost through attrition.
Other Income (Expense). Other expense, consisting primarily of interest
expense, for the six months ended June 30, 1997 was $373,484 compared to
$896,179 for the same period in 1996. Because of conversions of certain
convertible debentures which were sold by the Company in October 1995 and March
1996, the Company has recorded less interest expense and less amortization of
the related placement fee expenses and debenture discount in the first six
months of 1997.
Net Results. The consolidated net loss for the six months ended June 30,
1997 was $3,873,385 compared to the $5,876,955 loss incurred in the same period
of 1996. This reduction reflects the improved gross margin and lower general
and administrative and other expenses which were partially offset by the
increase in selling and marketing expense.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Sales. Consolidated sales for the three months ended June 30, 1997 were
$2,591,537 compared to $3,454,222 for the same period in 1996, a decrease of
$862,685 or 25%. Imaging segment sales decreased $678,000, or 74%, over the same
period last year primarily due to delays in shipments of plastic card printers
which are now expected to be delivered in the third quarter; however, sales of
related consumables and parts remained strong. Marking segment sales decreased
$185,000, or 12%, attributable to delays in re-introduction of the BlazerJet/TM/
and completion of a large upgrade of marking systems at a major customer. The
Company's net trade accounts receivable decreased $1,119,900, or 22%, at June
30, 1997 compared to June 30, 1996, a decrease resulting primarily from lower
sales in the second quarter of 1997 as compared to the same quarter of 1996.
Cost of Sales. Consolidated cost of sales for the three months ended June
30, 1997 was $1,394,433 compared to $2,138,369 for the same period in 1996, a
decrease of $743,936 or 35%. This decrease is consistent with lower sales at
the Imaging unit for the quarter combined with a higher gross margin percentage.
Gross margin as a percentage of sales was approximately 46% for the three months
ended June 30, 1997 and 38% for the same period in 1996. The lower margins in
the same quarter of 1996 were primarily due to competitive pricing and the
increased cost of producing application-specific plastic card printers in the
Imaging business.
Research and Development. Consolidated research and development expenses
were $670,658 for the three months ended June 30, 1997 compared to $592,830 for
the same period in 1996, an increase of 13%. The increase is primarily
attributable to the Marking segment's improvements in the Blazer 6000CE/TM/ and
the BlazerJet/TM/
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<PAGE>
General and Administrative. Consolidated general and administrative
expenses were $1,412,856 for the three months ended June 30, 1997 compared to
$1,451,146 for the same period in 1996, a decrease of 38,290 or 3%. This change
was due primarily to the Marking segment reduction of personnel and related
expenses of approximately $101,000, offset by slightly higher costs of
approximately $65,000 in various areas at the Sandia segment.
Selling and Marketing. Consolidated selling and marketing expenses were
$1,316,365 for the three months ended June 30, 1997 compared to $1,502,407 for
the same period in 1996, a decrease of $186,042 or 12%. This decrease is
primarily due to lower personnel and related travel costs because management has
delayed the replacement of personnel lost through attrition in the Marking
business.
Other Income (Expense). Other expense, consisting primarily of interest
expense, for the three months ended June 30, 1997 was $179,997 compared to
$598,240 for the same period in 1996. Interest expense decreased $505,845 from
the same quarter of 1996 due to lower average total debt outstanding, including
convertible debentures, as a result of debt redemptions and conversions to
Common Stock during 1996 and 1997.
Net Results. The consolidated net loss for the three months ended June 30,
1997 was $2,382,772 compared to the $3,929,965 loss incurred in the three months
ended June 30, 1996. This loss reduction reflects the improved gross margin,
lower general and administrative expenses, lower selling and marketing expenses,
and lower other expenses, partially offset by the decrease in revenue and the
small increase in research and development expense as discussed in the related
topics above.
Liquidity and Capital Resources
Since inception the Company has utilized the proceeds from a number of
public and private sales of its equity and debt securities and the exercise of
options and warrants to meet its working capital requirements.
Cash and cash equivalents decreased $1,109,280 at June 30, 1997 compared to
December 31, 1996. Financing activities generated net cash of $1,654,047
principally from borrowings under financing agreements. Operating activities
used net cash of $2,548,792 principally to support the loss of $3,873,385 and
the increase of $801,801 in accounts receivable, offset in part by the
$1,274,480 increase in accounts payable and $557,350 decrease in inventory.
Capital expenditures amounted to $214,535 compared to $124,023 for the same
period in 1996. The increase is the result of an increase in demonstration
equipment necessary for the increased sales effort.
The Company's operations in the second quarter of 1997 continued to
generate losses primarily due to operating expenses remaining at a higher level
compared to the sales volume achieved and lower than expected sales in both the
Imaging and Marking businesses.
15
<PAGE>
The Company's future working capital requirements will depend upon many
factors, including the extent and timing of the Company's product sales, the
Company's operating results and the status of competitive products. The Company
anticipates that its existing working capital resources and revenues from
operations, together with the $2,333,000 in bridge financing provided in June
and July, 1997 by two stockholders of the Company and any proceeds resulting
from the possible sale of its Marking unit, and the sale or refinancing of the
Marking units headquarters facility in Albuquerque, New Mexico, will be adequate
to satisfy its working capital requirements into 1998. The Company's actual
working capital needs will depend upon numerous factors, however, including
actual expenditures and revenues generated from its operations as compared to
its business plan, none of which can be predicted with certainty, and there can
be no assurance that the Company will not require additional funding prior to
1998. If the Company's losses continue, the Company may have to obtain
sufficient funds to meet its cash requirements through strategic or other
financial transactions with compatible entities having the resources to support
its programs, the sale of assets or securities or other financing arrangements,
or it will be required to curtail its programs or seek a merger partner. Any
additional funding may be on terms which are unfavorable to the Company or
disadvantageous to existing stockholders. In addition, no assurance may be given
that the Company will be successful in raising additional funds or entering into
any such strategic or other financial transactions. Currently, the Company has
no existing commitments for any additional external short-term or long-term
financing.
In 1983, the City of Albuquerque, New Mexico issued 8% tax-exempt
industrial development revenue bonds in connection with a 25-year capital lease
of LMC's headquarters facility. The principal amount outstanding as of June 30,
1997 was $1,023,469. Pursuant to its agreement with the City of Albuquerque,
Lasertechnics is required to maintain a current ratio of at least 1 to 1. At
June 30, 1997, Lasertechnics' current ratio was 1.5 to 1 which is in compliance
with the lease terms.
Other
Inflation has not had nor is expected to have a material impact on the
operations and financial condition of the Company.
CAUTIONARY STATEMENTS
This Report includes "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, results of competitively bid contracts and other factors
disclosed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996. Moreover, the Company operates in highly competitive
industry segments, and many of the Company's competitors have significantly
greater resources than the Company. Accordingly, although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, there can be no assurance that
16
<PAGE>
such expectations will prove to be correct, and investors are cautioned not to
place undue reliance on such forward looking statements. The Company disclaims
any undertaking to update or correct any forward looking statements contained
herein to reflect events and circumstances that may occur or become known to the
Company after the date of this filing.
Because of the specialized nature of its businesses, Lasertechnics is
dependent upon the efforts of its current officers, consultants and engineers
and upon its ability to attract and retain technologically qualified personnel,
particularly engineers and software designers highly qualified in the areas of
imaging and laser technology. There is intense competition for qualified
personnel in the imaging and marking industries, including competition from
companies with substantially greater resources than Lasertechnics. Although the
Company has been successful to date in recruiting adequate numbers of qualified
personnel, there can be no assurance that Lasertechnics will be successful in
the future in recruiting or retaining personnel of the requisite scientific
caliber or in the requisite numbers to enable the Company to compete
effectively.
Nasdaq Listing
Lasertechnics' Common Stock is listed on the Nasdaq SmallCap Market, which
requires a minimum stockholders' equity of $1,000,000 and tangible assets of
$2,000,000 for continued listing. Because Lasertechnics' stockholders' equity
fell below this limit at September 30, 1995, Nasdaq temporarily put the
Company's stock on a conditional listing until a new minimum of $2,450,000 in
equity was met on December 30, 1995. This was accomplished through the
conversion of an aggregate of $1,045,342 of convertible subordinated debentures
of the Company and the issuance of Series C Convertible Preferred Stock. On
January 2, 1996, Nasdaq removed the conditional listing and lowered the
stockholders' equity requirement to $1,000,000. While management believes that
in the event of future losses the Company will be able to obtain additional
equity financing to preserve such listing, there can be no assurance that the
Company will be able to do so.
In the event the Common Stock were delisted by Nasdaq, trading, if any,
would be conducted in the over-the-counter market on the NASD's electronic
bulletin board in what are commonly referred to as the pink sheets. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. In addition,
the Common Stock would be subject to rules promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") applicable to penny stocks. The
Securities and Exchange Commission (the "Commission") has adopted regulations
that generally define a "penny stock" to be an equity security that has a market
price (as defined) or exercise price of less than $5.00 per share, subject to
certain exceptions. By virtue of being listed on the Nasdaq SmallCap Market,
the Company's Common Stock is currently exempt from the definition of "penny
stock." If, however, the Common Stock is removed from Nasdaq, the Company's
securities may become subject to the penny stock rules that impose additional
sales practice requirements on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors. Consequently, the
penny stock rules may affect the ability of broker-dealers to sell the Company's
securities and may affect the ability of purchasers in the offering to sell
their securities in the secondary market.
17
<PAGE>
Shares Eligible for Future Sale; Convertible Securities and Warrants
Future sales of Common Stock in the public market by existing stockholders,
warrantholders and holders of convertible securities could adversely affect the
market price of Lasertechnics' Common Stock. At June 30, 1997, an aggregate of
29,806,294 shares of Common Stock were freely tradable without restriction under
the Securities Act of 1933 (the "Securities Act"). In addition, up to
11,876,294 shares were eligible for resale in accordance with the manner of sale
and volume limitations of Rule 144 promulgated under the Securities Act.
Lasertechnics has reserved approximately 10,200,000 shares of Common Stock
for issuance upon the exercise of outstanding convertible securities and
warrants. Lasertechnics has also reserved 1,150,000 shares of Common Stock for
issuance to key employees, officers, directors and consultants pursuant to the
Company's benefit plans. The Company's 10% Convertible Debentures due March 1,
1999 (the "1996 Debentures"), in the original principal amount of $5,500,000,
and the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock"), in the original stated amount of $8,350,000, became or will become
convertible in full into Common Stock at various times during 1996 and 1997. As
of June 30, 1997, an aggregate of $4,150,000 principal amount of the 1996
Debentures and $5,620,000 stated amount of Series D Preferred Stock have been
converted since the issuance of such convertible securities, resulting in the
issuance of 11,379,382 shares of Common Stock in the aggregate. The conversion
price for the 1996 Debentures is equal to the lesser of (i) $2.00 or (ii) a
variable conversion rate equal to 85% of the average closing bid price for the
Common Stock for the five trading days prior to conversion (the "Variable
Conversion Rate"). The conversion price for the Series D Preferred Stock is
equal to the lesser of (i) $2.1406 or (ii) a variable conversion rate equal to
85% of the average closing bid price for the Common Stock for the ten trading
days prior to the conversion date. These variable conversion rates for the 1996
Debentures and the Series D Preferred Stock would result in substantial dilution
to the existing stockholders of the Company if converted at the current trading
price of the Company's Common Stock. This potential dilution may also adversely
affect the Company's ability to raise additional financing on favorable terms in
the future. In addition, because the conversion prices are variable,
Lasertechnics is unable to determine whether the number of shares it has
reserved or its remaining authorized shares of Common Stock will be sufficient
to satisfy all future requirements for the issuance of shares of Common Stock
upon conversion of the 1996 Debentures and Series D Preferred Stock. The
governing instruments for both the Series D Preferred and the 1996 Debentures
include substantial penalties in the event that the Company has insufficient
authorized or reserved shares to satisfy the conversion requirements of the
Series D Preferred Stock and the 1996 Debentures.
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<PAGE>
Upon receipt of the holder's notice of conversion in May 1997, $600,000
principal amount of 1996 Debentures was redeemed by the Company with (i) the
proceeds from the private placement to a single new investor of the Company's
Series B Convertible Debenture, due March 1999 in the principal amount of
$500,000 and (ii) $100,000 in proceeds from the private placement of $500,000 of
a new series of Convertible Preferred Stock Series E, $0.01 par value (the
"Series E Preferred Stock") with a single new investor. The Series E Preferred
Stock has substantially identical terms as the Series D Preferred Stock and the
Series B Convertible Debenture has substantially identical terms as the 1996
Debentures. In June 1997, $400,000 of Series D Preferred Stock was redeemed by
the Company, upon receipt of the holder's notice of conversion, with the
remaining proceeds from the sale of Series E Preferred Stock. An aggregate of
319,127 shares of the Company's Common Stock was issued in satisfaction of
accrued interest, dividends and redemption premium in connection with these
redemptions.
In July 1997, the holders of the 1996 Debentures and the Series B
Debentures and the Series D and Series E convertible preferred stock agreed to a
ninety day suspension of conversion rights of 75% of their respective holdings
beginning July 14, 1997. Thereafter, holders can exercise the suspended portion
at the rate of 20% per month cumulatively. In exchange for the suspension
agreement, the holders received warrants equal to 25% of the suspended amount at
a $1.00 strike price, and a reduction of the maximum conversion price to $1.00
for the convertible debentures and $1.14 for the convertible preferred stock,
from $2.00 and $2.1406 respectively. It is expected that the suspension
agreement with respect to the Series D and Series E Preferred Stock will be
effected by an exchange of the shares of such stock, on a one-for-one basis, for
shares of a new series of Convertible Preferred Stock, Series F, $0.01 par value
(the "Series F Preferred Stock"). The terms of the Series F Preferred Stock are
substantially identical to the terms of the Series D and Series E Preferred
Stock, except as necessary to reflect the terms of the suspension agreement
described above. Upon the issuance of the Series F Preferred Stock in such
exchange, all of the outstanding shares of Series D and Series E Preferred Stock
will be cancelled, and thereafter shall revert to the status of authorized but
unissued shares of preferred stock of no particular designation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, on February 28, 1996, an investor group filed suit
against the Company in the United States District Court for the Southern
District of New York. This lawsuit arises out of the Company's refusal to
recognize the investor group's attempt to exercise an option to purchase
1,400,000 shares of the Company's Common Stock at a price of $.495 per share.
The option had been granted to the Company's former President and CEO who
attempted to transfer his option to the investor group on the last day of the
option term in September of 1995. On that same day, the investor group attempted
to exercise the option. The Company refused to recognize the attempted transfer
of the option to the investor group on the primary grounds that the option was
granted personally to the Company's former President and CEO and was not
transferable to third-parties. The lawsuit seeks issuance and registration of
the 1,400,000 shares upon payment of the exercise price, or in the alternative,
monetary damages which the investor group alleges to be not less than
$2,800,000. On May 1, 1996 the Company moved to dismiss the complaint on the
grounds that the court in New York lacked personal jurisdiction over the
Company. The court denied the motion to dismiss by order dated June 10, 1997.
Subsequently, the Company filed an answer, denying the material allegations of
the complaint and asserting various defenses. The case is proceeding through
discovery. Plaintiffs have been granted permission to move for partial summary
judgment on the question of liability, as to whether or not the option was
assignable. The Company will oppose any such motion. The Company believes the
claim is without merit and will vigorously oppose it. During this reporting
period, there have been no material developments regarding this matter.
19
<PAGE>
ITEM 2. CHANGES IN SECURITIES.
During the period covered by this report, the Company sold the following
securities without registration under the Securities Act (other than
unregistered sales made in reliance on Regulation S):
1. 22,989 shares of Common Stock were issued in January 1997 to the
Chairman of the Board as 1996 compensation, at an aggregate value of $40,000, as
determined by the Board of Directors of the Company based on the market price of
the Common Stock on the date of grant. These shares were issued in reliance on
the exemption from registration provided by Section 4 (2) of the Securities Act,
and an appropriate restrictive legend was affixed to the certificates
representing such shares.
2. At various times throughout the six months ended June 30, 1997, an
aggregate of 1,385,349 and 4,298,896 shares of Common Stock were issued upon the
conversion of the Company's outstanding 1996 Debentures and Series D Preferred
Stock respectively, in accordance with the terms thereof. The conversion price
and related terms of the 1996 Debentures are described in Part 1 of this report,
Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Shares Eligible for Future Sale; Convertible Securities
and Warrants." These shares were issued in reliance on the exemption from
registration provided by Section 4 (2) of the Securities Act. An appropriate
restrictive legend was affixed to the certificates representing such shares,
except for shares resold by the holders thereof pursuant to the Company's
effective resale shelf Registration Statement on Form S-3.
3. In June 1997, the Company issued 50 shares of Series E Preferred
Stock, par value $0.01 per share (the "Series E Preferred Stock") to H. T.
Ardinger for an aggregate purchase price of $500,000 (the "Series E Issuance").
The Series E Preferred Stock has substantially identical terms as the Company's
Series D Preferred Stock. In connection with the Series E Issuance, the Company
redeemed certain shares of Series D Preferred Stock at a cost of $400,000. The
Series E Issuance was exempt from the registration requirements of the
Securities Act by virtue of Section 4 (2) thereof as a transaction not involving
any public offering.
4. In April 1997, a five-year warrant to purchase a total of 25,806
shares of Common Stock was issued to Wolfensohn Associates, L.P. ("Wolfensohn"),
in connection with a bridge financing provided by Wolfensohn. This warrant was
canceled in connection with the June 1997 bridge financing provided by
Wolfensohn and another stockholder of the Company. (See 5, below)
5. 239,964 shares of Common Stock, and 3-year warrants to purchase a
total of 466,000 shares of Common Stock, were issued to Wolfensohn and JPMIC in
connection with a bridge financing provided by Wolfensohn and JPMIC, pursuant to
a Note Purchase Agreement dated June 25, 1997. The terms of the bridge financing
and the exercise price and related terms of the warrants are described in
footnote 3 to the condensed financial statements of the Company included in Part
1 of this report. These securities were issued in
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reliance upon the exemption from registration provided by Section 4 (2) of the
Securities Act, and an appropriate restrictive legend was affixed to the warrant
certificate. (See 4, above)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 --Certificate of Incorporation of Lasertechnics. Incorporated
herein by reference to Exhibit 3.1 to Lasertechnics' Registration
Statement on Form S-1 (Registration No. 2-80946).
3.2 --By-laws of Lasertechnics. Incorporated herein by reference to
Exhibit 3.2 to Lasertechnics' Registration Statement on Form S-1
(Registration No. 2-80946).
3.3 --First Amendment to Certificate of Incorporation of
Lasertechnics' dated June 6, 1986. Incorporated herein by
reference to Exhibit 3.3 to Lasertechnics' Annual Report on Form
10-KSB for the year ended December 31, 1987.
3.4 --Second Amendment to Certificate of Incorporation of
Lasertechnics, dated May 27, 1987. Incorporated herein by
reference to Exhibit 3.4 to Lasertechnics' Annual Report on Form
10-KSB for the year ended December 31, 1987.
3.5 --Third Amendment to Certificate of Incorporation of
Lasertechnics, dated November 11, 1994. Incorporated herein by
reference to Exhibit 4.4 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
3.6 --Fourth Amendment to Certificate of Incorporation of
Lasertechnics, dated July 28, 1995. Incorporated herein by
reference to Exhibit 4.5 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
3.7 --Fifth Amendment to Certificate of Incorporation of
Lasertechnics, dated June 17, 1996. Incorporated herein by
reference to Exhibit 4.6 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
4.1 --Certificate of Designation of Lasertechnics Series A, B and C
Preferred Stock, dated December 27, 1995. Incorporated herein by
reference to Exhibit 4.7 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
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4.2 --Certificate of Designation of Lasertechnics Series D Preferred
Stock. Incorporated herein by reference to Exhibit 4.1 to
Lasertechnics' Quarterly Report on Form 10-QSB for the period
ended June 30, 1996.
4.3 --Certificate of Designation of Lasertechnics Series E Preferred
Stock.*
4.4 --Certificate of Designation of Lasertechnics Series F Preferred
Stock and Certificate of Correction.*
10.1 --License agreement, dated June 30, 1988, between Lasertechnics
and Patlex Corporation. Incorporated herein by reference to
Exhibit 10.17 to Lasertechnics' Annual Report on Form 10-KSB for
the year ended December 31, 1988.
10.2 --Employment agreement dated August 31, 1989, between Louis F.
Bieck, Jr. and Lasertechnics, Inc. as amended. Incorporated
herein by reference to Exhibit 10.17 Lasertechnics' Form 10-KSB
for the year ended December 31, 1990.
10.3 --1991 Incentive Stock Option Plan, dated August 14, 1991.
Incorporated herein by reference to Exhibit 10.10 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1991.
10.4 --Purchase Agreement between Sandia Europe and Jean-Luc
Poutchnine, Alain Quilleau and Philippe Bonnevie, dated March 4,
1994. Incorporated herein by reference to Exhibit 10.15 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.5 --Letter confirming sale of shares of Lasertechnics Common Stock
to Singapore Precision Industries PTE LTD, dated May 12, 1994.
Incorporated herein by reference to Exhibit 10.16 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.6 --Contract Manufacturing Agreement between Sandia and Singapore
Precision Industries PTE LTD, dated May 13, 1994. Incorporated
herein by reference to Exhibit 10.17 to Lasertechnics' Annual
Report on Form 10-KSB for the year ended December 31, 1994.
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<PAGE>
10.7 --Advisory and investment banking services agreement between
Lasertechnics and Wolfensohn International, Inc., dated May 19,
1993. Incorporated herein by reference to Exhibit 10.18 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.8 --Purchase of Common Stock and Convertible Note Agreement
between Lasertechnics and J.P. Morgan Investment Corporation,
dated July 8, 1994. Incorporated herein by reference to Exhibit
10.19 to Lasertechnics' Annual Report on Form 10-KSB for the year
ended December 31, 1994.
10.9 --OEM License Agreement between Sandia and Xerox Corporation,
dated January 6, 1995. Incorporated herein by reference to
Exhibit 10.20 to Lasertechnics' Annual Report on Form 10-KSB for
the year ended December 31, 1994.
10.10 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 19, 1994. Incorporated herein by
reference to Exhibit 10.21 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.11 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 31, 1994. Incorporated herein by
reference to Exhibit 10.22 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.12 --Amendment to the OEM License Agreement between Sandia and
Xerox Corporation, dated December 27, 1996. Incorporated herein
by reference to Exhibit 10.12 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1996.
10.13 --Demand Promissory Note issued to Wolfensohn Associates L.P.,
dated March 27, 1997.
10.14 --Warrant to purchase shares of Lasertechnics Common Stock issued
to Wolfensohn Associates L.P., dated March 27, 1997.
10.15 --Note Purchase Agreement, dated June 25, 1997, by and among
Lasertechnics, J.P. Morgan Investment Corporation and Wolfensohn
Associates, L.P.*
______________
*Filed herewith.
(b) Reports on Form 8-K
None
23
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LASERTECHNICS, INC.
Dated: August 14, 1997 By: /s/ RICHARD C. E. MORGAN
--- ----------------------------
Richard C. E. Morgan
Chairman of the Board &
Chief Executive Officer
Date: August 14, 1997 By: /s/ E.A. MILO MATTORANO
--- ----------------------------
E.A. Milo Mattorano
Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT 4.3
CERTIFICATE OF DESIGNATION OF
SERIES E PREFERRED STOCK
OF
LASERTECHNICS, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is
Lasertechnics, Inc. a Delaware corporation.
2. The certificate of incorporation of the Company authorizes the
issuance of 7,000,000 shares of preferred stock, $.01 value per share, and
expressly vests in the Board of Directors of the Company the authority provided
therein to issue any or all of said shares in one or more series and by
resolution or resolutions to establish the designation and number and to fix the
relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series E issue of Preferred Stock:
RESOLVED, that 50 of the 7,000,000 authorized shares of Preferred Stock of
the Company shall be designated Series E Preferred Stock, $.01 par value per
share, and shall possess the rights and preferences set forth below:
Section 1. Designation and Amount. The shares of such series shall
----------------------
have a par value of $.01 per share and shall be designated as Series E Preferred
Stock (the "Series E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be 50. The Series E Preferred Stock shall be
offered at a purchase price of $10,000 per share (the "Original Series E Issue
Price"), with an 8% per annum accretion rate as set forth herein.
Section 2. Rank. The Series E Preferred Stock shall rank: (i)
----
junior to any other class or series of capital stock of the Company hereafter
created specifically ranking by its terms senior to the Series E Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.01 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series E
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with the Series A Preferred Stock of
the Company, par value $.01 per share (the "Series A Preferred Stock"), the
Series B Preferred Stock of the Company, par value $.01 per share (the "Series B
Preferred Stock"), the Series C Preferred
-1-
<PAGE>
Stock of the Company, par value $.01 per share (the "Series C Preferred Stock"),
the Series D Preferred Stock of the Company, par value $.01 per share (the
"Series D Preferred Stock") and any class or series of capital stock of the
Company hereafter created specifically ranking by its terms on parity with the
Series E Preferred Stock ("Parity Securities") in each case as to distributions
of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary (all such distributions being referred to collectively
as "Distributions").
Section 3. Dividends. The Series E Preferred Stock will bear no
---------
dividends, and the holders of the Series E Preferred Stock ("Holders") shall not
be entitled to receive dividends on the Series E Preferred Stock.
Section 4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company ("Liquidation Event"), either voluntary or involuntary, the Holders of
shares of Series E Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities but in parity with any
distribution to Parity Securities, an amount per share equal to the sum of (i)
the Original Series E Issue Price for each outstanding share of Series E
Preferred Stock and (ii) an amount equal to 8% of the Original Series E Issue
Price per annum for the period that has passed since May 18, 1997 (such amount
being referred to herein as the "Premium"). If upon the occurrence of such
event, and after payment in full of the preferential amounts with respect to the
Senior Securities, the assets and funds available to be distributed among the
Holders of the Series E Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Series E Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders of the
Series E Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which any person
or entity acquires more than 50% of the voting power of the Company (a "Change
of Control") shall be deemed to be a Liquidation Event as defined in Section
4(a); provided further that (i) a consolidation, merger, acquisition, or other
business combination of the Company with or into any other publicly traded
company or companies shall not be treated as a Liquidation Event as defined in
Section 4(a), but instead shall be treated pursuant to Section 5(e)(iii) hereof,
and (ii) a consolidation, merger, acquisition, or other business combination
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<PAGE>
of the Company with or into any other non-publicly traded company or companies
shall be treated as a Liquidation Event as defined in Section 4(a). The Company
shall not effect any transaction described in subsection 4(c)(ii) unless it
first gives 30 business days prior notice of such transaction (during which time
the Holder shall be entitled to convert its shares of Series E Preferred Stock
into Common Stock). For purposes of this Section 4(c), the public offering, sale
or distribution of shares of stock of the Company's Sandia Imaging Systems Corp.
subsidiary or its Lasertechnics Marking Corporation subsidiary (but not both),
or the sale or other disposition of substantially all the assets of one (but not
both) of such subsidiaries, shall not constitute a Liquidation Event.
(d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a Liquidation
Event, the cash distributions required by Section 4(a) or Section 6 have not
been made, the Company shall either: (i) cause such closing to be postponed
until such cash distributions have been made, or (ii) cancel such transaction,
in which event the rights of the Holders of Series E Preferred Stock shall be
the same as existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of this Series D
----------
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Subject to the Company's right of redemption
set forth in Section 6(a), and on the terms and subject to the conditions set
forth in this Certificate of Designation, each record Holder of Series E
Preferred Stock shall be entitled to convert the shares of Series E Preferred
Stock held by such Holder, in whole at any time and in part from time to time,
into that number of fully-paid and non-assessable shares of Common Stock of the
Company calculated in accordance with the following formula (the "Conversion
Rate"):
Number of shares issued upon conversion of one share of Series E Preferred
Stock =
(.08) (N/365) (10,000) + 10,000
-------------------------------
Conversion Price
where,
. N = the number of days between (i) May 18, 1997, and (ii) the applicable
Date of Conversion (as defined in Section 5(c)(iv) below) for the shares of
Series E Preferred Stock for which conversion is being elected, and
. Conversion Price = the lesser of (x) $2.1406 (the "Fixed Conversion
Price"), and (y) 85% of the average Closing Bid Price, as defined below, of
the Company's Common Stock for the ten trading days immediately preceding
the Date of Conversion, as defined below (the "Variable Conversion Price");
and
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. Closing Bid Price = (x) the closing bid price of the Common Stock on The
Nasdaq Stock Market, including the Nasdaq Small Cap Market or the Nasdaq
National Market, as applicable, or (y) if the Common Stock is then listed
for trading on any national securities exchange, the closing bid price of
the Common Stock on the principal such exchange on which the Common Stock
is then so listed, or (z) if the Common Stock is not then listed on Nasdaq
or any national securities exchange, the closing bid price of the Common
Stock as quoted by the National Quotation Bureau Incorporated; provided,
--------
however, that if for any day the Closing Bid Price of a share of Common
-------
Stock is not determinable by any of the foregoing means, then the Closing
Bid Price for such day shall be determined in good faith by the Board of
Directors of the Company on the basis of such quotations and other
considerations as such Board then determines to be appropriate, taking into
account all relevant circumstances.
(b) Mechanics of Conversion. In order to convert Series E Preferred
Stock into full shares of Common Stock, the Holder shall (i) fax to the Company
at the office of the Company or its designated transfer agent, if any (the
"Transfer Agent"), for the Series E Preferred Stock, on or prior to 3:00 p.m.,
New York City time (the "Conversion Notice Deadline") on the date of conversion,
a copy of a fully executed notice of conversion ("Notice of Conversion"), which
notice shall state that it is a notice of conversion relating to the Series E
Preferred Stock and shall specify the date of conversion, the number of shares
of Series E Preferred Stock to be converted, the applicable conversion price and
a calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the front page of each certificate to be
converted) and (ii) surrender to a common courier for delivery to the office of
the Company or such Transfer Agent (if any) the original certificates
representing the Series E Preferred Stock being converted (the "Preferred Stock
Certificates"), duly endorsed for transfer; provided, however, that the Company
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless either the Preferred Stock
Certificates are delivered to the Company or such Transfer Agent (if any) as
provided above, or the Holder notifies the Company or such Transfer Agent (if
any) that such certificates have been lost, stolen or destroyed (subject to the
requirements of subparagraph (i) below). Upon receipt by the Company of a
facsimile copy of a Notice of Conversion, the Company shall immediately send,
via facsimile, a confirmation of receipt of the Notice of Conversion to Holder
which shall specify that the Notice of Conversion has been received and the name
and telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and shall submit
the disputed calculations to its outside accountant via facsimile within three
days of receipt of Holder's Notice of Conversion. The Company shall cause such
accountant to perform the calculations and notify Company and Holder of the
results no later than forty-eight hours from the time it receives the disputed
calculations. Such accountant's calculation shall be deemed conclusive absent
manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing
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shares of Series E Preferred Stock, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the Preferred Stock Certificate(s), if
mutilated, the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, Company shall not be obligated
to re-issue such lost or stolen Preferred Stock Certificates if Holder
contemporaneously requests Company to convert such Series E Preferred Stock into
Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The Transfer
Agent (if any) or the Company (as applicable) shall use its best efforts to, no
later than the close of business on the second business day and in no event
later than the third business day (the "Deadline") after receipt by the Company
or the Transfer Agent (if any) of a facsimile copy of a Notice of Conversion and
receipt by the Company or the Transfer Agent (if any) of all necessary
documentation duly executed and in proper form required for conversion,
including the original Preferred Stock Certificates to be converted (or after
provision for security or indemnification in the case of lost or destroyed
certificates, if required), issue and surrender to a common courier for either
overnight or (if delivery is outside the United States) two-day delivery to the
Holder at the address of the Holder as shown on the stock records of the Company
a certificate for the number of shares of Common Stock to which the Holder shall
be entitled as aforesaid.
(iii) No Fractional Shares. A single whole share of Series E
Preferred Stock may be converted only in whole and not in part. If any
conversion of the Series E Preferred Stock would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon conversion, in the aggregate, shall be the next lower number of
shares.
(iv) Date of Conversion. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before 3:00 p.m., New York City time, on the
Date of Conversion, and (ii) that the original Preferred Stock Certificates
representing the shares of Series E Preferred Stock to be converted are
surrendered by depositing such certificates with a common courier, for delivery
to the Company or Transfer Agent (if any) as provided above, as soon as
practicable after the Date of Conversion. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record Holder or Holders of such shares of
Common Stock on the Date of Conversion.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series E Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all
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<PAGE>
then outstanding Series E Preferred Stock; and if at any time the number of
authorized but unissued of Series E Preferred Stock, the Company will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(d) Automatic Conversion. Each share of Series E Preferred Stock
outstanding on July 29, 1999, automatically shall be converted into Common Stock
on such date at the Conversion Rate then in effect (calculated in accordance
with the formula in Section 5(a) above), and such date shall be the Date of
Conversion with respect to such conversion.
(e) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Price Due to Stock Split,
Stock Dividend, Etc. If, prior to the conversion of all of the Series E
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Fixed Conversion
Price shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Fixed Conversion Price shall be proportionately
increased.
(ii) Adjustment to Variable Conversion Price. If, at any time
when any shares of the Series E Preferred Stock are issued and outstanding, the
number of outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any conversion of the Series E Preferred Stock, then the Variable
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all five trading days immediately preceding the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc. If, prior to
the conversion of all Series E Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets or there is a
Change of Control not deemed to be a liquidation pursuant to section 4(c), then
the Holders of Series E Preferred Stock shall thereafter have the right to
receive upon conversion of Series E Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities and/or
other assets which the Holder would have been entitled to receive in such
transaction had the Series E Preferred Stock been converted immediately prior to
such transaction, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Series E Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for the adjustment of the Conversion Price and of the number of
shares issuable upon conversion of the Series E Preferred
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<PAGE>
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities thereafter deliverable upon the exercise hereof. The
Company shall not effect any transaction described in this subsection 5(3)(iii)
unless (a) it first gives 30 business days prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event (during which time the Holder shall be entitled to convert its
shares of Series E Preferred Stock into Common Stock) and (b) the resulting
successor or acquiring entry (if not the Company) assumes by written instrument
the obligations of the Company under this Certificate of Designation including
this subsection 5(e)(iii).
(iv) No Fractional Shares. If any adjustment under this Section
5(e) would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be the next
lower number of shares.
Section 6. Redemption by Company.
---------------------
(a) Company's Right to Redeem Upon Receipt of Notice of Conversion.
If the Conversion Price of the Company's Common Stock is less than the Fixed
Conversion Price (as defined in Section 5(a)), at the time of receipt of a
Notice of Conversion pursuant to Section 5, the Company shall have the right, in
its sole discretion, to redeem in whole or in part any Series E Preferred Stock
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to
redeem some, but not all, of the Series E Preferred Stock submitted for
conversion, the Company shall redeem from among the Series E Preferred Stock
submitted by the various shareholders for conversion on the applicable date, a
pro-rata amount from each such Holder so submitting Series E Preferred Stock for
conversion.
(i) Redemption Price Upon Receipt of a Notice of Conversion.
The redemption price per share of Series E Preferred Stock under this Section
6(a) shall be calculated in accordance with the following formula ("Redemption
Rate"):
[[(.08)(N/365)(10,000)] + 10,000] X Closing Bid Price on Date of Conversion
---------------------------------------
Conversion Price
where,
"N", "Date of Conversion", "Closing Bid Price" and "Conversion Price" shall
have the same meanings as defined in Section 5.
(ii) Mechanics of Redemption Upon Receipt of Notice of
Conversion. The Company shall effect each such redemption by giving notice of
its election to redeem, by facsimile, by 5:00 p.m. New York City time the next
business day following receipt of a Notice of Conversion from a Holder, and the
Company shall provide a copy of such redemption notice by overnight or
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<PAGE>
two-day courier, to (A) the Holder of the Series E Preferred Stock submitted for
conversion at the address and facsimile number of such Holder appearing in the
Company's register for the Series E Preferred Stock and (B) the Company's
Transfer Agent. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series E Preferred Stock submitted for conversion and
the applicable redemption price.
(b) Company's Rights to Redeem at its Election. The Company shall have
the right, in its sole discretion, to redeem ("Redemption at Company's
Election"), in whole at any time, or in part from time to time, any or all of
the Series E Preferred Stock; provided (i) that the Company shall first provide
30 business days advance written notice as provided in subparagraph 6(b)(ii)
below, and (ii) that, in the case of any partial redemption, the Company shall
only be entitled to redeem Series E Preferred Stock having an aggregate Stated
Value (as defined below) of at least $1,000,000. If the Company elects to
redeem some, but not all, of the Series E Preferred Stock, the Company shall
redeem a pro-rata amount from each Holder of the Series E Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption
Price At Company's Election" shall be calculated as a percentage of Stated
Value, as that term is defined below, of the Series E Preferred Stock redeemed
pursuant to this Section 6(b), which percentage shall vary depending on the date
of Redemption at Company's Election (as defined below), and shall be determined
as follows:
Date of Notice of Redemption at Company's Election % of Stated Value
-------------------------------------------------- -----------------
On or before January 29, 1998 130%
January 30, 1998, to July 29, 1998 125%
July 30, 1998, to January 30, 1999 120%
January 30, 1999, to July 29, 1999 115%
For purposes hereof, "Stated Value" shall mean the Original Series E Issue
Price (as defined in Section 4(a)) of the shares of Series E Preferred Stock
being redeemed pursuant to this Section 6(b), together with the accreted but
unpaid Premium (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The Company
shall effect each such redemption by giving at least 30 business days prior
written notice ("Notice of Redemption At Company's Election") to (A) the Holders
of the Series E Preferred Stock selected for redemption, at the address and
facsimile number of such Holder appearing in the Company's Series E Preferred
Stock register and (B) the Transfer Agent, which Notice of Redemption At
Company's Election shall be deemed to have been delivered three business days
after the Company's mailing (by overnight or two-day courier, with a copy by
facsimile) of such Notice of Redemption At Company's Election. Such Notice of
Redemption At Company's Election shall indicate (i) the number of shares of
Series E Preferred Stock that have been selected for redemption, (ii) the date
which such redemption is to become effective (the "Date of Redemption At
Company's Election") and (iii) the applicable Redemption Price At Company's
Election, as defined in subsection (b)(i)
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<PAGE>
above. Notwithstanding the above, Holder may convert into Common Stock pursuant
to Section 5, prior to the close of business on the Date of Redemption at
Company's Election, any Series E Preferred Stock which it is otherwise entitled
to convert, including Series E Preferred Stock that has been selected for
redemption at Company's election pursuant to this subsection 6(b); provided,
however, that the Company shall still be entitled to exercise its right to
redeem upon receipt of a Notice of Conversion pursuant to section 6(a).
(c) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure under Sections 6(a) and 6(b) unless it has:
(i) the full amount of the redemption price in cash, available in a
demand or other immediately available account in a bank or similar financial
institution; or
(ii) immediately available credit facilities, in the full amount of
the redemption price with a bank or similar financial institution; or
(iii) an agreement with a standby underwriter willing to purchase
from the Company a sufficient number of shares of stock to provide proceeds
necessary to redeem any stock that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the redemption price.
If the foregoing conditions of this Section 6(c) are satisfied and Company
complies with Section 6(d) hereof, then any shares of Series E Preferred Stock
called for by a Redemption at Company's Election shall cease to be outstanding
for all purposes hereunder (including the right to convert or to accrete
additional Premium or to exercise any other right or privilege hereunder) on the
Date of Redemption at Company's Election and shall instead represent the right
to receive the Redemption Price at Company's Election without interest from and
after the Date of Redemption at Company's Election.
(d) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed under this
Section 6 shall send their Series E Preferred Stock Certificates so redeemed to
the Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five business days after the Date of
Redemption at Company's Election. The Company shall not be obligated to deliver
the redemption price unless the Preferred Stock Certificates so redeemed are
delivered to the Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, unless the Holder
has complied with Section 5(c)(i).
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<PAGE>
(ii) If Company elects to redeem pursuant to Section 6(a) hereof,
and Company fails to pay Holder the redemption price within the time frame as
required by this Section 6(d), then Company shall issue shares of Common Stock
to any such Holder who has submitted a Notice of Conversion in compliance with
Section 5(c) hereof. The shares to be issued to Holder pursuant to this
provision shall be the number of shares determined using a Conversion Price (as
defined in Section 6 hereof) that equals the lesser of (i) the Conversion Price
on the date Holder sends its Notice of Conversion to Company or Transfer Agent
via facsimile or (ii) the Conversion Price on the date the Transfer Agent issues
Common Stock pursuant to this Section 6(d)(ii).
(e) Blackout Period. Notwithstanding the foregoing, the Company may
not either send out a redemption notice or effect a redemption pursuant to
Section 6(b) above during a Blackout Period (defined as a period during which
the Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten days after the Company shall have given the Holder written notice that the
Blackout Period has been lifted.
Section 7. Advance Notice of Redemption.
----------------------------
(a) Holder's Right to Elect to Receive Notice of Cash Redemption by
the Company. Holder shall have the right to require Company to provide advance
notice stating whether the Company will elect to redeem Holder's shares of
Series E Preferred Stock in cash, pursuant to the Company's redemption rights
discussed in Section 6(a).
(b) Mechanics of Holder's Election Notice. Holder shall send notice
("Election Notice") to the Company and such other persons as the Company may
designate via facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise its right of conversion (pursuant to
Section 5) whether Company would elect to redeem a specific number of shares of
Holder's Series E Preferred Stock for cash in lieu of issuing Common Stock.
Company is required to disclose to Holder what action Company would take over
the subsequent 20 business day period, including the date of such Election
Notice, as further discussed in subsection 7(c).
(c) Company's Response. Upon receipt by the Company of a facsimile
copy of an Election Notice, Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to Holder, which shall specify
that the Election Notice has been received and the name and telephone number of
a contact person at the Company whom the Holder should contact regarding
information related to the requested advance notice. Thereafter, the Company
must respond by the close of business on the next business day following receipt
of Holder's Election Notice (1) via facsimile and (2) by depositing such
response with an overnight or two-day courier. The Company's response must state
whether it would redeem the shares, in whole or in part, or allow conversion
into shares of Common Stock without redemption. If Company does not respond to
Holder within one business day via facsimile and overnight or two-day courier,
Company shall be required to issue to Holder Common Stock upon Holder's
conversion within the subsequent 20
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<PAGE>
business day period of Holder's Election Notice. However, if the Company's
Common Stock price decreases so that under the Conversion Rate Company would be
required to issue more than an additional ten percent of shares of Common Stock
than Holder was entitled to receive at the time Holder sent Company its Election
Notice, then Company shall no longer be bound to convert Holder's Preferred
Stock into Common Stock but may elect to redeem for cash.
Section 8. Voting Rights. The Holders of the Series E Preferred Stock
-------------
shall have no voting power whatsoever, except as otherwise provided by the
corporation law of the State of Delaware Law ("Delaware Law"), and no Holder of
Series E Preferred Stock shall vote or otherwise participate in any proceeding
in which actions shall be taken by the Company or the shareholders thereof or be
entitled to notification as to any meeting of the shareholders.
Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company. In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten days prior to
the record date specified therein, of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under Delaware Law the vote of the Holders of the Series
E Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of shares of the Series E Preferred Stock represented at a
duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series E Preferred Stock (except as otherwise may be
required under Delaware Law) shall constitute the approval of such action by the
class. To the extent that under Delaware Law the Holders of the Series E
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one class, each share of Series E Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock into
which it is then convertible using the record date for the taking of such vote
of stockholders as the date as of which the Conversion Price is calculated.
Holders of the Series E Preferred Stock also shall be entitled to notice of all
shareholder meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's by-
laws and applicable statutes.
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Section 9. Protective Provision. So long as shares of Series D
--------------------
Preferred Stock and Series E Preferred Stock are outstanding, the Company shall
not:
(a) alter or change the rights, preferences or privileges of the
Series D Preferred Stock, the Series E Preferred Stock or any Senior Securities
so as to affect adversely the Series E Preferred Stock, unless such alteration
or change applies equally (on a pro rata basis) to the Series D Preferred Stock;
(b) create any new class or series of stock having a preference over
the Series E Preferred Stock with respect to Distributions (as defined in
Section 2 above), unless such new class or series of stock has an equivalent
preference over the Series D Preferred Stock;
(c) increase the size of the authorized number of shares of Series D
Preferred Stock or increase the size of the authorized number of shares of
Series E Preferred; or
(d) do any act or thing not authorized or contemplated by this
Certificate of Designation with respect to the Series E Preferred Stock which
would result in taxation of the holders of shares of the Series E Preferred
Stock under Section 305 of the Internal Revenue Code of 1986, as amended (or any
comparable provision of the Internal Revenue Code as hereafter from time to time
amended), unless such act or thing is done on the same basis with respect to the
Series D Preferred Stock.
If, pursuant to subsection (a) above, the Company alters or changes the
rights, preferences or privileges of the shares of the Series D Preferred Stock,
the Series E Preferred Stock or any Senior Securities so as to affect adversely
the Series E Preferred Stock, then the Company will deliver notice of such
approved change to the Holders of the Series E Preferred Stock that did not
agree to such alteration or change (the "Dissenting Holders") and the Dissenting
Holders shall have the right for a period of 30 business days to convert
pursuant to the terms of this Certificate of Designation as they exist prior to
such alteration or change, or continue to hold their shares of Series E
Preferred Stock.
Section 10. Status of Converted or Redeemed Stock. In the event any
--------------------------------------
shares of Series E Preferred Stock shall be converted or redeemed pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred Stock
of no designated series, and shall not be issuable by the Company as Series E
Preferred Stock.
Section 11. Preference Rights. Nothing contained herein shall be
-----------------
construed to prevent the Board of Directors of the Company from issuing one (1)
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to or on parity with the dividend and liquidation preferences of the
Series E Preferred Stock.
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Signed on July __, 1997
/s/ E.A. Milo Mattorano
------------------------------------------
E.A. Milo Mattorano, Vice President & CFO
Attest:
/s/ E.A. Milo Mattorano
- --------------------------------------
E.A. Milo Mattorano, Secretary
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EXHIBIT 4.4
CERTIFICATE OF DESIGNATION OF
SERIES F PREFERRED STOCK
OF
LASERTECHNICS, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is
Lasertechnics, Inc. a Delaware corporation.
2. The certificate of incorporation of the Company authorizes the
issuance of Seven Million (7,000,000) shares of preferred stock, $.01 value per
share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue any or all of said shares in one or more
series and by resolution or resolutions to establish the designation and number
and to fix the relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series F issue of Preferred Stock:
RESOLVED, that NINE HUNDRED (900) of the Seven Million (7,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series F
Preferred Stock, $.01 par value per share, and shall possess the rights and
preferences set forth below:
Section 1. Designation and Amount. The shares of such series shall
----------------------
have a par value of $.01 per share and shall be designated as Series F Preferred
Stock (the "Series F Preferred Stock") and the number of shares constituting the
Series F Preferred Stock shall be NINE HUNDRED (900). The Series F Preferred
Stock shall have a stated value of Ten Thousand Dollars ($10,000) per share (the
"Original Series F Issue Price"), with an eight percent (8%) per annum accretion
rate as set forth herein. The Series F Preferred Stock shall be issued by the
Company only (i) in exchange for an equal number of outstanding shares of Series
D Preferred Stock or Series E Preferred Stock or (ii) for cash, in a transaction
the proceeds of which are used by the Company to fund the redemption or
repurchase of shares of Series D Preferred Stock or Series E Preferred Stock.
Section 2. Rank. The Series F Preferred Stock shall rank: (i)
----
junior to any other class or series of capital stock of the Company hereafter
created specifically ranking by its terms senior to the Series F Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.01 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior
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<PAGE>
to or on parity with any Series F Preferred Stock of whatever subdivision
(collectively, with the Common Stock, "Junior Securities"); and (iv) on parity
with the Series A Preferred Stock of the Company, par value $.01 per share (the
"Series A Preferred Stock"), the Series B Preferred Stock of the Company, par
value $.01 per share (the "Series B Preferred Stock"), the Series C Preferred
Stock of the Company, par value $.01 per share (the "Series C Preferred Stock"),
the Series D Preferred Stock of the Company, par value $.01 per share (the
"Series D Preferred Stock"), the Series E Preferred Stock of the Company, par
value $.01 per share (the "Series E Preferred Stock") and any class or series of
capital stock of the Company hereafter created specifically ranking by its terms
on parity with the Series F Preferred Stock ("Parity Securities") in each case
as to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
Section 3. Dividends. The Series F Preferred Stock will bear no
---------
dividends, and the holders of the Series F Preferred Stock ("Holders") shall not
be entitled to receive dividends on the Series F Preferred Stock.
Section 4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company ("Liquidation Event"), either voluntary or involuntary, the Holders of
shares of Series F Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities but in parity with any
distribution to Parity Securities, an amount for each share of Series F
Preferred Stock then outstanding equal to the sum of (i) the Original Series F
Issue Price and (ii) an amount equal to eight percent (8%) of the Original
Series F Issue Price per annum for the period that has passed since the date
(the "Initial Funding Date") that, in connection with the consummation of the
original issuance and sale of shares of Series D Preferred Stock by the Company,
the escrow agent first had in its possession funds representing full payment for
the share of Series D Preferred Stock delivered in exchange for such share of
Series F Preferred Stock (such amount being referred to herein as the
"Premium"). If upon the occurrence of such event, and after payment in full of
the preferential amounts with respect to the Senior Securities, the assets and
funds available to be distributed among the Holders of the Series F Preferred
Stock and Parity Securities shall be insufficient to permit the payment to such
Holders of the full preferential amounts due to the Holders of the Series F
Preferred Stock and the Parity Securities, respectively, then the entire assets
and funds of the Company legally available for distribution shall be distributed
among the Holders of the Series F Preferred Stock and the Parity Securities, pro
rata, based on the respective liquidation amounts to which each such series of
stock is entitled by the Company's Certificate of Incorporation and any
certificate(s) of designation relating thereto. Notwithstanding the foregoing,
for all purposes hereof, including without limitation calculating the Premium:
in the case of any share of Series F Preferred Stock issued in exchange for a
share of Series E Preferred Stock, the Initial Funding Date should be May 18,
1997; and in the case of any share of Series F Preferred Stock issued for cash
pursuant to clause (ii) of Section 1 hereof, the Initial Funding Date shall be
the date on which such share was purchased and paid for by the original holder
thereof.
-2-
<PAGE>
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which any person
or entity acquires more than fifty percent (50%) of the voting power of the
Company (a "Change of Control") shall be deemed to be a Liquidation Event as
defined in Section 4(a); provided further that (i) a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
publicly traded company or companies shall not be treated as a Liquidation Event
as defined in Section 4(a), but instead shall be treated pursuant to Section
5(e)(iii) hereof, and (ii) a consolidation, merger, acquisition, or other
business combination of the Company with or into any other non-publicly traded
company or companies shall be treated as a Liquidation Event as defined in
Section 4(a). The Company shall not effect any transaction described in
subsection 4(c)(ii) unless it first gives thirty (30) business days prior notice
of such transaction (during which time the Holder shall be entitled to convert
its shares of Series F Preferred Stock into Common Stock). For purposes of this
Section 4(c), the public offering, sale or distribution of shares of stock (or
assets) of the Company's Sandia Imaging Systems Corp. subsidiary or the
Lasertechnics Marking Corporation subsidiary (but not both) shall not be deemed
to be a Liquidation Event.
(d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a Liquidation
Event, the cash distributions required by Section 4(a) or Section 6 have not
been made, the Company shall either: (i) cause such closing to be postponed
until such cash distributions have been made, or (ii) cancel such transaction,
in which event the rights of the Holders of Series F Preferred Stock shall be
the same as existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of this Series F
----------
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Subject to the Company's right of redemption
set forth in Section 6(a) and to the limitations set forth in Section 5(f), and
on the terms and subject to the conditions set forth in this Certificate of
Designation, each record Holder of Series F Preferred Stock shall be entitled to
convert the shares of Series F Preferred Stock held by such Holder, in whole at
any time and in part from time to time, into that number of fully-paid and non-
assessable shares of Common Stock of the Company calculated in accordance with
the following formula (the "Conversion Rate"):
Number of shares issued upon conversion of one share of Series F Preferred
Stock =
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<PAGE>
(.08) (N/365) (10,000) + 10,000
-------------------------------
Conversion Price
where,
. N = the number of days between (i) the Initial Funding Date for the
shares of Series F Preferred Stock for which conversion is being elected,
and (ii) the applicable Date of Conversion (as defined in Section 5(c)(iv)
below) for the shares of Series F Preferred Stock for which conversion is
being elected, and
. Conversion Price = the lesser of (x) $1.1406 (the "Fixed Conversion
Price"), or (y) X% of the average Closing Bid Price, as that term is
defined below, of the Company's Common Stock for the ten (10) trading days
immediately preceding the Date of Conversion, as defined below (the
"Variable Conversion Price"), where X is determined as follows:
No. of Days Between Last
Closing Date and Date of Conversion X =
----------------------------------- ---
60 - 119 90%
120- 179 87.5%
180(+) 85%
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the Nasdaq Small Cap Market, or if no longer traded on the Nasdaq
Small Cap Market, the closing bid price on the principal national securities
exchange or the National Market System on which the Common Stock is so traded
and if not available, the mean of the high and low prices on the principal
national securities exchange or the National Market System on which the Common
Stock is so traded. The term "Last Closing Date" means July 29, 1996.
(b) Mechanics of Conversion. In order to convert Series F Preferred
Stock into full shares of Common Stock, the Holder shall (i) fax, on or prior to
8:00 p.m., New York City time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Company at the office of the Company or its designated
transfer agent (the "Transfer Agent") for the Series F Preferred Stock stating
that the Holder elects to convert, which notice shall specify the date of
conversion, the number of shares of Series F Preferred Stock to be converted,
the applicable conversion price and a calculation of the number of shares of
Common Stock issuable upon such conversion (together with a copy of the front
page of each certificate to be converted) and (ii) surrender to a common courier
for delivery to the office of the Company or the Transfer Agent the original
certificates representing the Series F Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed for transfer; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the Preferred
Stock Certificates are delivered to the Company or its Transfer Agent as
provided above, or the Holder notifies the Company or its Transfer Agent that
such certificates have been lost, stolen or destroyed
-4-
<PAGE>
(subject to the requirements of subparagraph (i) below). Upon receipt by Company
of a facsimile copy of a Notice of Conversion, Company shall immediately send,
via facsimile, a confirmation of receipt of the Notice of Conversion to Holder
which shall specify that the Notice of Conversion has been received and the name
and telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and shall submit
the disputed calculations to its outside accountant via facsimile within three
(3) days of receipt of Holder's Notice of Conversion. The Company shall cause
the accountant to perform the calculations and notify Company and Holder of the
results no later than forty-eight (48) hours from the time it receives the
disputed calculations. Accountant's calculation shall be deemed conclusive
absent manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series F Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Company, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Company shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, Company shall
not be obligated to re-issue such lost or stolen Preferred Stock Certificates if
Holder contemporaneously requests Company to convert such Series F Preferred
Stock into Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The Transfer
Agent or the Company (as applicable) shall use its best efforts to, no later
than the close of business on the second (2nd) business day and in no event
later than the third (3rd) business day (the "Deadline") after receipt by the
Company or the Transfer Agent of a facsimile copy of a Notice of Conversion and
receipt by Company or the Transfer Agent of all necessary documentation duly
executed and in proper form required for conversion, including the original
Preferred Stock Certificates to be converted (or after provision for security or
indemnification in the case of lost or destroyed certificates, if required),
issue and surrender to a common courier for either overnight or (if delivery is
outside the United States) two-day delivery to the Holder at the address of the
Holder as shown on the stock records of the Company a certificate for the number
of shares of Common Stock to which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the Series F
Preferred Stock would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon conversion,
in the aggregate, shall be the next lower number of shares.
(iv) Date of Conversion. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before 8:00 p.m., New York City time, on the
Date of Conversion, and (ii) that the original Preferred Stock Certificates
representing the shares of Series F Preferred Stock to be converted are
surrendered by depositing
-5-
<PAGE>
such certificates with a common courier, for delivery to the Company or the
Transfer Agent as provided above, as soon as practicable after the Date of
Conversion. The person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
Holder or Holders of such shares of Common Stock on the Date of Conversion.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series F Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
Series F Preferred Stock; and if at any time the number of authorized but
unissued of Series F Preferred Stock, the Company will take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
(d) Automatic Conversion. Each share of Series F Preferred Stock
outstanding on the date which is three (3) years after the Last Closing Date
automatically shall be converted into Common Stock on such date at the
Conversion Rate then in effect (calculated in accordance with the formula in
Section 5(a) above), and the date which is three (3) years after the Last
Closing Date shall be deemed the Date of Conversion with respect to such
conversion.
(e) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Price Due to Stock Split,
Stock Dividend, Etc. If, prior to the conversion of all of the Series F
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Fixed Conversion
Price shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Fixed Conversion Price shall be proportionately
increased.
(ii) Adjustment to Variable Conversion Price. If, at any time
when any shares of the Series F Preferred Stock are issued and outstanding, the
number of outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any conversion of the Series F Preferred Stock, then the Variable
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all five (5) trading days immediately preceding the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc. If, prior to
the conversion of all Series F Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the company shall
be changed into the same or a different number of shares of
-6-
<PAGE>
the same or another class or classes of stock or securities of the Company or
another entity or there is a sale of all or substantially all the Company's
assets or there is a Change of Control not deemed to be a liquidation pursuant
to section 4(c), then the Holders of Series F Preferred Stock shall thereafter
have the right to receive upon conversion of Series F Preferred Stock, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities and/or other assets which the Holder would have been entitled
to receive in such transaction had the Series F Preferred Stock been converted
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holders
of the Series F Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Series F
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection
5(3)(iii) unless (a) it first gives thirty (30) business days prior notice of
such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holder shall be
entitled to convert its shares of Series F Preferred Stock into Common Stock)
and (b) the resulting successor or acquiring entry (if not the Company) assumes
by written instrument the obligations of the Company under this Certificate of
Designation including this subsection 5(e)(iii).
(iv) No Fractional Shares. If any adjustment under this Section
5(e) would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be the next
lower number of shares.
(f) Standstill. Anything contained herein to the contrary
notwithstanding, during the period from and including July 14, 1997, to and
including February 13, 1998 (the "Standstill Period"), no record Holder of
Series F Preferred Stock shall be entitled to convert any shares of Series F
Preferred Stock held by such Holder, except to the extent that the aggregate
number of shares of Series F Preferred Stock converted by such Holder (or
redeemed by the Company in lieu of conversion) during the Standstill Period does
not, during the period indicated below, exceed the applicable aggregate
percentage set forth below of the number of shares of Series F Preferred Stock
held by such Holder on the first day of the Standstill Period:
Portion of Standstill Period Aggregate Percentage
---------------------------- --------------------
From and including July 14, 1997,
to and including October 13, 1997................... 25%
From and including October 14, 1997,
to and including November 13, 1997.................. 40%
From and including November 14, 1997,
to and including December 13, 1997.................. 55%
-7-
<PAGE>
From and including December 14, 1997,
to and including January 13, 1998................... 70%
From and including January 14, 1998,
to and including February 13, 1998.................. 85%
From and after February 14, 1998...................... 100%
For purposes of this Section 5(f), any Holder (a "Transferee") that acquires
shares of Series F Preferred Stock during the Standstill Period directly or
indirectly from another Holder (the "Transferor") that held such shares at the
beginning of the Standstill Period, shall only be entitled to convert such
shares to the extent that the aggregate number of such shares converted by such
Transferee (or redeemed by the Company in lieu of conversion) during the
remainder of the Standstill Period does not at any time exceed the product of
(x) the applicable percentage set forth above times (y) the percentage of the
-----
Transferor's shares of Series F Preferred Stock held at the beginning of the
Standstill Period that had not been converted (or redeemed by the Company in
lieu of Conversion) at the time of the transfer to the Transferee.
Section 6. Redemption by Company.
---------------------
(a) Company's Right to Redeem Upon Receipt of Notice of Conversion.
If the Conversion Price of the Company's Common Stock is less than the Fixed
Conversion Price (as defined in Section 5(a)), at the time of receipt of a
Notice of Conversion pursuant to Section 5, the Company shall have the right, in
its sole discretion, to redeem in whole or in part any Series F Preferred Stock
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to
redeem some, but not all, of the Series F Preferred Stock submitted for
conversion, the Company shall redeem from among the Series F Preferred Stock
submitted by the various shareholders for conversion on the applicable date, a
pro-rata amount from each such Holder so submitting Series F Preferred Stock for
conversion.
(i) Redemption Price Upon Receipt of a Notice of Conversion.
The redemption price per share of Series F Preferred Stock under this Section
6(a) shall be calculated in accordance with the following formula ("Redemption
Rate"):
[[(.08)(N/365)(10,000)] + 10,000] X Closing Bid Price on Date of Conversion
---------------------------------------
Conversion Price
where,
"N", "Date of Conversion", "Closing Bid Price" and "Conversion Price" shall
have the same meanings as defined in Section 5.
-8-
<PAGE>
(ii) Mechanics of Redemption Upon Receipt of Notice of
Conversion. The Company shall effect each such redemption by giving notice of
its election to redeem, by facsimile, by 5:00 p.m. New York City time the next
business day following receipt of a Notice of Conversion from a Holder, and the
Company shall provide a copy of such redemption notice by overnight or two-day
courier, to (A) the Holder of the Series F Preferred Stock submitted for
conversion at the address and facsimile number of such Holder appearing in the
Company's register for the Series F Preferred Stock and (B) the Company's
Transfer Agent. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series F Preferred Stock submitted for conversion and
the applicable redemption price.
(b) Company's Rights to Redeem at its Election. At any time,
commencing twelve months and one day after the Last Closing Date, the Company
shall have the right, in its sole discretion, to redeem ("Redemption at
Company's Election"), from time to time, any or all of the Series F Preferred
Stock; provided (i) Company shall first provide thirty (30) business days
advance written notice as provided in subparagraph 6(b)(ii) below (which can be
given beginning thirty (30) business days prior to the date which is twelve
months and one day after the Last Closing Date), and (ii) that, in the case of
any partial redemption, the Company shall only be entitled to redeem Series F
Preferred Stock having an aggregate Stated Value (as defined below) of at least
One Million Dollars ($1,000,000). If the Company elects to redeem some, but not
all, of the Series F Preferred Stock, the Company shall redeem a pro-rata amount
from each Holder of the Series F Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption
Price At Company's Election" shall be calculated as a percentage of Stated
Value, as that term is defined below, of the Series F Preferred Stock redeemed
pursuant to this Section 6(b), which percentage shall vary depending on the date
of Redemption at Company's Election (as defined below), and shall be determined
as follows:
Date of Notice of Redemption at Company's Election % of Stated Value
- -------------------------------------------------- -----------------
12 months and 1 day to 18 months following Last Closing Date 130%
18 months and 1 day to 24 months following Last Closing Date 125%
24 months and 1 day to 30 months following Last Closing Date 120%
30 months and 1 day to 36 months following Last Closing Date 115%
For purposes hereof, "Stated Value" shall mean the Original Series F Issue
Price (as defined in Section 1) of the shares of Series F Preferred Stock being
redeemed pursuant to this Section 6(b), together with the accreted but unpaid
Premium (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The Company
shall effect each such redemption by giving at least thirty (30) business days
prior written notice ("Notice of Redemption At Company's Election") to (A) the
Holders of the Series F Preferred Stock selected for redemption, at the address
and facsimile number of such Holder appearing in the
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<PAGE>
Company's Series F Preferred Stock register and (B) the Transfer Agent, which
Notice of Redemption At Company's Election shall be deemed to have been
delivered three (3) business days after the Company's mailing (by overnight or
two-day courier, with a copy by facsimile) of such Notice of Redemption At
Company's Election. Such Notice of Redemption At Company's Election shall
indicate (i) the number of shares of Series F Preferred Stock that have been
selected for redemption, (ii) the date which such redemption is to become
effective (the "Date of Redemption At Company's Election") and (iii) the
applicable Redemption Price At Company's Election, as defined in subsection
(b)(i) above. Notwithstanding the above, Holder may convert into Common Stock
pursuant to Section 5, prior to the close of business on the Date of Redemption
at Company's Election, any Series F Preferred Stock which it is otherwise
entitled to convert, including Series F Preferred Stock that has been selected
for redemption at Company's election pursuant to this subsection 6(b); provided,
however, that the Company shall still be entitled to exercise its right to
redeem upon receipt of a Notice of Conversion pursuant to section 6(a).
(c) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure under Sections 6(a) and 6(b) unless it has:
(i) the full amount of the redemption price in cash, available
in a demand or other immediately available account in a bank or similar
financial institution; or
(ii) immediately available credit facilities, in the full amount
of the redemption price with a bank or similar financial institution; or
(iii) an agreement with a standby underwriter willing to purchase
from the Company a sufficient number of shares of stock to provide proceeds
necessary to redeem any stock that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the redemption price.
If the foregoing conditions of this Section 6(c) are satisfied and Company
complies with Section 6(d) hereof, then any shares of Series F Preferred Stock
called for by a Redemption at Company's Election shall cease to be outstanding
for all purposes hereunder (including the right to convert or to accrete
additional Premium or to exercise any other right or privilege hereunder) on the
Date of Redemption at Company's Election and shall instead represent the right
to receive the Redemption Price at Company's Election without interest from and
after the Date of Redemption at Company's Election.
(d) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed under
this Section 6 shall send their Series F Preferred Stock Certificates so
redeemed to the Company or its
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<PAGE>
Transfer Agent, and the Company shall pay the applicable redemption price to
that Holder within five (5) business days of the Date of Redemption at Company's
Election. The Company shall not be obligated to deliver the redemption price
unless the Preferred Stock Certificates so redeemed are delivered to the Company
or its Transfer Agent, or, in the event one (1) or more certificates have been
lost, stolen, mutilated or destroyed, unless the Holder has complied with
Section 5(c)(i).
(ii) If Company elects to redeem pursuant to Section 6(a)
hereof, and Company fails to pay Holder the redemption price within the time
frame as required by this Section 6(d), then Company shall issue shares of
Common Stock to any such Holder who has submitted a Notice of Conversion in
compliance with Section 5(c) hereof. The shares to be issued to Holder pursuant
to this provision shall be the number of shares determined using a Conversion
Price (as defined in Section 6 hereof) that equals the lesser of (i) the
Conversion Price on the date Holder sends its Notice of Conversion to Company or
Transfer Agent via facsimile or (ii) the Conversion Price on the date the
Transfer Agent issues Common Stock pursuant to this Section 6(d)(ii).
(e) Blackout Period. Notwithstanding the foregoing, the Company may
not either send out a redemption notice or effect a redemption pursuant to
Section 6(b) above during a Blackout Period (defined as a period during which
the Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten (10) days after the Company shall have given the Holder written notice that
the Blackout Period has been lifted.
Section 7. Advance Notice of Redemption.
----------------------------
(a) Holder's Right to Elect to Receive Notice of Cash Redemption by
the Company. Holder shall have the right to require Company to provide advance
notice stating whether the Company will elect to redeem Holder's shares of
Series F Preferred Stock in cash, pursuant to the Company's redemption rights
discussed in Section 6(a).
(b) Mechanics of Holder's Election Notice. Holder shall send notice
("Election Notice") to the Company and such other person(s) as the Company may
designate via facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise his, her or its right of conversion
(pursuant to Section 5) whether Company would elect to redeem a specific number
of shares of Holder's Series F Preferred Stock for cash in lieu of issuing
Common Stock. Company is required to disclose to Holder what action Company
would take over the subsequent twenty (20) business day period, including the
date of such Election Notice, as further discussed in subsection 7(c).
(c) Company's Response. Upon receipt by the Company of a facsimile
copy of an Election Notice, Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to Holder, which shall specify
that the Election Notice has been received and the name and telephone number of
a contact person at the Company whom the Holder should contact
-11-
<PAGE>
regarding information related to the requested advance notice. Thereafter, the
Company must respond by the close of business on the next business day following
receipt of Holder's Election Notice (1) via facsimile and (2) by depositing such
response with an overnight or two-day courier. The Company's response must state
whether it would redeem the shares, in whole or in part, or allow conversion
into shares of Common Stock without redemption. If Company does not respond to
Holder within one (1) business day via facsimile and overnight or two-day
courier, Company shall be required to issue to Holder Common Stock upon Holder's
conversion within the subsequent twenty (20) business day period of Holder's
Election Notice. However, if the Company's Common Stock price decreases so that
under the Conversion Rate Company would be required to issue more than an
additional ten percent (10%) of shares of Common Stock than Holder was entitled
to receive at the time Holder sent Company its Election Notice, then Company
shall no longer be bound to convert Holder's Preferred Stock into Common Stock
but may elect to redeem for cash.
Section 8. Voting Rights. The Holders of the Series F Preferred Stock
-------------
shall have no voting power whatsoever, except as otherwise provided by the
corporation law of the State of Delaware Law ("Delaware Law"), and no Holder of
Series F Preferred Stock shall vote or otherwise participate in any proceeding
in which actions shall be taken by the Company or the shareholders thereof or be
entitled to notification as to any meeting of the shareholders.
Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company. In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten (10) days prior
to the record date specified therein, of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under Delaware Law the vote of the Holders of the Series
F Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of shares of the Series F Preferred Stock represented at a
duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series F Preferred Stock (except as otherwise may be
required under Delaware Law) shall constitute the approval of such action by the
class. To the extent that under Delaware Law the Holders of the Series F
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one (1) class, each share of Series F Preferred Stock shall
be entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible using the record date for the taking of such
vote of stockholders as the date as
-12-
<PAGE>
of which the Conversion Price is calculated. Holders of the Series F Preferred
Stock also shall be entitled to notice of all shareholder meetings or written
consents with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Company's by-laws and applicable statutes.
Section 9. Prospective Provision. So long as shares of Series F
---------------------
Preferred Stock are outstanding, the Company shall not without first obtaining
the approval (by vote or written consent, as provided by Delaware Law) of the
Holders of at least seventy-five (75%) of the then outstanding shares of Series
F Preferred Stock, and at least seventy-five (75%) of the then outstanding
Holders:
(a) alter or change the rights, preferences or privileges of the
Series F Preferred Stock or any Senior Securities so as to affect adversely the
Series F Preferred Stock; provided, however, that no such change may be approved
at any time on or prior to the fortieth (40th) day following the Last Closing
Date unless such change is unanimously approved by all Holders;
(b) create any new class or series of stock having a preference over
the Series F Preferred Stock with respect to Distributions (as defined in
Section 2 above) or increase the size of the authorized number of Series F
Preferred; or
(c) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series F Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event Holders of at least seventy-five percent (75%) of the then
outstanding shares of Series F Preferred Stock and at least seventy-five percent
(75%) of the then outstanding Holders agree to allow the Company to alter or
change the rights, preferences or privileges of the shares of Series F Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series F Preferred
Stock, then the Company will deliver notice of such approved change to the
Holders of the Series F Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) business days to convert pursuant to the terms of
this Certificate of Designation as they exist prior to such alteration or change
(notwithstanding the provisions of Section 5(f) hereof), or continue to hold
their shares of Series F Preferred Stock provided, however, that the Dissenting
Holders may not convert anytime on or before the fortieth (40th) day following
the Last Closing Date.
Section 10. Status of Converted or Redeemed Stock. In the event any
--------------------------------------
shares of Series F Preferred Stock shall be converted or redeemed pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred Stock
of no designated series, and shall not be issuable by the Company as Series F
Preferred Stock.
-13-
<PAGE>
Section 11. Preference Rights. Nothing contained herein shall be
-----------------
construed to prevent the Board of Directors of the Company from issuing one or
more series of Preferred Stock with dividend and/or liquidation preferences
junior to or on parity with the dividend and liquidation preferences of the
Series F Preferred Stock.
Signed on July 30, 1997
/s/ E.A. Milo Mattorano
-----------------------------------------
E.A. Milo Mattorano, Vice President & CFO
Attest:
/s/ E.A. Milo Mattorano
- ------------------------------
E.A. Milo Mattorano, Secretary
-14-
<PAGE>
EXHIBIT 4.4
(Continued)
CERTIFICATE OF CORRECTION
Filed pursuant to Section 103(f)
of the Delaware General Corporation Law
with respect to the
CERTIFICATE OF DESIGNATION
OF
SERIES F PREFERRED STOCK
OF
LASERTECHNICS, INC.
WHEREAS, on August 1, 1997, Lasertechnics, Inc. (the "Company") filed with
the Secretary of State of the State of Delaware a Certificate of Designation of
Series F Preferred Stock of the Company (the "Certificate of Designation");
WHEREAS, no shares of the Company's Series F Preferred Stock are issued and
outstanding; and
WHEREAS, the last sentence of Section 5(f) of the Certificate of
Designation inaccurately reflects the corporate action taken with respect to the
subject matter thereof and should be deleted, and in its place four sentences
should be inserted at the end of such Section 5(f).
NOW, THEREFORE, the Certificate of Designation is hereby corrected in
accordance with the provisions of Section 103(f) of the Delaware General
Corporation Law as follows:
The last sentence of Section 5(f) of the Certificate of Designation
which currently reads as follows:
"For purposes of this Section 5(f), any Holder (a "Transferee") that
acquires shares of Series F Preferred Stock during the Standstill Period
directly or indirectly from another Holder (the "Transferor") that held
such shares at the beginning of the Standstill Period, shall only be
entitled to convert such shares to the extent that the aggregate number of
such shares converted by such Transferee (or redeemed by the Company in
lieu of conversion) during the remainder of the Standstill Period does not
at any time exceed the product of (x) the applicable percentage set forth
above times (y) the percentage of the Transferor's shares of Series F
-----
Preferred Stock held at the beginning of the Standstill Period that had not
been converted (or redeemed by the Company in lieu of Conversion) at the
time of the transfer to the Transferee."
shall be deleted from the Certificate of Designation and the following four last
sentences to
<PAGE>
Section 5(f) shall be substituted in its place:
"For all purposes of this Section 5(f) any Holder (a "Transferee") that
acquires shares of Series F Preferred Stock during the Standstill Period
from another Holder (the "Transferor") in any single transaction (the
"Transfer") shall be deemed (i) to have held at the beginning of the
Standstill Period a number of shares of Series F Preferred Stock equal to
the product of (x) the number of shares of Series F Preferred Stock held by
the Transferor at the beginning of the Standstill Period times (y) the
Acquired Percentage; and (ii) to have converted (or have had redeemed by
the Company in lieu of conversion) during the period from the beginning of
the Standstill Period through the date of such Transfer a number of shares
of Series F Preferred Stock equal to the product of (x) the number of
shares of Series F Preferred Stock converted by such Transferor (or
redeemed by the Company in lieu of conversion) from the beginning of the
Standstill Period through the date of such Transfer times (y) the Acquired
Percentage. As used in this paragraph, the term "Acquired Percentage" means
the percentage that the total number of shares of Series F Preferred Stock
acquired by the Transferee from the Transferor in such Transfer bears to
the total number of shares of Series F Preferred Stock held by the
Transferor immediately before giving effect to such Transfer. Upon any
Transfer, for all purposes of this Section 5(f), the Transferor shall be
deemed (i) to have held at the beginning of the Standstill Period a number
of shares of Series F Preferred Stock equal to the product of (x) the
number of shares of Series F Preferred Stock held by the Transferor at the
beginning of the Standstill Period times (y) the difference between 100%
and the Acquired Percentage; and (ii) to have converted (or have had
redeemed by the Company in lieu of conversion) during the period from the
beginning of the Standstill Period through the date of such Transfer a
number of shares of Series F Preferred Stock equal to the product of (x)
the number of shares of Series F Preferred Stock converted by such
Transferor (or redeemed by the Company in lieu of conversion) from the
beginning of the Standstill Period through the date of such Transfer times
(y) the difference between 100% and the Acquired Percentage. In the event
of successive Transfers, this paragraph will be applied successively.
Notwithstanding anything herein to the contrary, if at any time during
the Standstill Period the Company shall, in breach of its obligations
hereunder, fail to convert (or to redeem in lieu of conversion) any shares
of Series F Preferred Stock held of record by the Holder thereof and
properly presented for conversion by the Holder pursuant to this Section 5
(and which the Holder is entitled to convert pursuant to this Section
5(f)), then, upon written notice by the Holder to the Company given
pursuant to this paragraph (and without limiting any other rights or
remedies of the Holder in respect of such failure to convert), so long as
such default by the Company shall continue, the provisions of this Section
5(f) shall not apply to the Holder."
2
<PAGE>
Executed on the date set forth below by the undersigned duly authorized
officer of the Company.
Date: August 8, 1997 /s/ E.A. Milo Mattorano
_______________________________
Name: E.A. Milo Mattorano
Title: Vice President and CFO
Attest:
/s/ E.A. Milo Mattorano
- --------------------------
Name: E.A. Milo Mattorano
Title: Secretary
3
<PAGE>
EXHIBIT 10.15
LASERTECHNICS, INC.
3208 Commander Drive
Carrollton, Texas 75006
June 25, 1997
Wolfensohn Partners L.P. ("WPLP")
590 Madison Avenue, 32nd Floor
New York, New York 10022
J.P. Morgan Investment Corporation ("JPMIC")
60 Wall Street
New York, New York 10260
Note Purchase Agreement
-----------------------
Dear Sirs:
This letter sets forth the terms and conditions on which
Lasertechnics, Inc., a Delaware corporation (the "Company"), is issuing and
selling to each of WPLP and JPMIC (each, a "Purchaser") on the date hereof: (a)
a Senior Promissory Note of the Company in substantially the form attached
hereto as Exhibit A (each, a "Note"); (b) the number of shares (the "Restricted
Shares") of Common Stock, $.01 par value (the "Common Stock"), of the Company
determined as set forth in paragraph 2, below; and (c) a warrant in
substantially the form attached hereto as Exhibit B (each, a "Warrant") to
purchase the number of shares (the "Warrant Shares") of Common Stock determined
as set forth in paragraph 3, below.
1. Senior Promissory Notes.
-----------------------
(a) General. The Senior Promissory Notes shall represent and evidence
-------
the indebtedness of the Company to the Purchasers for advances made by the
Purchasers to the Company from time to time thereunder ("Advances"), including
without limitation the unpaid principal amount of, and accrued interest on, all
Advances, and any additional amounts that may be owed by the Company to the
Purchasers in respect thereof. Advances shall be made from time to time in cash,
or by the cancellation and exchange of other existing indebtedness, as the
Company may request; provided, however, that (i) the Purchasers shall not be
-------- -------
obligated to make any Advances in excess of the initial Advances made by each
Purchaser on the date hereof, (ii) the Purchasers shall not be entitled to make
any Advances, or to purchase any Notes or Warrants hereunder, unless requested
by the Company, and (iii) except as provided in paragraph 1(c), below, any
Advances made by the Purchasers hereunder shall be made 60% by WPLP and 40% by
JPMIC, unless both WPLP and JPMIC agree to a different ratio. The rights and
obligations of WPLP and JPMIC hereunder are several and independent,
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 2 of 10
and nothing herein shall be construed to constitute either WPLP or JPMIC as the
agent, representative, partner, joint venturer or fiduciary of the other.
(b) Interest Rate. The Base Interest Rate for all Advances by WPLP
-------------
under its Note shall be 10.00% per annum. The Base Interest Rate for all
Advances by JPMIC under its Note shall be 6.64% per annum.
(c) Prior Advance by WPLP. Concurrently with the purchase and sale of
---------------------
the Notes hereunder (the "Initial Closing"), the Company and WPLP have agreed to
convert certain prior advances by WPLP to the Company in the aggregate principal
amount of $1,000,000 (the "Prior Advances") into Advances under the Notes.
Accordingly, at the Initial Closing: (i) the Prior Advances shall be recorded
with appropriate notations on the Notes; (ii) all promissory notes representing
the Prior Advances, and all common stock warrants issued by the Company to WPLP
in respect of the Prior Advances, shall be canceled and surrendered to the
Company against receipt of the securities issued to WPLP hereunder; and (iii)
the indebtedness of the Company to WPLP represented by the Prior Advances shall
constitute an Advance by WPLP to the Company under the Notes in the aggregate
principal amount of the Prior Advances, for all purposes hereof.
2. Restricted Shares. Upon the making of each Advance under the
-----------------
Notes, the Company shall issue to each Purchaser 45.714 Restricted Shares for
each $1,000 principal amount of such Advance.
3. Common Stock Warrants. Upon the making of each Advance under the
---------------------
Notes, the Company shall issue to each Purchaser a Warrant representing the
right to purchase 200 Warrant Shares for each $1,000 principal amount of such
Advance, at an exercise price of $.70 per share. Each Warrant shall be
exercisable for a period of three years from the date of issuance.
4. Allocation of Purchase Price. The amount of each Advance
----------------------------
hereunder shall be allocated as purchase price among the Notes (or, in the case
of any Advance following the Initial Closing, the increase in the principal
amount of the Notes), the Restricted Shares and the Warrants being purchased by
each Purchaser hereunder in such manner as such Purchaser shall reasonably
determine with the Company's consent, which consent shall not unreasonably be
withheld or delayed; provided, however, that the portion of such purchase price
-------- -------
allocated to such Restricted Shares shall not in any event be less than the par
value per share of the Common Stock at the time of such Advance multiplied by
the number of such shares.
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 3 of 10
5. Loan Fee. In consideration for work performed in connection with
--------
structuring, arranging for and providing the financings contemplated hereby,
upon the making of each Advance under the Notes, the Company shall pay to each
Purchaser a loan fee (the "Loan Fee") in the amount of 4% of the principal
amount of such Advance, payable in shares of Common Stock, valued at $.70 per
share (the "Loan Fee Shares").
6. Pledge of Subsidiary Stock.
--------------------------
(a) The obligations of the Company under the Notes, including
without limitation the principal amount of, and accrued interest on,
all Advances, shall be ratably secured by the pledge and collateral
assignment of, and the grant of a security interest in, all the issued
and outstanding shares (the "Pledged Shares") of capital stock of
Lasertechnics Marking Corporation, a wholly-owned subsidiary of the
Company (the "Stock Pledge"). The Stock Pledge shall be on such terms
as are reasonable and customary for transactions such as the
transactions contemplated hereby. Prior to the occurrence of an event
of default under the Notes, the Purchasers shall not have any rights
with respect to the voting or disposition of any shares of such
subsidiary capital stock so pledged.
(b) Concurrently, with the execution and delivery of this
Agreement, the Company is delivering to JPMIC, as collateral agent
for the benefit of the holders of the Notes, ratably in proportion to
the respective aggregate unpaid principal amounts thereof (the
"Collateral Agent"), certificates representing the Pledged Shares,
together with stock powers in customary form. The Company hereby
pledges the Pledged Shares to the Collateral Agent, and grants to the
Collateral Agent a security interest therein, to secure the full and
timely payment and performance of all obligations of the Company under
the Notes, in accordance with paragraph 6(a), above, effective at the
Initial Closing. The parties shall use their respective best
commercially reasonable efforts to negotiate, execute and deliver a
definitive pledge agreement, in customary and reasonable form, to
further document the Stock Pledge on terms and conditions consistent
with the terms and conditions set forth herein (the "Pledge
Agreement"), and upon the effectiveness of the Pledge Agreement, the
terms of the Pledge Agreement shall amend and supersede any contrary
provisions of this paragraph 6(b).
7. Late Payment. In the event the Company fails to repay the entire
------------
principal amount of, and accrued interest on, all Advances by 3:00 p.m., New
York City time, on the Final Maturity Date, the Company shall issue to each
Purchaser the following additional consideration as a late payment fee:
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 4 of 10
(a) that number of shares of Common Stock equal to (i) the
aggregate unpaid principal amount of all Advances outstanding on the
Final Maturity Date, times (ii) 1%, divided by (iii) the average
----- ------- --
closing price per share of the Common Stock for the 10 trading days
immediately preceding the Final Maturity Date, as reported in the Wall
Street Journal (or, if not so reported, as determined in good faith by
a majority of the disinterested members of the Board of Directors of
the Company) (such average, the "Current Market Price"); and
(b) a Warrant to purchase that number of shares of Common Stock
equal to (i) the aggregate unpaid principal amount of all Advances
outstanding on the Final Maturity Date, times (ii) 5%, divided by
----- ------- --
(iii) the Current Market Price on the Final Maturity Date; such
warrant to be exercisable for a period of three years commencing on
the Final Maturity Date, at an exercise price per share equal to the
Current Market Price on the Final Maturity Date.
The provision of this paragraph 7 will be subject to appropriate
adjustments in the event of any stock split, reverse stock split, or similar
transaction affecting the Common Stock between the date hereof and the Final
Maturity Date.
8. Securities Act Legend. The securities issued pursuant to this
---------------------
Agreement, including the Notes, the Restricted Shares, the Warrants, the Loan
Fee Shares, and any additional shares of Common Stock and Warrants issued
pursuant to paragraph 7 hereof, will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"). Certificates representing the
Restricted Shares, shares of Common Stock issued upon exercise of Warrants, and
shares of Common Stock issued in payment of the Loan Fee or pursuant to
paragraph 7(a) shall bear a restrictive legend substantially to the effect of
the following:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS, NOR THE
SECURITIES LAWS OF ANY OTHER JURISDICTION. THEY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THOSE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION THEREFROM."
9. Right to Exchange Notes. Each Purchaser shall have the non-
-----------------------
assignable right, exercisable upon 30 days' prior written notice to the Company
given at any time after September 1, 1997, to exchange the unpaid principal
amount of the Advances of such Purchaser, in whole or in part, for an equal
principal amount of convertible debentures of the Company
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 5 of 10
having substantially the same economic terms and conditions as the Company's
existing 10% convertible debentures due March 1, 1999 (or any other convertible
debt security issued to refinance, or in substitution or exchange for, such
convertible debentures), as such terms and conditions shall be in effect at the
time of any exchange pursuant to this paragraph 9.
10. Representations and Warranties by the Company. The Company
---------------------------------------------
hereby represents and warrants to each Purchaser as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Notes, the Warrants and the Pledge
Agreement.
(b) The execution and delivery by the Company of this Agreement, the
Notes, the Warrants and the Pledge Agreement, and the performance by the
Company of its obligations hereunder and thereunder, have been duly
authorized by all requisite corporate action on the part of the Company and
will not (i) violate any provision of law, statute, rule or regulation or
any order of any court or other agency of government, (ii) conflict with or
violate the Certificate of Incorporation or By-Laws of the Company, in each
case as amended to the date hereof, or (iii) violate, conflict with or
constitute (with due notice or lapse of time or both) a default under any
indenture, mortgage, lease, license, agreement or other contract or
instrument or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon the properties or assets of the
Company or any of its subsidiaries (other than the lien of the Stock Pledge
granted hereunder and under the Pledge Agreement), in each case if such
violation, conflict, default, lien, charge or encumbrance would have a
material adverse effect on the Company.
(c) This Agreement, the Notes and the Warrants have been duly executed
and delivered by the Company and constitute, and the Pledge Agreement when
duly executed and delivered will constitute, the valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except to the extent the enforceability thereof may be limited by
applicable bankruptcy, moratorium or similar laws affecting the rights of
creditors generally.
(d) Based in part upon the representations and warranties of each
Purchaser contained in this Agreement, no registration or filing with, or
consent or approval of, or other action by, any federal, state or other
governmental department, commission, board, bureau, agency or
instrumentality or any third party is or will be necessary for (a) the
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 6 of 10
Company's execution and delivery of this Agreement, the Notes and the
Warrants, and the Company's performance of its obligations hereunder and
thereunder.
(e) Attached hereto as Schedule 10(e) are (i) a memorandum dated June
19, 1997, from the Company's subsidiary Sandia Imaging Systems Corporation,
stating that division's outstanding accounts receivable, firm orders and
verbal orders as of June 18, 1997, and (ii) a letter dated June 20, 1997,
from the Company's subsidiary Lasertechnics Marking Corporation, stating
that division's outstanding accounts receivable and firm orders as of June
18, 1997. Such memorandum and letter, and the attachments thereto, were
prepared by the Company in good faith and are believed by the Company to be
accurate. The accounts receivable reflected therein represent valid
accounts for goods sold and/or services performed in the conduct of the
Company's business.
(f) The Restricted Shares and the Loan Fee Shares issued to such
Purchaser hereunder are, and the Warrant Shares, when issued upon the
exercise of such Purchaser's Warrant in accordance with the terms hereof
will be, duly authorized, validly issued, fully paid and non-assessable,
and are not subject to any pre-emptive rights.
(g) The Company is the record holder and beneficial owner of the
Pledged Shares and owns the Pledged Shares free and clear of all liens
and encumbrances, other than the lien of the Stock Pledge created hereunder
and under the Pledge Agreement.
11. Representations and Warranties of Each Purchaser. Each Purchaser
------------------------------------------------
hereby severally represents and warrants to the Company as follows:
(a) Such Purchaser is acquiring the Note, the Warrant and the
Restricted Shares to be purchased by it hereunder, and the Loan Fee Shares
issued to it pursuant to paragraph 5 hereof (collectively, the "Acquired
Securities"), and, if such Purchaser acquires Warrant Shares upon the
exercise of such Warrant, such Purchaser will be acquiring such Warrant
Shares, for its own account, for investment and not with a view to the
distribution thereof within the meaning of the Securities Act.
(b) Such Purchaser understands that the Acquired Securities have not
been, and the Warrant Shares will not be, registered under the Act, by
reason of their issuance by the Company in transactions exempt from the
registration requirements of the Act, and that such Acquired Securities and
Warrant Shares must be held by such Purchaser indefinitely unless a
subsequent disposition thereof is registered under the Act or is exempt
from such registration.
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 7 of 10
(c) Such Purchaser further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Act depends on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
(d) Such Purchaser understands that its investments hereunder involve
substantial risks and represents and warrants that it has made such
independent examination and investigation of the Company as it has deemed
necessary in making its investment decision.
(e) Such Purchaser is able to bear the economic risk of the
investments contemplated by this Agreement and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment contemplated by this
Agreement.
12. Miscellaneous. (a) This Agreement, the Notes and the Warrants
-------------
constitute our entire agreement with respect to the subject matter hereof, and
this Agreement may not be modified or amended or any provision hereof waived
except by an instrument in writing signed by the Company and each Purchaser.
(b) This Agreement, the Notes and the Warrants shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. The rights of each Purchaser hereunder shall be
assignable to any holder of the Notes, provided that the right of each Purchaser
--------
under paragraph 9 above to exchange Notes for Convertible Debentures shall not
be assignable to any person without the prior written consent of the Company.
Except as provided in the immediately preceding sentence, this Agreement and the
rights of the Purchasers hereunder shall not be assignable and any purported
assignment thereof shall be void.
(c) This Agreement may be executed in any number of counterparts and
on separate counterparts, each of which shall be an original instrument, but all
of which together shall constitute a single agreement. One or more signature
pages from any counterpart of this Agreement may be attached to any other
counterpart of this Agreement without in any way changing the effect thereof.
This Agreement shall be effective as to each Purchaser, severally, when executed
and delivered by the Company and such Purchaser.
(d) All notices, requests, demands, consents, waivers, or other
communications made hereunder or under the Notes or the Warrants to any party or
holder thereof shall be in writing and shall be deemed to have been duly given
if delivered personally or
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 8 of 10
sent by nationally-recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below:
if to the Company, to:
Lasertechnics, Inc.
3208 Commander Drive
Carrollton, TX 75006
Attention: Chief Financial Officer
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Marc A. Leaf, Esq.
if to a Purchaser, to such Purchaser at its address first set
forth above,
or to such other address as the party to whom such communication is to be given
may have furnished to the other party in writing in accordance herewith. All
such notices, requests, demands, consents, waivers or other communications shall
be deemed to have been delivered (i) in the case of personal delivery, on the
date of delivery, (ii) if sent by overnight courier, on the next business day
following the date when send and (iii) in the case of mailing, on the third
business day following such mailing.
(e) All representations, warranties and agreements contained herein
and in the Notes and the Warrants shall survive the execution and delivery of
this Agreement and the sale of the Notes and the Warrants hereunder.
(f) Nothing contained herein shall be construed to prohibit either
Purchaser from selling or otherwise disposing of any Acquired Securities
acquired by such Purchaser hereunder; provided that such sale or disposition,
--------
and any and all related offers, are made in compliance with the Securities Act,
any other applicable securities and blue sky laws, and all applicable rules and
regulations thereunder.
<PAGE>
Lasertechnics, Inc.
Note Purchase Agreement, dated June 25, 1997
Page 9 of 10
(g) THIS AGREEMENT AND ALL RIGHTS, OBLIGATIONS AND LIABILITIES
HEREUNDER SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN. Any judicial
proceeding brought against the Company to enforce, or otherwise in connection
with, this Agreement may be brought in any court of competent jurisdiction in
the City of New York, and, by execution and delivery of this Agreement, the
Company (i) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this Agreement and (ii) irrevocably waives any objection it may now or hereafter
have as to the venue of any such proceeding brought in such a court or that such
a court is an inconvenient forum.
<PAGE>
If the foregoing correctly sets forth your understanding of our
agreement, please so indicate by signing and returning to the Company the
enclosed counterpart of this Agreement.
Very truly yours,
LASERTECHNICS, INC.
/s/ E.A. MILO MATTORANO
------------------------------
Name: E.A. Milo Mattorano
Title: Vice President & CFO
Each of the undersigned agrees with and
accepts the foregoing terms and provisions
as of the date first above written.
WOLFENSOHN PARTNERS L.P.
/s/ RICHARD C.E. MORGAN
--------------------------------
Name: Richard C.E. Morgan
Title: Partner
J.P. MORGAN INVESTMENT CORPORATION
/s/ ROBERT E. KISS
-----------------------------
Name: Robert E. Kiss
Title: Vice President
<PAGE>
EXHIBIT A
---------
"TO NOTE PURCHASE AGREEMENT"
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS, NOR THE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THEY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THOSE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION THEREFROM.
LASERTECHNICS, INC.
SENIOR PROMISSORY NOTE
----------------------
Master Note June 25, 1997
LASERTECHNICS, INC., a Delaware corporation having its principal place of
business in Carrollton, Texas (the "Company"), for value received, hereby
promises to pay to the order of Wolfensohn Partners L.P., a Delaware limited
partnership, or its transferees or assigns (the "Holder"), on December 31, 1997
(the "Final Maturity Date"), the unpaid principal amount of all advances made by
the Holder to the Company hereunder ("Advances"), as recorded on the grid below,
including any additional pages (the "Grid"), together with interest thereon from
the date of such Advance recorded on the Grid, at the rate of ten percent (10%)
per annum*, calculated on the basis of the actual number of days elapsed over
a 364- (or 365-) day year (the "Base Interest Rate"). Each payment received by
the Holder hereunder shall be applied to Advances in reverse of the order in
which such Advances were made, and each such payment shall be applied first to
the interest accrued on and then to the unpaid principal amount of the
applicable Advance. This Note is one of the Senior Promissory Notes ("Notes")
issued and sold by the Company under the Note Purchase Agreement dated as of
June 25, 1997 (the "Note Purchase Agreement"), among the Company, the initial
Holder and the other purchaser named therein, and the Holder shall be entitled
to the benefits of any collateral security provided for therein for the benefit
of Holders of Senior Notes.
Payment of principal and interest shall be made in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts. All such payments shall be paid by wire
transfer of Federal funds in accordance with the written instructions of the
Holder or, in the absence of such instructions, by check mailed to the Holder at
the address last given to the Company by the Holder in writing for such purpose.
This Note may be prepaid in whole or in part at any time at the option of
the Company, without premium or penalty, upon not less than 20 days' prior
written notice to the Holder.
- ---------------------------
*6.64% for JPMIC
Page 1 of 3
<PAGE>
If any time after the date hereof the Company or any subsidiary completes
(i) an equity or long-term debt financing, (ii) a sale of assets outside the
ordinary course of business, (iii) a sale-leaseback or similar financing, or
(iv) a joint venture or other strategic partnership (any such transaction, an
"Extraordinary Transaction"), and such Extraordinary Transaction results in cash
proceeds to the Company (together with the cash proceeds of any other
Extraordinary Transaction after the date hereof, to the extent not previously
applied) in excess of $1,000,000 (such excess, the "Available Cash Proceeds"),
then the full amount of Available Cash Proceeds shall be applied to prepay this
Note as provided herein; provided, however, that if the Available Cash Proceeds
-------- -------
are not sufficient to pay in full the principal of, and accrued interest on,
this Note and all other Notes issued under the Note Purchase Agreement, then the
Available Cash Proceeds shall be applied to prepay this Note and all other Notes
issued under the Note Purchase Agreement on a pro rata basis, in proportion to
--- ----
the respective aggregate unpaid principal amounts thereof.
The Company hereby waives presentment for payment, demand for payment,
notice of nonpayment, protest and notice of protest.
This Note may be prepaid in whole or in part (in amounts not less than
$50,000) at any time at the option of the Company, upon not less than 20 days'
prior written notice to the Holder, without premium or penalty; provided,
--------
however, that any amounts prepaid hereunder or under any of the other Notes
- -------
shall be applied to prepay this Note and all other Notes issued under the Note
Purchase Agreement on a pro rata basis, in proportion to the respective
--- ----
aggregate unpaid principal amounts thereof.
This Note shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of the Holder and its successors, assigns and
transferees.
If the Company fails to pay any amount of principal or interest when due,
the entire unpaid principal of and accrued interest on all Advances shall
forthwith become absolutely due and payable without any notice, demand, protest
or presentment whatsoever, all of which are hereby expressly waived. Interest
on any past due principal amount, whether at the Final Maturity Date or by
acceleration, shall accrue at a rate equal to the Base Interest Rate plus five
percent (5%) per annum, but in no event higher than the maximum legal rate of
interest permitted under applicable law. In addition, if any amount payable
hereunder shall remain unpaid after 3:00 p.m., New York City time, on the Final
Maturity Date, the Company shall pay to the record Holder of this Note at such
time the Additional Consideration provided for in the Note Purchase Agreement
(as such term is defined therein). The Company shall pay to the Holder all
costs and expenses of collection and enforcement relating to this Note,
including without limitation reasonable attorneys' fees and expenses.
This Note shall be governed by and construed in accordance with the laws of
the State of New York, without reference to its rules as to conflicts of law.
Any judicial proceeding brought against the Company to enforce, or otherwise in
connection with, this Note may be brought in any court of competent jurisdiction
in the City of New York, and, by execution and delivery of this Note, the
Company (i) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this Note and (ii) irrevocably waives any objection it may now or hereafter have
Page 2 of 3
<PAGE>
as to the venue of any such proceeding brought in such a court or that such a
court is an inconvenient forum.
THE COMPANY HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES TRIAL BY JURY IN
ANY ACTION, SUIT, COUNTERCLAIM OR CROSS CLAIM ARISING OUT OF OR IN CONNECTION
WITH THIS NOTE.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
Vice President and has caused its corporate seal to be affixed and attested by
its Secretary.
[Corporate Seal] Attested: LASERTECHNICS, INC.
By:
- --------------------------- -------------------------------------------
E. A. Milo Mattorano E. A. Milo Mattorano
Secretary Vice President and Chief Financial Officer
<TABLE>
<CAPTION>
GRID
----
- --------------------------------------------------------------------------------
ADVANCES PAYMENTS
- --------------------------------------------------------------------------------
Balance Due
Date Made Amount Date Made Principal Interest on principal Recorded By
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
EXHIBIT B
---------
"TO NOTE PURCHASE AGREEMENT"
NEITHER THIS WARRANT NOR ANY SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION.
WARRANT NO. ______ FOR THE PURCHASE OF _______________ SHARES
LASERTECHNICS, INC.
COMMON STOCK PURCHASE WARRANT
-----------------------------
THIS CERTIFIES THAT, for value received, _______________________
("__________") or its successors in interest, assigns or transferees
(collectively, the "Warrant Holder"), is entitled to purchase from
Lasertechnics, Inc., a Delaware corporation (the "Company"), ______________
shares of the Company's Common Stock (as defined in paragraph 9(a) hereof) (the
"Warrant Shares") at the exercise price of SEVENTY CENTS ($.70) per share
("Exercise Price"). The number of Warrant Shares and the Exercise Price shall
be adjusted and readjusted or changed from time to time in accordance with
paragraph 4 hereof.
This Warrant may be exercised at any time and from time to time on or prior
to the third anniversary of the date of issuance set forth on the signature page
of this Warrant.
1. Exercise of Warrant.
-------------------
The rights represented by this Warrant may be exercised by the Warrant
Holder, in whole or in part, by (a) delivering to the Company a duly executed
notice of exercise in the form of Annex A hereto and (b) at the Warrant Holder's
option, either (i) delivering a check payable to (or wire transfer to the
account of) the Company in an amount equal to the product of (x) the Exercise
Price times (y) the number of Warrant Shares as to which this Warrant is being
exercised (such product, the "Total Exercise Price") or (ii) delivering to the
company a letter (the "Conversion Letter") requesting conversion or exchange of
a portion of any indebtedness owed by the Company to the Warrant Holder in an
amount equal to the Total Exercise Price or (iii) surrendering to the Company a
portion of this Warrant with a "Value" (as defined below) equal to the Total
Exercise Price. For the purpose of clause (b)(iii) above, "Value" shall mean the
product of (I) the amount by which the average closing price per share of the
Company's Common Stock over the ten trading days preceding the date of exercise,
as reported in the Wall
Page 1 of 9
<PAGE>
Street Journal, exceeds the Exercise Price and (II) the number of Warrant Shares
as to which this Warrant is surrendered for the purpose of effecting payment for
Warrant Shares. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of delivery of a duly executed notice
of exercise, together with the amount (in cash or by delivering the Conversion
Letter or by surrender of a portion of this Warrant) payable upon exercise of
this Warrant and, as of such moment, (i) the rights of the Warrant Holder, as
such, with respect to the number of Warrant Shares as to which this Warrant is
being exercised (and, if applicable, surrendered as payment of the Total
Exercise Price) shall cease, and (ii) such Warrant Holder shall be deemed to be
the record holder of the shares of Common Stock issuable upon such exercise. As
soon as practicable after the exercise, in whole or in part, of this Warrant,
and in any event within 5 business days thereafter, the Company at its expense
(including the payment by it of any applicable issuance or stamp taxes) will
cause to be issued in the name of and delivered to the Warrant Holder, or as the
Warrant Holder (upon payment by the Warrant Holder of any applicable transfer
taxes) may direct, a certificate or certificates for the number of fully paid
and nonassessable shares of Common Stock to which the Warrant Holder shall be
entitled upon such exercise. In the event of partial exercise of this Warrant
and, if applicable, partial surrender of this Warrant pursuant to clause
(b)(iii) of this paragraph, the Warrant need not be delivered to the Company
provided that the Warrant Holder agrees to make a notation of such partial
exercise and, if applicable, surrender on the Warrant. If this Warrant is
delivered to the Company, the Company shall issue and deliver to the Warrant
Holder a new Warrant evidencing the rights to purchase the remaining Warrant
Shares, which new Warrant shall in all other respects be identical to this
Warrant.
2. Investment Representation.
-------------------------
The Warrant Holder by accepting this Warrant represents that the Warrant
Holder is acquiring this Warrant for its own account or the account of an
affiliate for investment purposes and not with the view to any offering or
distribution and that the Warrant Holder will not sell or otherwise dispose of
this Warrant or the underlying Warrant Shares in violation of applicable
securities laws. The Warrant Holder acknowledges that the certificates
representing any Warrant Shares will bear a legend indicating that they have not
been registered under the Act, and may not be sold by the Warrant Holder except
pursuant to an effective registration or pursuant to an exemption from
registration. The Warrant Holder shall be entitled to include the Warrant Shares
in any demand or piggyback registration to which Warrant Holder is otherwise
entitled in respect of Common Stock held by it, in accordance with (and subject
to) the terms and conditions of any agreement between the Company and the
Warrant Holder with respect to such registration rights.
3. Validity of Warrant and Issue of Shares.
---------------------------------------
The Company represents and warrants that this Warrant has been duly
authorized and validly issued and covenants and agrees that all shares of Common
Stock that may be issued upon the exercise of the rights represented by this
Warrant will, when issued upon such exercise, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and
Page 2 of 9
<PAGE>
charges with respect to the issue thereof. The Company further covenants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Antidilution Provisions.
-----------------------
The terms of this Warrant shall be subject to adjustment as follows:
(a) If the Company shall (i) pay a stock dividend or make a distribution to
holders of Common Stock in shares of its Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of capital stock of the Company, (A)
the Exercise Price shall be increased or decreased, as the case may be, to an
amount which shall bear the same relation to the Exercise Price in effect
immediately prior to such action as the total number of shares outstanding
immediately prior to such action shall bear to the total number of shares
outstanding immediately after such action and (B) this Warrant automatically
shall be adjusted so that it shall thereafter evidence the right to purchase the
kind and number of Warrant Shares or other securities which the Warrant Holder
would have owned and would have been entitled to receive after such action if
this Warrant had been exercised immediately prior to such action or any record
date with respect thereto. An adjustment made pursuant to this subparagraph (a)
shall become effective retroactively immediately after the record date in the
case of a dividend or distribution of Common Stock and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) If the Company shall fix a record date for the making of a distribution
to all holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of (i) assets (other than cash dividends or cash distributions
payable out of consolidated net income or retained earnings or dividends payable
in Common Stock), (ii) evidences of indebtedness or other debt or equity
securities of the Company, or of any corporation other than the Company (except
for the Common Stock of the Company) or (iii) subscription rights, options or
warrants to purchase any of the foregoing assets or securities, whether or not
such rights, options or warrants are immediately exercisable (hereinafter
collectively called "Distributions on Common Stock"), the Company shall make
provisions for the Warrant Holder to receive upon exercise of this Warrant, a
proportional amount (depending upon the extent to which this Warrant is
exercised) of such assets, evidences of indebtedness, securities or such other
rights, as if such Warrant Holder had exercised this Warrant on or before such
record date.
(c) In the case of any consolidation or merger of the Company with or into
another corporation or the sale of all or substantially all the assets of the
Company to another person or entity, this Warrant thereafter shall be
exercisable for the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Page 3 of 9
<PAGE>
Company deliverable upon exercise of this Warrant would have been entitled upon
such consolidation, merger or sale; and, in such case, appropriate adjustment
shall be made in the application of the provisions in this paragraph 4, to the
end that the provisions set forth in this paragraph 4 (including provisions with
respect to changes in and adjustments of the exercise price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the exercise of this
Warrant.
(d) Upon the occurrence of each adjustment or readjustment of the exercise
price or any change in the number of Warrant Shares or in the shares of stock or
other securities or property deliverable upon exercise of this Warrant pursuant
to this paragraph 4, the Company at its expense shall promptly compute such
adjustment or readjustment and change in accordance with the terms hereof and
furnish to each holder hereof a certificate signed by the chief financial
officer of the Company, setting forth such adjustment or readjustment and change
and showing in detail the facts upon which such adjustment or readjustment and
change is based. The Company shall, upon the written request at any time of the
Warrant Holder, furnish or cause to be furnished to such Holder, a similar
certificate setting forth (i) such adjustment or readjustment and change, (ii)
the Exercise Price then in effect, and (iii) the number of Warrant Shares and
the amount. if any, of other shares of stock and other securities and property
which would be received upon the exercise of the Warrant.
(e) The Company shall not be required upon the exercise of this Warrant to
issue any fraction of shares, but shall make any adjustment therefor by rounding
the number of shares obtainable upon exercise to the next highest whole number
of shares.
5. Transfer of Rights.
------------------
This Warrant is transferable in whole or in part, at the option of the
Warrant Holder upon delivery of the Warrant Assignment Form annexed as Annex B
hereto, duly executed. The Company shall execute and deliver a new Warrant or
Warrants in the form of this Warrant with appropriate changes to reflect the
issuance of subsequent Warrants, in the name of the assignee or assignees named
in such instrument of assignment and, if the Warrant Holder's entire interest is
not being transferred or assigned, in the name of the Warrant Holder, and this
Warrant shall promptly be canceled. Any transfer or exchange of this Warrant
shall be without charge to the Warrant Holder and any new Warrant or Warrants
issued shall be dated the date hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or for which it may
be exchanged. The Warrant Holder (and not the Company) will be responsible for
any stamp, transfer or other taxes payable on any such transfer.
Page 4 of 9
<PAGE>
6. Lost, Mutilated or Missing Warrant.
----------------------------------
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like denomination and date.
7. Rights of Warrant Holder.
------------------------
The Warrant Holder shall not, by virtue hereof, be entitled to any voting
or other rights of a shareholder of the Company, either at law or equity, and
the rights of the Warrant Holder are limited to those expressed in this Warrant.
8. Successors.
----------
All the provisions of this Warrant by or for the benefit of the Company or
the Warrant Holder shall bind and inure to the benefit of their respective
successors and assigns.
9. Miscellaneous.
-------------
(a) As used herein, the term "Common Stock" shall mean and include the
Company's currently authorized common stock, $.01 par value per share, and stock
of any other class or other consideration into which such currently authorized
Common Stock may hereafter have been changed.
(b) This Warrant shall be construed in accordance with and governed by the
laws of the State of Delaware.
(c) The caption headings used in this Warrant are for convenience of
reference only and shall not be construed in any way to affect the
interpretation of any provisions of this Warrant.
10. Notices.
-------
Any notice pursuant to this Warrant shall be effective if sent by first
class mail, postage prepaid, or delivered by facsimile transmission, addressed
as follows:
Page 5 of 9
<PAGE>
If to the Company, then to it at:
Lasertechnics, Inc.
3208 Commander Drive
Carrollton, Texas 75006
Attention: Chief Financial Officer
Facsimile No.: (214) 407-9085
(or to such other address as the Company may have furnished in writing to
the Warrant Holder for this purpose); and
If to the Warrant Holder, then to it at such address as such Warrant Holder
may have furnished in writing to the Company for this purpose.
Page 6 of 9
<PAGE>
IN WITNESS WHEREOF, the Company, intending to be legally bound hereby, has
caused this Warrant to be signed by its Vice President, and attested by its
Secretary or Assistant Secretary as of the date set forth below.
LASERTECHNICS, INC.
By:
----------------------------
Name:
Title:
Attest:
- ---------------------
Name:
Title:
ISSUANCE DATE:
-------------------
Page 7 of 9
<PAGE>
ANNEX A
-------
COMMON STOCK PURCHASE WARRANT
-----------------------------
NOTICE OF EXERCISE
____________ 19__
To: LASERTECHNICS, INC.
The undersigned, pursuant to the provisions set forth in Warrant No. ________,
hereby irrevocably elects and agrees to purchase ________ shares of the
Company's Common Stock covered by such Warrant, and makes payment herewith in
full therefor of the Total Exercise Price of $__________.
The undersigned hereby represents that the undersigned is exercising such
Warrant for its own account or the account of an affiliate and will not sell or
otherwise dispose of the underlying Warrant Shares in violation of applicable
securities laws. If said number of shares is less than all of the shares
purchasable hereunder the undersigned requests that a new Warrant evidencing the
rights to purchase the remaining Warrant Shares (which new Warrant shall in all
other respects be identical to the Warrant exercised hereby) be registered in
the name of ____________________________________ whose address is:
-----------------------------
-----------------------------
-----------------------------
Signature:
------------------------------------
Printed Name:
------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
Page 8 of 9
<PAGE>
ANNEX B
-------
ASSIGNMENT
FOR VALUE RECEIVED ______________________ hereby sells, assigns and
transfers all of its rights as set forth in Warrant No. ________ with respect to
the shares of the Company's Common Stock covered thereby as set forth below
unto:
NAME OF ASSIGNEE(S) ADDRESS(ES) NO. OF SHARES
- ------------------- ----------- -------------
- ------------------- ----------------------- -------------
- ------------------- ----------------------- -------------
All notices to be given by the Company to the Warrant Holder pursuant to
paragraph 10 of Warrant No. ________ shall be sent to the Assignee(s) at the
above stated address(es), and, if the number of shares being hereby assigned is
less than all of the shares covered by Warrant No. ________, than also to the
undersigned.
The undersigned requests that the Company execute and deliver, if necessary
to comply with the provisions of paragraph 5 of Warrant No. ________, a new
Warrant or, if the number of shares being hereby assigned is less than all of
the shares covered by Warrant No. ________, new Warrants in the name of the
undersigned, the assignee and/or the assignees, as is appropriate.
Dated:______________, 19__
Signature:
-------------------------------
Printed Name:
-------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
Page 9 of 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 489,464
<SECURITIES> 0
<RECEIVABLES> 4,230,465
<ALLOWANCES> 239,448
<INVENTORY> 6,042,657
<CURRENT-ASSETS> 11,120,171
<PP&E> 6,112,855
<DEPRECIATION> 2,872,256
<TOTAL-ASSETS> 16,112,702
<CURRENT-LIABILITIES> 7,388,055
<BONDS> 1,196,438
0
7,076,641
<COMMON> 428,408
<OTHER-SE> (2,206,676)
<TOTAL-LIABILITY-AND-EQUITY> 16,112,702
<SALES> 7,181,324
<TOTAL-REVENUES> 7,181,324
<CGS> 4,057,005
<TOTAL-COSTS> 10,681,225
<OTHER-EXPENSES> (4,922)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,406
<INCOME-PRETAX> (3,873,385)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,873,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,227,507)<F1>
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
<FN>
<F1>Net loss applicable to common stock.
</FN>
</TABLE>
