UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1998
Commission File No. 0-13316
LASER CORPORATION
(Name of small business issuer in its charter)
Utah 87-0395567
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1832 South 3850 West, Salt Lake City, Utah 84104
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 972-1311
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on
which registered
(None) (None)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.05 per share
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year. $3,336,105
As of March 15, 1999, 1,387,538 shares of Common Stock were outstanding. The
aggregate market value of the shares held by non-affiliates of the registrant
(based upon closing price of $1.75 per share of these shares on February 26,
1999) was approximately $1,019,210.
Documents Incorporated by Reference:
Proxy Statement for the May 25, 1999 Annual Meeting of Shareholders which
Registrant intends to file pursuant to Regulation 14(A) by a date no later than
120 days after December 31, 1998. If such definitive Proxy Statement is not
filed in that 120-day period, the information called for by Part III will be
filed as an amendment to this Form 10-KSB not later than the end of the 120-day
period (Part III of this report).
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PART I
ITEM 1. BUSINESS
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During 1998, Laser Corporation was engaged in the business of designing,
manufacturing, marketing and servicing laser products through its wholly-owned
subsidiary, American Laser Corporation and in the business of designing and
marketing medical laser systems through its wholly-owned subsidiary, American
Laser Medical, Inc.
Laser Corporation is a Utah corporation organized on January 12, 1983.
Unless the context indicates otherwise, all references to the "Company" include
Laser Corporation and its subsidiaries.
American Laser Corporation ("American Laser") was incorporated in June 1970
and became a wholly-owned subsidiary of Laser Corporation in August 1984.
American Laser designs, manufactures, markets and services lasers and related
laser systems which are purchased primarily by original equipment manufacturers
("OEM"). These OEMs then manufacture equipment that incorporates the lasers as
component parts.
In June 1996, the Company established two developmental stage subsidiaries,
American Laser Medical, Inc.("ALM") and American Laser Software, Inc. ("ALS") to
develop and market retail medical products. ALM (doing business as A.R.C. Laser
Corporation) designs and markets medical laser systems for the dermatological
and ophthalmic marketplace. ALS was inactive during 1998.
The Company's 1998 Annual Meeting of Stockholders was held on May 28, 1998.
At that meeting, the proposed slate of Directors was elected but the
Shareholders failed to approve the Laser Corporation 1998 Stock Incentive plan.
Laser Products and Medical Laser Systems
----------------------------------------
The word "laser" is an acronym for Light Amplification by Stimulated
Emission of Radiation. A laser is capable of generating an intense beam of light
at visible, infrared and ultraviolet wavelengths. Lasers are broadly
distinguished by whether their mediums are gas, liquid or solid. The laser's
medium determines the wavelength, power and other characteristics of the optical
radiation emitted. Lasers are also distinguished by their operational mode
(either continuous mode or pulsed mode) and the power of the beam emitted. Thus,
the active medium, operational mode and power determine the particular tasks
lasers are best able to perform.
The Company principally produces laser tubes filled with argon,
krypton/argon or krypton gas. A mirror is placed at one end of the tube, and a
partial mirror is placed at the opposite end. An external power supply activates
the gas within the tube and causes the gas to produce light. The light reflects
off the mirror at one end of the tube and exits from the tube through the
partial mirror at the other end.
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The Company manufacturers argon, krypton/argon and krypton lasers with a
variety of power outputs and other performance specifications, often customized
to the requirement of the customer's application. The Company's laser products
are used in confocal microscopes, retinal photocoagulators in ophthalmology,
laser printers, dentistry, entertainment and display, research and development,
and other commercial and medical applications. The Company also purchases a
diode pumped solid state laser from an unaffiliated supplier for use in certain
models of its medical laser systems.
During 1998, the Company was limited in its expansion into the retail
medical marketplace due primarily to the inability of the supplier of the diode
pumped solid state laser to deliver a useable laser which is a component in the
Company's medical products. The Company is continuing its development of new
medical products including the NuvoLase and Classic series of medical laser
systems for dermatological procedures for the treatment of vascular and
pigmented lesions, and the ophthalmic medical laser systems for use in retinal
and macular photocoagulation and trabeculoplasty.
Company procedures include performing quality tests on its laser products
and medical laser systems prior to their shipment. The Company's "Terms and
Conditions of Sale" offer a standard product warranty against defects in
materials and workmanship for a period of one year from the date of original
shipment, although warranty terms, or the level of warranty coverage and the
warranty period, are subject to negotiation. Currently, the Company also offers
a standard warranty period of two years on one model of its medical laser
systems. Two of the largest OEM customers of the Company have modified warranty
terms and warranty periods. Company A has an operating hour or calendar warranty
period, whichever expires first. The calendar warranty period exceeds one year
on certain models. Company B has a warranty period which exceeds one year. At
December 31, 1998, the reserve for anticipated warranty expenses for Company
products which had been sold as of that date was $115,000, although no assurance
can be given that this reserve will be adequate to cover the actual warranty
expenses. The Company's laser products are generally returned for service or
repair to the Company at its Salt Lake City, Utah, facility, while the Company's
medical laser systems are serviced and repaired either at their point of use, at
the applicable distributor's facility, or at the Company's Salt Lake City, Utah,
facility.
Service sales is a term used internally by the Company for the repair or
refurbishment of customer-owned laser products. Service and repair typically
entails the replacement, repair or refurbishment of component parts comprising
the laser products or sub-assemblies.
Sales and Marketing
-------------------
Laser Products
In the past, essentially all of the Company's sales have been to OEM
customers. OEM customers manufacture equipment of which the Company's laser
products are a component part. As each OEM customer has unique needs and product
requirements, the Company markets its laser products and services directly by
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executive personnel, engineering and sales management.
The Company sells or has sold laser products to over 100 customers
worldwide. For the year ended December 31, 1998, two companies each accounted
for more than 10% of the Company's sales. Company A and B accounted for 37% and
23%, respectively, of the Company's 1998 sales. For the year ended December 31,
1997, three companies accounted for over 10% of the Company's sales. Company A,
B, and C, accounted for 29%, 22% and 20% respectively, of the 1997 sales.
Customers typically fulfill their laser product requirements by placing
purchase orders with the Company which are generally filled and shipped within
the customer's requested delivery schedule. Laser product sales to and purchase
orders received from customers typically can be expected to fluctuate in part
due to (i) changes in the quantity of Company products held in inventory by its
customers, (ii) changes in end user demand for customer products which use or
incorporate the Company's laser products, (iii) the competitiveness, cost and
customer use of alternative products, technologies or suppliers, and (iv) other
factors. The Company's backlog of new product and service orders for its laser
products and medical laser systems as of December 31, 1998 was approximately
$807,637, as compared to approximately $1,680,000 on December 31, 1997. Based on
past experience, the Company anticipates that substantially all of its unfilled
orders for laser products will be delivered in 1999.
For many years, the Company has been and remains substantially dependent
upon a limited number of OEM customers for sales of its laser products and
service sales. The Company believes that future sales of its laser products and
service sales will depend upon its ability to attract and maintain a variety of
volume OEM customers requiring its laser products. However, there can be no
assurance that the Company will be successful in these efforts, or that its
competitors, customers or others will not introduce products or technologies
superior to those of the Company or produce comparable products at lower prices,
in which case the Company's business could be adversely affected. In addition,
rapid technological advances made by competitors, customers, or others could
make the product lines obsolete. Also, overall customer demand for laser
products and sub-assemblies may decrease as a result of their replacement by
superior, alternative, or lower cost products and technologies.
The Company typically invoices its laser product customers upon product
shipment. Payment on approved credit terms is generally due in 30 days after
date of invoice, but such terms can vary, especially in the case of foreign
sales. Collection of trade accounts receivable typically occurs within 30 to 45
days after invoice.
Medical Laser Systems
Management has recently expanded the Company's business into dermatological
and ophthalmic medical laser systems. The Company commenced the production and
sale of its NuvoLase 532 medical laser system for dermatology in October 1997.
However, its ability to market and sell its medical laser systems during 1998
was adversely affected by usability issues regarding a diode pumped solid state
laser component supplied to the Company by an outside vendor. The Company
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believes, but can give no assurance, that these useability issues have been
resolved. For the year ended December 31, 1998, medical laser system sales
accounted for 5.3% of the Company's sales. The Company is in the final
development stage of its ophthalmic products and has applied for and just
received classification of its improved models of the ophthalmic devices from
the Food and Drug Administration ("FDA") of the United States Department of
Health and Human Services. The Company anticipates, but cannot guarantee, that
sales of its ophthalmic products will commence in 1999. The Company has entered
into an agreement with A.R.C. AG, Switzerland, a company owned and controlled by
Reinhardt Thyzel, a director and the majority shareholder of the Company,
pursuant to which the Company and A.R.C. AG will distribute the products of the
other. In addition to the use of advertising in trade publications, direct mail
advertising and attendance at medical conventions and workshops, the Company is
now using sales agents, distributors and strategic partners to market and sell
its medical laser systems. The Company has qualified its initial sales agents,
distributors and strategic partners for its medical laser systems and is now in
the process of identifying additional qualified sales agents, distributors and
strategic partners in the United States and internationally.
The Company typically invoices the retail purchaser of its medical laser
systems on a 10% down, balance due on delivery/installation, but such terms can
vary. Payment on approved credit terms to distributors and strategic partners is
generally net 30 days after date of invoice, but such terms can vary. Collection
of trade accounts receivable typically occurs within 30 to 45 days.
Foreign Sales
-------------
The Company sells a majority of its laser products to customers in Europe
and other foreign countries. The Company's two largest customers for laser
products in 1998 were foreign customers. Foreign sales to these two customers,
accounted for approximately 29% and 23% respectively, of the total laser
products sales during 1998. Total sales to all foreign customers accounted for
approximately 71% of the Company's total sales. (See Note 13 to Consolidated
Financial Statements for further discussion).
Manufacturing and Suppliers
---------------------------
The Company relies upon unaffiliated suppliers for components used in the
fabrication of its laser products. For most components, the Company is not
dependent upon any one particular supplier, and with the exception of certain
deliveries of acceptable optical components on a timely basis, has not
experienced significant delays in obtaining components. Currently, certain
components utilized in the manufacture of the products are available from a
limited number of suppliers or a sole supplier. The Company believes that its
operations could be adversely affected in the event that it is unable to obtain
components on a timely basis from these suppliers.
The Company relies upon unaffiliated suppliers for subassemblies and
components used in the fabrication of its medical laser systems. For many
subassemblies and components, the Company is dependent upon on one particular
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supplier. The Company has experienced problems with certain subassemblies
meeting the reliability criteria required for use in the Company's medical laser
systems as well as deliveries on a timely basis. The Company believes that its
operations have been and could in the future be adversely affected in the event
that it is unable to obtain acceptable subassemblies and components on a timely
basis from these suppliers.
The Company maintains an inventory of laser components and medical laser
system subassemblies and components as well as a minimal level of finished
goods. The Company generally manufactures its products in response to customer
orders.
The Company's raw material inventory at December 31, 1998 was $674,851,
with an allowance of obsolete inventory of $211,416, work in process inventory
was $451,356, and the remaining $52,931 was finished goods inventory.
Competition
-----------
The laser products and medical laser systems markets are complex and
fragmented as a result of the specialized nature of laser products and medical
laser systems and the various applications required by purchasers. Rapid
technological advances and intense competition are characteristic of the laser
products and medical laser systems industries. The Company is subject to the
risk that its competitors or certain of its customers may introduce products or
technologies which are superior to those of the Company or produce products at
lower prices, which could make its products obsolete. The Company is also
subject to the risk that customer products which incorporate its lasers products
may become obsolete or may be redesigned, eliminating the need for its products.
The principal competitive factors for its OEM laser products are technology,
price, service, quality, performance and ability to meet customer
specifications. The principal competitive factors for medical laser systems are
the product's technological capabilities and proven clinical ability, price,
service, quality, and scope of regulatory approval.
Future sales are in a large part dependent on the success of the
introduction of new or improved laser products and medical laser systems and on
the Company's ability to become and remain competitive in the medical
marketplace. In addition, future laser products sales are dependent on the
Company's OEM customers remaining competitive in their marketplace.
There can be no assurance that the Company's competitors, customers or
others will not develop products or technologies which could render the products
of the Company obsolete. If such products or technologies were successfully
developed, continued sales of the existing products could rapidly diminish, in
which case the Company's business, results of operations or ability to maintain
or increase its market share could be adversely affected.
Certain of the Company's current or future competitors have substantially
greater financial, technical, manufacturing, marketing and other resources as
well as a broader range of products than the Company. There can be no assurance
that competition will not adversely affect the Company's business, results of
operations, or ability to maintain or increase it market share which could be
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adversely affected.
Patents, Licenses and Trade Secrets
-----------------------------------
Although the Company owns certain domestic patents relating to laser
technology, the Company believes that the ownership of patents is not essential
to its current OEM laser products operations. However, the Company's future
success may depend, in part, on its ability to operate and introduce new
products without infringing on the rights of third parties.
The Company entered into a license agreement in March 1989 with Patlex
Corporation which requires the Company to pay royalties based on a percentage of
net sales of products covered by certain patents.
The Company believes, but can give no assurance, that the supplier of its
diode pumped solid state laser, which is used in certain of its medical laser
products, is adequately and appropriately licensed to manufacture and sell such
devices.
Government Regulation
---------------------
Laser products manufactured by the Company are subject to the requirements
of the Center for Devices and Radiological Health ("CDRH") of the FDA. The CDRH
is the Federal government body primarily responsible for the regulation and
administration of laser technology and related products. The CDRH has issued
laser radiation safety regulations which require certain laser manufacturers and
end users to file new product and annual reports, to maintain records of sales
and quality control results, conduct proper testing, and to incorporate certain
design and operating features, including warning labels and protective devices
in all lasers sold to end users. The regulations required generally do not apply
to OEM laser products which are incorporated as components in laser-based end
products.
The Company's medical laser systems with applications in the fields of
dermatology and ophthalmology are regulated as medical devices by the FDA and
the CDRH under the federal Food, Drug and Cosmetic Act. As such, these devices
require premarket clearance by the FDA prior to commercialization. The FDA
classifies medical devices in commercial distribution into one of three classes:
Class I, II or III. This classification is based on the control the FDA deems
necessary to reasonably ensure the safety and effectiveness of medical devises.
The Company's laser based medical products are classified as Class II devices.
If a manufacturer of a medical device can establish that a proposed device is
"substantially equivalent" to a legally marketed Class II medical device the
manufacturer may seek FDA clearance for the device by filing a submission of a
premarket notification to the CDRH, Office of Device Evaluation, in accordance
with Section 510(k) of the federal Food, Drug, and Cosmetic Act.
The Company submitted the required Section 510(k) premarket notification to
the FDA and the CDRH seeking classification of both its argon gas, krypton gas
and diode pumped solid state laser systems for ophthalmic and dermatological
applications and received its 510(k) clearance to market these systems.
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The Company and its medical products manufactured pursuant to a 510(k)
premarket clearance notification, are or will be subject to continuing
regulation by the FDA and must comply with all applicable requirements of the
FDA on an ongoing basis. The federal Food, Drug, and Cosmetic Act also requires
the Company to manufacture its products in registered establishments and in
accordance with the Quality System Requirements of the Current Good
Manufacturing Practices (CGMP), 21 CFR 820 (Technical equivalent to the ISO 9001
& ISO/DIS 13485). The Company's facilities in the United States are subject to
periodic inspections by the FDA.
Certain of the Company's medical products manufactured and sold in foreign
countries are required to comply with the European Community's Medical Device
Directive ("MDD") (93/42/EEC). In addition, certain non-medical lasers sold in
foreign countries are required to comply with the European Community's
Electromagnetic Compatibility Directive (89/336/EEC) and Low Voltage Directive
(72/23/EEC). The Company has received its applicable certification of compliance
on a number of its products and others are currently in process.
The above Directives also require the Company to manufacture its products
in registered establishments and in accordance with the harmonized quality
system standards (ISO 9000 series). The compliance to such standards is
determined by audit from a "notified" body and through periodic surveillance.
Although the Company believes that it currently complies and will continue
to comply with the applicable regulations, such regulations are always subject
to change. Regulations such as ISO 9000 require a more difficult and time
consuming level of compliance and therefore the Company cannot assure that it
will meet all these regulations in a timely manner. In addition there can be no
assurance that future changes in law, regulations, review guidelines,
administrative interpretations by the FDA, any international governing agency or
other regulatory bodies will not adversely affect the Company.
Product Development
-------------------
The Company continues to be engaged in the development of medical laser
systems and laser products. In 1998, the Company maintained its narrowed
engineering focus to that of laser-based dermatological and ophthalmic medical
systems and to a lesser extent to the product needs of certain of its OEM laser
products customers.
The Company booked expenses of $583,602 in 1998 and $511,544 in 1997 on
research and development activities.
Insurance
---------
The Company carries product liability insurance on its laser products and
medical laser systems to a maximum of $4,000,000.
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Compliance with Environment Laws
--------------------------------
The costs and effects of compliance with environmental laws (federal,
state, and local) to and on the Company have been minimal.
Employees
---------
On December 31, 1998, the Company had 45 full-time equivalent employees: 5
in general and administrative services, 27 in manufacturing and support
services, 9 in Engineering, and 4 in management and marketing.
ITEM 2. DESCRIPTION OF PROPERTIES
- ----------------------------------
The Company's administrative offices and assembly facilities for its laser
products are located in a building of approximately 46,000 square feet in Salt
Lake City, Utah, which is owned by Dr. William H. McMahan, a significant
shareholder and former Chairman, President and Chief Executive Officer of the
Company. The Company leases the building from Dr. McMahan pursuant to a lease
agreement which terminates on April 30, 1999. The annual base rent for this
facility is $236,725. The Company anticipates vacating this facility upon the
expiration of the lease. The Company has signed a ten year lease, commencing May
1, 1999, with an unrelated party for a new facility for its administrative
offices, research and development, and assembly functions. The new facility is
approximately 32,300 square feet and is located in Salt Lake City, Utah.
The Company believes that these facilities are currently more than
adequate for its activities.
Item 3. LEGAL PROCEEDINGS
- --------------------------
There are no pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------
The Company's common stock was historically, through October 7, 1998,
traded on the NASDAQ Small-Cap Market tier of the NASDAQ Stock Market under the
symbol LSER. Effective with the close of business on October 7, 1998, the
Company's common stock was delisted from the Nasdaq Small-cap Market for failure
to meet the minimum net tangible asset requirement. The Company's common stock
is now traded on the OTC Bulletin Board under the symbol LSER. The following
table sets forth the prices for the periods as indicated. The high and low sales
price are used in reporting. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
High Low
---- ---
1998 First quarter $ 4.60 $ 2.10
----
Second quarter 3.50 1.00
Third quarter 2.50 1.00
Fourth quarter 1.6875 1.0625
1997 First quarter $ 3.75 $ 2.375
----
Second quarter 4.625 1.3125
Third quarter 5.75 2.25
Fourth quarter 6.6875 2.875
As of December 31, 1998 there were approximately 520 beneficial holders of
the Company's Common Stock.
On December 16, 1997, the Board of Directors declared a five-for-four stock
dividend which was issued on February 18, 1998 to the shareholders of record as
of January 30, 1998.
The Company did not pay cash dividends on its common stock in 1998 and it
does not anticipate paying any cash dividends thereon in the foreseeable future.
On October 9, 1998, the Company issued 521,739 shares of its common stock
to Reinhardt Thyzel for the purchase price of $600,000. No underwriters were
engaged to sell the stock and no underwriting discounts or commissions were
paid. The securities were offered pursuant to an exception from registration
under Section 4(2) of the Securities Act of 1933. Mr. Thyzel is a sophisticated
investor who has dealt with the Company for several years. He is also a resident
of Switzerland. The proceeds of the offering were used for working capital
purposes.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
- -------------------------------------------------------------------
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by, and information currently available to management. Such
statements reflect the current view of the Company respecting future events and
are subject to certain risks, uncertainties, and assumptions, including the
risks and uncertainties noted throughout the document. Although the Company has
attempted to identify important factors that could cause the actual results to
differ materially, there may be other factors that cause the forward-looking
statements not to come true as anticipated, believed, projected, expected, or
intended. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may differ
materially from those described herein as anticipated, believed, projected,
estimated, expected, or intended.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere herein.
Results of Operations
---------------------
Net sales for the year ended December 31, 1998, were $3,310,719 as compared
to $5,074,232 for the same period in 1997, a decrease of $1,763,513 or 35%. This
decrease was primarily a result of decreases in laser product and service sales
during 1998 to three of the Company's larger customers totaling $1,387,884.
Laser product and service sales to all other customers during 1998 decreased by
$379,125. Medical laser system sales during 1998 were $176,000, an increase of
$3,496 from the previous year.
For many years, fluctuations in laser product and service sales have been
influenced by (i) changes in the quantity of Company products held in inventory
by its OEM customers, (ii) changes in end user demand for OEM customer products
in which the Company's laser products are a component part, (iii) the
competitiveness, cost and customer use of alternative products, technologies or
suppliers and (iv) various other factors. The Company's decrease in net sales
for 1998 was primarily a result of a downward fluctuation in demand for its
laser products and service sales.
Examples of such recurring fluctuations from period to period are laser
products and service sales to (i) Company A which totaled $1,230,521,
$1,472,790, and $1,042,748 for 1998, 1997, and 1996 respectively, (ii) Company B
which totaled $755,929, $1,125,519, and $697,591 for 1998, 1997, and 1996
respectively, and Company C which totaled $213,859, $989,883, and $275,964 for
1998, 1997, and 1996 respectively.
Cost of products sold as a percentage of the Company's net sales increased
from 77% in 1997 to 95% in 1998, exclusive of a write off of obsolete and slow
moving inventory of $275,889. This increase was primarily the result of (i) a
decrease in the volume of products produced and sold which resulted in unit
increases in labor and overhead costs, and (ii) increased material costs which
resulted primarily from differences in the mix of products manufactured in 1998
as compared to the same period in 1997.
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Selling, general and administrative costs for the year ended December 31,
1998 were $993,226, or 30% of net sales, as compared to $856,263, or 17% of net
sales, for the same period in 1997, an increase of $136,963, or 16%. This
increase was primarily the result of an increase in marketing, advertising, and
other start-up related costs of the Company's dermatological and ophthalmic
medical laser systems.
Research and development expenditures for the year ended December 31, 1998
were $583,602 as compared to $511,544 for the same period in 1997, an increase
of $72,058 or 14%. This increase was primarily the result of the Company's
continuing engineering efforts focusing on laser based dermatological and
ophthalmic medical systems, to a lesser extent the product needs of certain of
the Company's OEM customers and to certain accounting adjustments.
Royalty expenses decreased from $91,293 in 1997 to $50,814 during 1998, a
decrease of $40,479 or 44%. This decrease was the result of the decrease in
laser product and service sales during 1998.
Interest income and other revenue for the year ended December 31, 1998 was
$25,386 as compared to $52,076 for the same period in 1997, a decrease of
$26,690 or 51%.
The Company recognized a net loss for the year ended December 31, 1998 of
$1,710,252 or $1.57 per share. This compares to a net loss for the same period
in 1997 of $254,608 or $.30 per share, an increased loss of $1,455,644. This
difference was a result of a decrease in the volume of products sold causing
increases in the unit cost of products sold, year-end inventory adjustments, the
Company's inability to more aggressively market and sell its medical laser
systems in 1998 and to a lesser extent increased selling, general and
administrative expenses and decreased interest and other income.
On December 31, 1998 the Company had net operating loss carryforwards for
tax purposes of approximately $4,925,000 available to offset future taxable
income. The loss carryforwards will begin to expire in the year 2004.
Liquidity and Capital Resources
-------------------------------
On December 31, 1998, the Company had working capital of $818,603 as
compared to $1,853,244 at December 31, 1997, a decrease of $1,034,641 or 56%.
Cash equivalents at December 31, 1998 were $531,734 as compared to $164,479 on
December 31, 1997, an increase of $367,255, or 223%.
The decrease in working capital was primarily the result of the net loss
experienced during 1998 which was partially offset by cash proceeds from sales
of the Company's common stock. Other significant factors affecting working
capital include decreases in receivables, inventory, payables and payments
received on long-term notes.
Currently, the Company has no material commitments for capital
expenditures, and has not entered into any agreements for additional sources of
borrowing or capital.
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Year 2000 Issue
---------------
The Company is aware of the issues associated with programming codes in
existing computer systems as the millennium (year 2000) approaches. The Company
has completed the upgrading of its design engineering software and believes, but
can give no assurance, that this software is year 2000 compliant. However, the
accounting and material management system is not compliant. The Company has
conducted preliminary research into replacement accounting and material
management system. The Company plans to acquire and implement a new system in
the third quarter 1999. If the new accounting and material management system is
not implemented as planned, the Company could be adversely affected beginning in
the year 2000 since many computer applications could fail.
The Company has requested or will request confirmations from the Company's
principal vendors stating whether their systems are year 2000 compliant or what
plans are being developed to address the issue. Management has not yet fully
assessed the year 2000 compliance expense and related potential effect on the
Company's earnings.
ITEM 7. FINANCIAL STATEMENTS
- -----------------------------
The response to this item is submitted in a separate section of this
report. See page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There has been no reported disagreement on any matter of accounting
principles or material financial statement disclosures of a kind described in
Item 304 of Regulation S-B.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- ----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1998, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1998, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1998, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1998, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
Page 14 of 14
<PAGE>
PART IV
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits
3 (i) - *Articles of Incorporation, as amended
(ii) - Bylaws with amendments
4 (a) - *Specimen Stock Certificate
(b) - *Incentive Stock Option Plan
(c) - *Non-Statutory Stock Option Plan
(d) - 1998 Stock Incentive Plan
(e) - *Lease Agreement between Dr. McMahan and American Laser
(f) - *Amendment to Lease Agreement between Dr. McMahan and
American Laser
(g) - Lease Agreement between NP#2, LLC and Registrant.
(h) - *Stock Purchase Agreement dated as of January 1, 1995
between Barrie Brewer, Brad Brewer and Jean Brewer
and Registrant.
(i) - *Stock Redemption Agreement dated as of January 1, 1995
between Pro Med Co. and Registrant.
(j) - Stock Purchase Agreement dated as of August 5, 1998
between Reinhardt Thyzel and Registrant.
21 - Statement re: Subsidiaries of the Registrant
(b) The Company filed a report on Form 8-K dated October 9, 1998 to
report the execution of a stock purchase agreement wherein the
Company issued 521,739 shares of common stock in a private placement
for $600,000.
- ------------------
* Previously filed and incorporated herein by reference
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LASER CORPORATION
By: /s/ B. Joyce Wickham Date March 29, 1999
----------------------------------- ----------------------------
B. Joyce Wickham
President & Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Date
/s/ B. Joyce Wickham March 29, 1999
- ---------------------------------------- ----------------------
B. Joyce Wickham
President and Chief Executive Officer
Treasurer and Director
/s/ Mark L. Ballard March 29, 1999
- ---------------------------------------- ----------------------
Mark L. Ballard
Vice President and Director
/s/ Rod O. Julander March 29, 1999
- ---------------------------------------- ----------------------
Rod O. Julander
Secretary and Director
/s/ Elizabeth A. Whitsett March 29, 1999
- ---------------------------------------- ----------------------
Elizabeth A. Whitsett
Director
/s/ Reinhardt Thyzel March 29, 1999
- ---------------------------------------- ----------------------
Reinhardt Thyzel
Director
/s/ Todd G. Loosle March 29, 1999
- ---------------------------------------- ----------------------
Todd G. Loosle
Controller
<PAGE>
LASER CORPORATION
Financial Statements
December 31, 1998 and 1997
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Page
----
Independent auditors' report F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholders'
equity F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Laser Corporation
We have audited the accompanying consolidated balance sheet of Laser Corporation
and subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Laser Corporation
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2, the
Company has incurred operating losses and has been unable to generate cash flows
from operations for three consecutive years, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
TANNER+CO.
Salt Lake City, Utah
March 3, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
LASER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
-----------------------------------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 531,734 $ 164,479
Receivables, net 319,091 903,106
Inventories 967,722 1,747,774
Notes receivable - current portion - 534,308
Other current assets 72,733 23,055
-----------------------------------
Total current assets 1,891,280 3,372,722
Equipment and leasehold improvements, net 212,801 263,405
Other assets 130,203 131,999
-----------------------------------
$ 2,234,284 $ 3,768,126
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 756,078 $ 1,063,560
Accrued expenses 201,599 295,918
Accrued warranty expense 115,000 160,000
-----------------------------------
Total current liabilities 1,072,677 1,519,478
-----------------------------------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.05 par value, 10,000,000 shares
authorized; 1,400,038 and 867,049 shares issued,
respectively 70,003 43,353
Additional paid-in capital 1,327,583 731,022
Retained earnings (deficit) (135,979) 1,574,273
Treasury stock, at cost (100,000) (100,000)
-----------------------------------
Total stockholders' equity 1,161,607 2,248,648
-----------------------------------
$ 2,234,284 $ 3,768,126
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
-----------------------------------
<S> <C> <C>
Revenues:
Net sales $ 3,310,719 $ 5,074,232
Interest and other income 25,386 52,076
-----------------------------------
3,336,105 5,126,308
-----------------------------------
Cost and expenses:
Cost of products sold 3,142,826 3,921,740
Write off of inventory 275,889 -
Selling, general and administrative 993,226 856,263
Research and development 583,602 511,544
Royalties 50,814 91,293
Interest - 76
-----------------------------------
5,046,357 5,380,916
-----------------------------------
Loss before income taxes (1,710,252) (254,608)
Benefit for income taxes - -
-----------------------------------
Net loss $ (1,710,252) $ (254,608)
-----------------------------------
Loss per share - basic and diluted $ (1.57) $ (.30)
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------
Additional Retained
Common Stock Paid-In Earnings Treasury Stock
------------------------ ------------------------
Shares Amount Capital (Deficit) Shares Amount Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1997 682,088 $ 34,105 $ 701,537 $ 1,837,554 10,000 $ (100,000) $ 2,473,196
Issuance of common
stock for cash 5,500 275 10,285 - - - 10,560
Issuance of common
stock for services 6,000 300 19,200 - - - 19,500
Stock split-up effected in
the form of a dividend 173,461 8,673 - (8,673) 2,500 - -
Net loss - - - (254,608) - - (254,608)
------------------------------------------------------------------------------------
Balance at
December 31, 1997 867,049 43,353 731,022 1,574,273 12,500 (100,000) 2,248,648
Issuance of common
stock for cash 532,989 26,650 596,561 - - - 623,211
Net loss - - - (1,710,252) - - (1,710,252)
------------------------------------------------------------------------------------
Balance at,
December 31, 1998 1,400,038 $ 70,003 $ 1,327,583 $ (135,979) 12,500 $ (100,000) $ 1,161,607
------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
-----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,710,252) $ (254,608)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 138,027 103,040
Provision for losses on accounts receivable 23,000 (54,000)
Increase in other assets - (69,003)
Gain on disposal of asset - (69)
Issuance of common stock for services - 19,500
(Increase) decrease in:
Receivables 561,015 (276,968)
Inventories 780,052 (458,771)
Other assets (47,882) 11,774
Increase (decrease) in:
Accounts payable and accrued expenses (401,801) 485,982
Accrued warranty expense (45,000) 60,000
-----------------------------------
Net cash used in
operating activities (702,841) (433,123)
-----------------------------------
Cash flows from investing activities:
Purchase of property and equipment (87,423) (145,270)
Proceeds from notes receivable 534,308 176,284
Proceeds from sale of property and equipment - 824
-----------------------------------
Net cash provided by
investing activities 446,885 31,838
-----------------------------------
Cash flows from financing activities-
proceeds from issuance of common stock 623,211 10,560
-----------------------------------
Increase (decrease) in cash and cash equivalents 367,255 (390,725)
Cash and cash equivalents, beginning of year 164,479 555,204
-----------------------------------
Cash and cash equivalents, end of year $ 531,734 $ 164,479
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Continued
- --------------------------------------------------------------------------------
Supplemental disclosure of noncash transactions:
The Company recorded an investment of $69,003 in exchange for services, during
the year ended December 31, 1997.
During the year ended December 31, 1997, the Company capitalized retained
earnings of $8,673 due to the issuance of a 25% stock split-up effected in the
form of a dividend.
Supplemental disclosures of cash flow information:
Years Ended
December 31,
-----------------------------------
1998 1997
-----------------------------------
Interest paid $ - $ 76
-----------------------------------
Income taxes paid $ - $ -
-----------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization and Principles of Consolidation
The consolidated financial statements include the accounts of Laser Corporation
(Laser) and its wholly-owned subsidiaries, American Laser Corporation (American
Laser), American Laser Software, Inc. (ALS), and American Laser Medical, Inc.
(ALM) (the Company) located in Salt Lake City, Utah. All significant
intercompany account balances and transactions have been eliminated in
consolidation.
The Company is engaged in designing, manufacturing, marketing and servicing of
laser products and medical laser systems.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid certificates of deposit with maturities of three months or less to be
cash equivalents.
Inventories
Inventories are valued at the lower of cost or market, cost being determined on
the first-in, first-out method.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost, less accumulated
depreciation. Depreciation on equipment and leasehold improvements is determined
using the straight-line and declining balance methods over the estimated useful
lives of the assets or terms of the lease. Expenditures for maintenance and
repairs are expensed when incurred and betterments are capitalized. Gains and
losses on sale of equipment and leasehold improvements are reflected in net
income.
Income Taxes
Deferred income taxes are provided for temporary differences in reporting income
for financial statement and tax purposes, arising primarily from depreciation
and accrued liabilities.
Warranty Costs
The Company records the estimated cost of warranty obligations on laser products
and medical laser systems at the time the related products are sold.
- --------------------------------------------------------------------------------
F-8
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies Continued
Loss Per Common Share
Loss per common share is computed using the weighted average number of common
shares outstanding. Common equivalent shares consist of the Company's stock
options and are considered to be antidilutive common stock equivalents,
determined using the treasury stock method.
Concentration of Credit Risk
The Company designs, manufactures, markets and provides service on lasers and
related laser systems which are primarily used by original equipment
manufacturers in both domestic and foreign markets. These laser products are
used in items such as printers, medical instruments, entertainment products and
other applications. The Company grants credit in these markets without requiring
collateral to substantially all its customers.
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of trade receivables. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within the range
of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such account. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
- --------------------------------------------------------------------------------
F-9
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies Continued
Reclassifications
Certain reclassifications have been made to the prior period's financial
statements in order to conform them to the classifications used for the current
year.
2. Going Concern
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During the years ended December
31, 1998, 1997 and 1996 the Company incurred losses of $1,710, 252, $254,608 and
$688,024, respectively. Additionally the Company has been unable to generate
cash flows from operations and has for the years ended December 31, 1998, 1997
and 1996 used cash in operating activities of $702,841, $433,123 and $448,476,
respectively. These factors among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.
The Company's continuation as a going concern is dependent on its ability to
generate sufficient income and cash flow to meet its obligations on a timely
basis, to obtain additional financing as may be required, and ultimately to
attain profitability. The Company is active in the development of new products
that will increase the Company's versatility in the laser products market. There
is no assurance that the Company will be successful.
- --------------------------------------------------------------------------------
F-10
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Detail of Certain Balance Sheet Accounts
December 31,
-----------------------------------
1998 1997
-----------------------------------
Receivables:
Trade receivables $ 344,091 $ 902,781
Less allowance for doubtful
accounts (25,000) (2,000)
Other - 2,325
-----------------------------------
$ 319,091 $ 903,106
-----------------------------------
Inventories:
Raw materials $ 674,851 $ 1,186,832
Work-in-process 451,356 597,356
Finished goods 52,931 108,586
Reserve for obsolescence (211,416) (145,000)
-----------------------------------
$ 967,722 $ 1,747,774
-----------------------------------
4. Notes Receivable
Notes receivable consist of the following:
December 31,
-----------------------------------
1998 1997
-----------------------------------
Note receivable from ProMed in
monthly installments of $16,121,
including interest at 7.5%, secured
by common stock of the debtor $ - $ 372,034
Non interest bearing note
receivable from ProMed secured
by common stock of the debtor - 162,274
-----------------------------------
$ - $ 534,308
-----------------------------------
The total balance on both outstanding notes was received in January and February
1998.
- --------------------------------------------------------------------------------
F-11
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Equipment and Leasehold Improvements
Equipment and leasehold improvements consist of the following:
December 31,
-----------------------------------
1998 1997
-----------------------------------
Equipment $ 1,591,972 $ 1,504,549
Leasehold improvements 641,692 641,692
-----------------------------------
2,233,664 2,146,241
Less accumulated depreciation
and amortization (2,020,863) (1,882,836)
-----------------------------------
$ 212,801 $ 263,405
-----------------------------------
6. Income Taxes
The benefit for income taxes differs from the amount computed at federal
statutory rates as follows:
Years Ended
December 31,
-----------------------------------
1998 1997
-----------------------------------
Income tax benefit at statutory
rates $ 581,000 $ 83,000
Change in valuation allowance (581,000) (83,000)
-----------------------------------
$ - $ -
-----------------------------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Income Taxes Continued
Deferred tax assets (liabilities) consist of the following:
December 31,
-----------------------------------
1998 1997
-----------------------------------
Net operating loss carryforwards $ 1,675,000 $ 1,168,000
General business and AMT credit
carryforwards 176,000 118,000
Depreciation (8,000) (8,000)
Inventory reserve 72,000 49,000
Warranty reserve 39,000 54,000
Bad debt reserve 9,000 1,000
-----------------------------------
1,963,000 1,382,000
Valuation allowance (1,963,000) (1,382,000)
-----------------------------------
$ - $ -
-----------------------------------
The Company has net operating loss carryforwards for tax purposes of
approximately $4,925,000 at December 31, 1998 available to offset future taxable
income which begins to expire in 2004. Should a change of more than 50 percent
in the Company's ownership occur, any future benefits from such carryforwards
may be substantially lost. A valuation allowance has been established for the
net deferred tax asset due to the uncertainty of realization.
7. Commitments and Contingencies
Operating Leases
The Company's administrative offices and primary assembly facilities for its
laser products are located in a 46,000 square foot building in Salt Lake City,
Utah. The Company leases the building from a significant shareholder, pursuant
to a lease agreement which terminates on April 30, 1999. Under this lease, the
Company recognized annual rent expense of $236,725 in 1998 and 1997.
- --------------------------------------------------------------------------------
F-13
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Commitments and Contingencies Continued
In December 1998 the Company, in anticipation of relocating its offices and
primary assembly facilities, entered into a new lease agreement for
approximately 32,000 square feet of office and manufacturing space located in
Salt Lake City, Utah. The new lease expires on December 31, 2008.
Future minimum payments under the noncancellable operating leases are as
follows:
Year Amount
------------------
1999 $ 215,737
2000 234,564
2001 234,564
2002 246,588
2003 252,600
Thereafter 1,421,416
------------------
$ 2,605,469
------------------
Investment Agreement
The Company entered into an agreement with another corporate entity (the
investee). The agreement provided that the Company would invest cash and/or
services in exchange for the investee's stock. At December 31, 1997, the Company
had performed cumulative services of $129,003, in exchange for common stock of
the investee. The investment of $129,003 has been included in other assets at
December 31, 1998 and 1997.
Effective September 30, 1997, the agreement expired as certain requirements were
not met by the investee according to the terms of the agreement. The investment
of $129,003 represents a 3.2% ownership in the investee.
Royalty Agreement
The Company is party to an agreement with Patlex Corporation which requires the
Company to pay royalties based on a percentage of net sales of products covered
by certain patents. Total royalty expense was $50,814 and $91,293 in 1998 and
1997, respectively.
- --------------------------------------------------------------------------------
F-14
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Commitments and Contingencies Continued
Employment Agreements
The Company has employment agreements with its President and Chief Executive
Officer and with its Vice President. These agreements have a three year term
with automatic renewals for additional terms of equal length unless terminated
by either party. The agreements also provide for severance benefits at the time
of termination unless termination is for cause, lack of performance,
resignation, or by reason of death.
8. Stock Option Plans
The Company has adopted a stock bonus plan whereby 62,500 shares of the
Company's common stock have been reserved for ultimate issuance to qualified
employees. The Company's Board of Directors has complete discretion as to which
employees qualify, the number of shares to be granted, and any restrictions to
be placed upon such shares. No more than 1,000 shares may be granted to any one
employee during any fiscal year.
The Company has an incentive stock option plan and a non-qualified stock option
plan whereby an aggregate of 125,000 shares, or 62,500 shares for each plan, of
the Company's unissued and restricted common stock was reserved for ultimate
issuance to selected employees. The stock option committee of the Board of
Directors administers both plans and has discretion to determine the terms of
options granted under each plan. Such terms include the exercise price of each
option, the number of shares subject to each option, and the exercisability of
such options. Options under the incentive plan must be granted at the fair
market value on the date of grant except that the option price must be one
hundred ten percent (110%) of such fair market value if the optionee owns more
than ten percent (10%) of the outstanding common stock. The aggregate fair
market value of the shares issuable on exercise of options granted to any
employee in a calendar year may not exceed $20,000 plus certain carry over
allowances. Options under the non-qualified plan must be granted at a price
equal to at least the fair market value of the shares on the date of grant. For
either plan, no more than 20 percent of the shares under option may be exercised
during the first year following the date of grant, and options expire five years
from the date of grant. The incentive plan and the non-qualified plan, as
amended on May 21, 1993, expired on June 30, 1998.
- --------------------------------------------------------------------------------
F-15
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
8. Stock Option Plans Continued
The Company has adopted a stock incentive plan whereby 150,000 shares of the
Company's common stock have been reserved for issuance to its employees. The
stock option committee of the Company's Board of Directors has complete
discretion to grant awards pursuant to the terms and provisions of the plan. The
stock incentive plan expires December 31, 2008.
Information regarding the stock option plans are summarized below:
Number of Option Price
Options Per Share
---------------------------------
Outstanding at January 1, 1997 96,250 $ 1.14-4.10
Granted 26,250 1.30-3.73
Exercised (6,875) 1.92-2.00
Expired (7,500) 2.19-3.03
---------------------------------
Outstanding at December 31, 1997 108,125 1.43-4.10
Granted 10,000 1.13-2.02
Exercised 10,750 1.14-3.03
Expired (10,000) 1.50-3.03
Forfeited (9,875) 1.30-4.10
---------------------------------
Outstanding at December 31, 1998 87,500 $ 1.13-4.10
---------------------------------
- --------------------------------------------------------------------------------
F-16
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Stock Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No.123, Accounting for Stock- Based Compensation.
Accordingly, no compensation cost has been recognized for employees in the
financial statements. Had compensation cost for the Company's stock options been
determined based on the fair value at the grant date for awards in 1998 and
1997, consistent with the provisions of SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:
Years Ended
December 31,
-----------------------------------
1998 1997
-----------------------------------
Net loss - as reported $ (1,710,252) $ (254,608)
Net loss - pro forma $ (1,719,632) $ (292,539)
Loss per share - as reported $ (1.57) $ (.30)
Loss per share - pro forma $ (1.58) $ (.34)
-----------------------------------
The fair value of each option grant is estimated in the date of grant using the
Black-Scholes option pricing model with the following assumptions:
December 31,
-----------------------------------
1998 1997
-----------------------------------
Expected dividend yield $ -0- $ -0-
Expected stock price volatility 88.86% 61.10%
Risk-free interest rate 5.00% 5.71%
Expected life of options 5 years 5 years
-----------------------------------
The weighted average fair value of options granted during 1998 and 1997 are $.94
and $1.45, respectively.
- --------------------------------------------------------------------------------
F-17
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Stock Based Compensation Continued
The following table summarizes information about stock options outstanding at
December 31, 1998:
Options Outstanding Options Exercisable
------------------------------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Prices 12/31/98 (Years) Price 12/31/98 Price
- --------------------------------------------------------------------------------
$1.13 to 1.30 26,750 2.9 $ 1.20 26,750 $ 1.20
1.90 to 2.40 32,000 2.6 2.09 32,000 2.09
2.90 to 4.10 28,750 2.1 3.55 28,750 3.55
- --------------------------------------------------------------------------------
$1.13 to 4.10 87,500 2.5 $ 2.30 87,500 $ 2.30
- --------------------------------------------------------------------------------
10. Earnings Per Share
Financial accounting standards require companies to present basic earnings per
share (EPS) and diluted earnings per share along with additional informational
disclosures. Information related to earnings per share is as follows:
Year Ended
December 31,
------------------------------------
1998 1997
------------------------------------
Basic and Diluted EPS
Net loss available to common $ (1,710,252) $ (254,608)
stockholders ------------------------------------
Weighted average common shares 1,087,000 861,000
------------------------------------
Net loss per share $ (1.57) $ (.30)
------------------------------------
- --------------------------------------------------------------------------------
F-18
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
11. Profit Sharing Plans
American Laser adopted a 401(k) retirement savings and profit sharing plan. All
full-time employees of American Laser who are at least 21 years of age and have
a minimum of three months of service with American Laser are eligible to
participate. The plan contains a matching contribution which is at American
Laser's discretion and is limited to two percent of the applicable employee's
salary. No matching contributions were made during 1998 and 1997.
12. Related Party Transactions
The Company has a lease agreement with Dr. William H. McMahan, a significant
shareholder and former Chairman, President and Chief Executive Officer of the
Company, which is described in note 7.
The Company has employment agreements with its President and Chief Executive
Officer and Vice President as described in note 7.
During the year ended December 31, 1998 the Company recognized $269,860 of
revenue from the sale of products to an entity owned by a director and major
shareholder of the Company.
13. Export Sales and Major Customers
Export sales to unaffiliated customers were as follows:
Years Ended
December 31,
-----------------------------------
1998 1997
-----------------------------------
Europe $ 2,109,735 $ 2,903,634
Other 247,800 341,781
-----------------------------------
$ 2,357,535 $ 3,245,415
-----------------------------------
Combined domestic and foreign sales and service of lasers to the Company's major
customers are as follows:
Years Ended
December 31,
-----------------------------------
Major customers 1998 1997
- ---------------
-----------------------------------
Company A $ 1,230,521 $ 1,472,790
Company B $ 755,929 $ 1,125,519
Company C $ 213,859 $ 989,883
- --------------------------------------------------------------------------------
F-19
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
14. Fair Value of Financial Instruments
None of the Company's financial instruments are held for trading purposes. The
Company estimates that the fair value of all financial instruments at December
31, 1998, does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgement is
necessarily required in interpreting market data to develop the estimates of
fair value, and, accordingly, the estimates are not necessarily indicative of
the amount that the Company could realize in a current market exchange.
15. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. The statement is effective for
fiscal years beginning after June 15, 1999. The Company believes that the
adoption of SFAS 133 will not have any material effect on the financial
statements of the Company.
- --------------------------------------------------------------------------------
F-20
BYLAWS
OF
LASER CORPORATION
ARTICLE I
---------
OFFICE
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation may also have offices in such other places
as the Board may from time to time designate.
The location of the initial principal office of the Corporation shall
be:
1832 South 3850 West
Salt Lake City, Utah 84104
ARTICLE II
----------
SHAREHOLDERS MEETING
Section 1. Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the state of
incorporation as shall be set forth in compliance with these Bylaws. The meeting
shall be held on the second Tuesday of the third calendar month immediately
following the close of the Corporation's fiscal year, at 10:00 a.m., or if not
held on such date as soon thereafter as the Board of Directors in its discretion
shall determine. This meeting shall be for the election of Directors and for the
transaction of such other business as may properly come before it.
Section 2. Special Meetings. Special meetings of shareholders, other than
those regulated by statute, may be called at any time by the Chief Executive
Officer, or a majority of the Directors, and must be called by the Chief
Executive Officer upon written request of the holders of 10% of the outstanding
shares entitled to vote at such special meeting. Written notice of such meeting
stating the place, the date and hour of the meeting, the purpose or purposes for
which it is called, and the name of the person by whom or at whose direction the
meeting is called shall be given. The notice shall be given to each shareholder
of record in the same manner as notice of the annual meeting. No business other
than that specified in the notice of the meeting shall be transacted at any such
special meeting.
Section 3. Notice of Shareholders Meetings. The Secretary shall give
written notice stating the place, day, and hour of the meeting, and in the case
of a special meeting, the purpose or purposes for which the meeting is called,
which shall be delivered not less than ten nor more than fifty days before the
date of the meeting, either personally or by mail to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his address as it appears on the books of the Corporation, with postage
thereon prepaid.
<PAGE>
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the state of
incorporation as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal office of the Corporation.
Section 5. Record Date. The Board of Directors may fix a date not less than
ten nor more than fifty days prior to any meeting as the record date for the
purpose of determining shareholders entitled to notice of and to vote at such
meetings of the shareholders. The transfer books may be closed by the Board of
Directors for a stated period not to exceed fifty days for the purpose of
determining shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose.
Section 6. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed.
Section 7. Voting. A holder of an outstanding share, entitled to vote at a
meeting, may vote at such meeting in person or by proxy. Except as may otherwise
be provided in the Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing in his name on the record of
shareholders. Except as herein or in the Articles of Incorporation otherwise
provided, all corporate action shall be determined by a majority of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. Informal Action by Shareholders. Any action required to be taken
at a meeting of the shareholders, or any action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
2
<PAGE>
ARTICLE III
-----------
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of "Directors. The Board of Directors may adopt
such rules and regulations for the conduct of their meetings and the management
of the Corporation as they deem proper.
Section 2. Number, Tenure and Qualifications. The number of Directors of
the Corporation shall be three (3). The number of Directors may be varied by
amending these Bylaws. Each Director shall hold office until the next annual
meeting of shareholders and until his successor shall have been elected and
qualified. Directors need not be residents of the state of incorporation or
shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than by this Bylaw, immediately following
after and at the same place as the annual meeting of shareholders. The Board of
Directors may provide, by resolution the time and place for the holding of
additional regular meetings without other notice than this resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by order of the Chairman of the Board, the Chief Executive Officer, or
by one-third of the Directors. The Secretary shall give notice of the time,
place and purpose or purposes of each special meeting by mailing the same at
least two days before the meeting or by telephoning or telegraphing the same at
least one day before the meeting to each Director.
Section 5. Quorum. A majority of the members of the Board of Directors
shall constitute a quorum for the transaction of business, but less than a
quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. At any meeting at which a quorum of directors shall be present, even
though without any notice, any business may be transacted.
Section 6. Manner of Acting. At all meetings of the Board of Directors,
each Director shall have one vote. The act of a majority present at a meeting
shall be the act: of the Board of Directors, provided a quorum is present. Any
action required to be taken or which may be taken at a meeting of the Board of
Directors may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the members of the Board of
Directors.
Section 7. Vacancies. A vacancy in the Board of Directors shall be deemed
to exist in case of death, resignation, or removal of any Director, or if the
authorized number of Directors be increased, or if the shareholders fail at any
meeting of shareholders at which any Director is to be elected, to elect the
full authorized number to be elected at that meeting. Any such vacancy may be
filled by the Directors then in office, though less than a quorum.
Section 8. Removals. Directors may be removed at any time by the
shareholders. Vacancies resulting from any removal shall be filled by the
Directors then in office, though less than a quorum, to hold office until the
next annual meeting or until his successor is duly elected and qualified, except
that any directorship to be filled by reason of removal by the shareholders may
be filled by election by the shareholders at the meeting at which the Director
is removed. No reduction of the authorized number of Directors shall have the
effect of removing any Director prior to the expiration of his term of office.
3
<PAGE>
Section 9. Resignation. A Director may resign at any time by delivering
written notification thereof to the Chief Executive Officer or Secretary of the
Corporation. Resignation shall become effective upon its acceptance by the Board
of Directors; provided, however, that if the Board of Directors has not acted
thereon within ten days from the date of its delivery, the resignation shall
upon the tenth day be deemed accepted.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action an any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 11. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12. Chairman. The Board of Directors may elect from its own number
a Chairman of the Board, who shall preside at all meetings of the Board of
Directors, and shall perform such other duties as may be prescribed from time to
time by the Board of Directors. In the absence of such an election, the Chief
Executive Officer shall serve as Chairman of the Board.
ARTICLE IV
----------
OFFICERS
Section 1. Number. The officers of the Corporation shall be a Chief
Executive Officer, President, one or more Vice-Presidents, a Secretary, a
Treasurer, a general Manager, and a general Counsel, each of whom shall be
elected by a majority of the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. In its discretion, the Board of Directors may leave unfilled
for any such period as it may determine any office except those of Chief
Executive Officer and Secretary. Any two or more offices may be held by the same
person, except the offices of Chief Executive Officer and Secretary. The Chief
Executive Officer shall be a member of the Board of Directors. Other officers
may or may not be directors or shareholders of the Corporation.
4
<PAGE>
Section 2. Election and Term of Office. The officers of the Corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as convenient. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
Section 3. Resignations. Any officer may resign at any time by delivering a
written resignation either to the Chief Executive Officer or to the Secretary.
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
Section 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights. Any such removal shall
require a two-thirds vote of the Board of Directors, exclusive of the officer in
question if he is also a Director.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office shall be
created, may be filled by the Board of Directors for the unexpired portion of
the term.
Section 6. Chief Executive Officer. The Chief Executive Officer shall be
the chief executive and administrative officer of the company. He shall preside
at all meetings of the stockholders and, in the absence of the Chairman of the
Board, at meetings of the Board of Directors. He shall exercise such duties as
customarily pertain to the office of Chief Executive Officer and shall have
general and active supervision over the property, business, and affairs of the
company and over its several officers. He may appoint officers, agents, or
employees other than those appointed by the Board of Directors. He may sign,
execute and deliver in the name of the company powers of attorney, contracts,
bonds and other obligations, and shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws.
Section 7. President. The President shall have such powers and perform such
duties as may be assigned to him by the Board of Directors or the Chief
Executive Officer. In the absence or disability of the Chief Executive Officer,
the President shall perform the duties and exercise the powers of the Chief
Executive Officer. The President may sign and execute contracts and other
obligations pertaining to the regular course of his duties.
Section 8. Vice-President. The Vice-President shall have such powers and
perform such duties as may be assigned to him by the Board of Directors or the
Chief Executive Officer. In the absence or disability of the President, the
Vice-President designated by the Board or the Chief Executive Officer shall
perform the duties and exercise the powers of the President. A Vice-President
may sign and execute contracts and other obligations pertaining to the regular
course of his duties.
5
<PAGE>
Section 9. Secretary. The Secretary shall, subject to the direction of a
designated Vice-President, keep the minutes of all meetings of the stockholders
and of the Board of Directors and, to the extent ordered by the Board of
Directors or the Chief Executive Officer, the minutes of meetings of all
committees. He shall cause notice to be given of meetings of stockholders, of
the Board of Directors, and of any committee appointed by the Board. He shall
have custody of the corporate seal and general charge of the records, documents
and papers of the company not pertaining to the performance of the duties vested
in other officers, which shall at all reasonable times be open to the
examination of any Director. He may sign or execute contracts with the Chief
Executive Officer, President, or a Vice-President thereunto authorized in the
name of the company and affix the seal of the company, thereto. He shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws. He shall be sworn to the faithful discharge of his
duties. Assistant Secretaries shall assist the Secretary and shall keep and
record such minutes of meetings as shall be directed by the Board of Directors.
Section 10. Treasurer. The Treasurer shall, subject to the direction of a
designated Vice-President, have general custody of the collection and
disbursement of funds of the company. He shall endorse on behalf of the company
for collection checks, notes and other obligations, and shall deposit the same
to the credit of the company in such bank or banks or depositories as the Board
of Directors may designate. He may sign, with the Chief Executive Officer or
such other persons as may be designated for the purpose by the Board of
Directors, all bills of exchange or promissory notes of the company. He shall
enter or cause to be entered regularly in the books of the company full and
accurate account of all monies received and paid by him on account of the
company; shall at all reasonable times exhibit his books and accounts to any
Director of the company upon application at the office of the company during
business hours; and, whenever required by the Board of Directors or the Chief
Executive Officer, shall render a statement of his accounts. He shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
Section 11. General Counsel. The General Counsel shall advise and represent
the company generally in all legal matters and proceedings, and shall act as
counsel to the Board of Directors and the Executive Committee. The General
Counsel may sign and execute pleadings, powers of attorney pertaining to legal
matters, and any other contracts and documents in the regular course of his
duties.
Section 12. General Manager. The Board of Directors may employ and appoint
a General Manager who, or may not, be one of the officers or Directors of the
corporation. He shall be the chief operating officer of the corporation and,
subject to the directions of the Board of Directors, shall have general charge
of the business operations of the corporation and general supervision over its
employees and agents. He shall have the exclusive management of the business of
the corporation and of: all of its dealings, but at all times subject to the
control of the Board of Directors. Subject to the approval of the Board of
Directors or the Executive Committee, he shall employ all employees of the
corporation, or delegate such employment to subordinate officers, or such
division chiefs, and shall have authority to discharge any person so employed.
He shall make a report to the Chief Executive Officer and Directors quarterly,
or more often if required to do so, setting forth the result of the operations
under his charge, together with suggestions looking to the improvement and
betterment of the condition of the corporation, and to perform such other duties
as the Board of Directors shall require.
Section 13. Other Officers. Other officers shall perform such duties and
have such powers as may be assigned to them by the Board of Directors.
6
<PAGE>
Section 14. Salaries. The salaries or other compensation of the officers of
the corporation shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents. No officer shall be prevented from receiving any such salary
or compensation by reason of the fact that he is also a Director of the
corporation.
Section 15. Surety Bonds. In case the Board of Directors shall so require,
any officer or agent of the corporation shall execute to the corporation a bond
in such sums and with such surety or sureties as the Board of Directors may
direct, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting for
all property, monies or securities of the corporation which may come into his
hands.
ARTICLE V
---------
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than two nor more than
seven members, one of whom shall be the Chief Executive Officer, and shall
designate one of such members as Chairman. The Board may also designate one or
more of its members as alternates to serve as members of the Executive Committee
in the absence of a regular member or members. The Board of Directors reserves
to itself alone the power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, change the membership of any
committee at any time, fill vacancies therein, and discharge any committee
either with or without cause at any time. Subject to the foregoing limitations,
the Executive Committee shall possess and exercise all other powers of the Board
of Directors during the intervals between meetings.
Section 2. Other Committees. The Board of Directors may also appoint from
among its own members such other committees as the Board of Directors may
determine, which shall in each case consist of not less than two Directors, and
which shall have such powers and duties as shall from time to time be prescribed
by the Board. The Chief Executive Officer shall be a member ex officio of each
committee appointed by the Board of Directors. A majority of the members of any
committee may fix its rules of procedure.
ARTICLE VI
----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
7
<PAGE>
Section 2. Loans. No loan or advances shall be contracted on behalf of the
corporation, no negotiable paper or other evidence of its obligation under any
loan or advance shall be issued in its name, and no property of the corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of the corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
Section 3. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select, or as may be selected by any officer or agent authorized to do so by the
Board of Directors.
Section 4. Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the corporation shall be signed by
such officer or officers or such agent or agents of the corporation and in such
manner as the Board of Directors from time to time may determine. Endorsements
for deposit to the credit of the corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
Section 5. Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the Chief Executive Officer, President or a Vice-President and by the
Treasurer or by the Secretary, and sealed with the seal of the corporation. The
seal may be facsimile, engraved or printed. Where such bond or debenture is
authenticated with the manual signature of an authorized officer of the
corporation or other trustee designated by the indenture of trust or other
agreement under which such security is issued, the signature of any of the
corporation's officers named thereon may be facsimile. In case any officer who
signed, or whose facsimile signature has been used on any such bond or
debenture, shall cease to be an officer of the corporation for any reason before
the same has been delivered by the corporation, such bond or debenture may
nevertheless be adopted by the corporation and issued and delivered as though
the person who signed it or whose facsimile signature has been used thereon had
not ceased to be such officer.
ARTICLE VII
-----------
CAPITAL STOCK
Section 1. Certificate of Shares. The shares of the corporation shall be
represented by certificates prepared by the Board of Directors and signed by the
Chief Executive Officer, President or the Vice-President and by the Secretary,
and sealed with the seal of the corporation or a facsimile. The signatures of
such officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or one of its employees. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and dates of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lot, destroyed or mutilated certificate, a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
8
<PAGE>
Section 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
Section 3. Transfer Agent and Registrar. The Board of Directors shall have
power to appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
Section 4. Lost or Destroyed Certificates. The corporation may issue a new
certificate to replace any certificate theretofore issued by it alleged to have
been lost or destroyed. The Board of Directors may require the owner of such a
certificate or his legal representative to give the corporation a bond in such
sum and with such sureties as the Board of Directors may direct to indemnify the
corporation as transfer agents and registrars, if any, against claims that may
be made on account of the issuance of such new certificates. A new certificate
may be issued without requiring any bond.
Section 5. Consideration for Shares. The capital stock of the corporation
shall be issued for such consideration, but not less than the par value thereof,
as shall be fixed from time to time by the Board of Directors. In the absence of
fraud, the determination of the Board of Directors as to the value of any
property or services received in full or partial payment of shares shall be
conclusive.
Registered Shareholders. The company shall be entitled to treat the holder of
record of any share or shares of stock as the holder thereof, in fact, and shall
not be bound to recognize any equitable or other claim to or on behalf of this
company to any and all of the rights and power incident to the ownership of such
stock at any such meeting, and shall have power and authority to execute and
deliver proxies and consent on behalf of this company in connection with the
exercise by this company of the rights and powers incident to the ownership of
such stock. The Board of Directors, from time to time, may confer like powers
upon any other person or persons.
9
<PAGE>
ARTICLE VIII
------------
INDEMNIFICATION
Section 1. Indemnification. No officer or Director shal1 be personally
liable for any obligations of the corporation or for any duties or obligations
arising out of any acts or conduct of said officer or Director performed for or
on behalf of the corporation. The corporation shall and does hereby indemnify
and hold harmless each person and his heirs and administrators who shall serve
at any time hereafter as a Director or officer of the corporation from and
against any and all claims, judgment sand liabilities to which such persons
shall become subject by reason of his having heretofore or hereafter been a
Director or officer of the corporation, or by reason of any action alleged to
have been heretofore or hereafter taken or omitted to have been taken by him as
such Director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such person from all suits or claims as
provided for under the provisions of the Business Corporation Act of the state
of incorporation; provided, however, that no such person shall be indemnified
against, or be reimbursed for, any expense incurred in connection with any claim
or liability arising out of his own negligence or willful misconduct. The rights
accruing to any person under the foregoing provisions of this section shall not
exclude any other right to which he may lawfully be entitled, nor shall anything
herein contained restrict the right of the corporation to indemnify or reimburse
such person in any proper case, even though not specifically herein provided
for. The corporation, its directors, officers, employees and agents shall be
fully protected in taking any action or making any payment, or in refusing so to
do in reliance upon the advice of counsel.
Section 2. Other Indemnification. The, indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee, and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 3. Insurance. The corporation may purchase and maintain insurance
an behalf of any person who is or was a Director, officer or employee of the
corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
liability under the provisions of this section.
Section 4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the corporation by its Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
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ARTICLE IX
----------
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder" or Director
of the corporation under the provisions of these Bylaws, or under the provisions
of the Articles of Incorporation, or under the provisions of the Business
Corporation Act of the state of incorporation, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Attendance at any meeting shall constitute a waiver of notice of such
meetings, except where attendance is for the express purpose of objecting to the
legality of that meeting.
ARTICLE X
---------
AMENDMENTS
These bylaws may be altered, amended, repealed, or new bylaws adopted by
the Board of Directors at any regular or special meeting. Any bylaw adopted by
the Board may be repealed or changed by action of the shareholders.
ARTICLE XI
----------
FISCAL YEAR
The fiscal year of the corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XII
-----------
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the corporation.
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ARTICLE XIII
------------
CORPORATE SEAL
The seal of the corporation shall be in the form of a circle and shall bear
the name of the corporation and the year of incorporation per sample affixed
hereto.
/s/ Mark Ballard
S E A L ________________________________
Secretary
January 21, 1983
Dated: ____________________
461575
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AMENDMENT TO THE BYLAWS
Section 1. Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the state of
incorporation as shall be set forth in compliance with these Bylaws. The meeting
shall be held on the fourth Tuesday of the fourth calendar month immediately
following the close of the corporation's fiscal year, at 10:00 a.m., or if not
held on such date as soon thereafter as the Board of Directors in its discretion
shall determine. This meeting shall be for the election of Directors and for the
transaction of such other business as may properly come before it.
Section 2. Number, Tenure and Qualifications. The number of Directors of the
Corporation shall be five (5). The number of Directors may be varied by amending
these Bylaws. Each Director shall hold office until his successor and shall have
been elected and qualified. Directors need not be residents of the state of
incorporation or shareholders of the Corporation.
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AMENDMENT OF THE BYLAWS
OF LASER CORPORATION
Article III, Section 2, Number, Tenure and Qualifications.
- ----------------------------------------------------------
The number of Directors of the Corporation shall be five (5). The number of
Directors may be varied by amending these Bylaws. Each Director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified. Directors need not be residents of the
state of incorporation or shareholders of the Corporation.
The above amendment to the bylaws of Laser Corporation was duly adopted by
the Board of Directors on October 16, 1998.
/s/ Rod O. Julander
---------------------------------
Rod O. Julander
Secretary
461575
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Exhibit 4(d)
LASER CORPORATION
STOCK INCENTIVE PLAN
TO BE EFFECTIVE JANUARY 1, 1998
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this Plan is the Laser Corporation Stock Incentive Plan (the
"Plan"). The purpose of this Plan is to enable the Corporation (as hereinafter
defined) and its Subsidiaries (as hereinafter defined) to obtain and retain
competent personnel who will contribute to the Corporation's success by their
ability, ingenuity and industry and to provide incentives to the participating
officers and key employees which are related to increases in stockholder value
and will therefore inure to the benefit of all stockholders of the Corporation.
For purposes of this Plan, the following terms shall be defined as set
forth below:
(a) "Award" means any grant under this Plan in the form of Stock Options,
Performance Stock Units, Restricted Stock Units or any combination of the
foregoing.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
(d) "Committee" means the Stock Option Committee or any other committee the
Board may subsequently appoint to administer this Plan. The Committee shall be
composed entirely of directors who meet the qualifications referred to in
Section 2 of this Plan.
(e) "Corporation" means Laser Corporation, a corporation incorporated under
the laws of the State of Utah (or any successor corporation).
(f) "Disability" means an event of illness or other incapacity of Optionee
resulting in Optionee's failure or inability to discharge Optionee's duties as
an employee of the Corporation, any Subsidiary or any Related Entity for ninety
(90) or more days during any period of 120 consecutive days.
(g) "Eligible Employee" means an employee of the Corporation, any
Subsidiary or any Related Entity as described in Section 4 of this Plan.
(h) "Fair Market Value" means, as of any given date, with respect to any
Awards granted hereunder, the mean of the high and low trading price of the
Stock on such date as reported on The Nasdaq Stock Market or if the Stock is not
then traded on The Nasdaq Stock Market, on such other national securities
exchange on which the Stock is admitted to trade or, if none, on the National
Association of Securities Dealers Automated Quotation System if the Stock is
admitted for quotation thereon; provided, however, that if any such system,
exchange or quotation system is closed on any day on which Fair Market Value
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is to be determined, Fair Market Value shall be determined as of the first day
immediately proceeding such day on which such system, exchange or quotation
system was open for trading; provided, further, that in all other circumstances,
"Fair Market Value" means the value determined by the Committee after obtaining
an appraisal by one or more independent appraisers meeting the requirements of
regulations issued under Section 170(a)(1) of the Code.
(i) "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
("Rule 16b-3"), as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), or any successor definition adopted by the Securities and Exchange
Commission.
(j) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(k) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of this Plan which remains outstanding.
(l) "Participant" means any Eligible Employee selected by the Committee,
pursuant to the Committee's authority in Section 2 of this Plan, to receive
Awards.
(m) "Performance Stock Unit" means the right to receive one share of Stock
as set forth in an Award granted pursuant to Section 7 of this Plan.
(n) "Related Entity" means any corporation, joint venture or other entity,
domestic or foreign, other than a Subsidiary, in which the Corporation owns,
directly or indirectly, a substantial equity interest.
(o) "Restricted Stock Unit" means the right to receive one share of Stock
as set forth in an Award granted pursuant to Section 7 of this Plan.
(p) "Retirement" means (i) retirement from active employment under a
retirement plan of the Corporation, any Subsidiary or Related Entity or under an
employment contract with any of them or (ii) termination of employment at or
after age 55 under circumstances which the Committee, in its sole discretion,
deems equivalent to retirement.
(q) "Stock" means the common stock, par value $0.05 per share, of the
Corporation.
(r) "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 5 of this Plan.
(s) "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Corporation, if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 2. ADMINISTRATION.
This Plan shall be administered by the Committee, composed solely of two or
more directors who are Non-Employee Directors, who shall be appointed by the
Board and who shall serve at the pleasure of the Board. In the event that a
Committee has not been appointed or in the Board's sole discretion, this Plan
shall be administered by the Board which shall have all of the power
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and authority of the Committee set forth below. The Committee shall have the
power and authority in its sole discretion to grant Awards pursuant to the terms
and provisions of this Plan.
In particular, the Committee shall have the full authority, not
inconsistent with this Plan:
(a) to select Participants;
(b) to determine whether and to what extent Awards are to be granted to
Participants hereunder;
(c) to determine the number of shares of Stock to be covered by each such
Award granted hereunder, but in no case shall such number be in the aggregate
greater than that allowed under this Plan;
(d) to approve or ratify transactions by Participants involving
acquisitions from the Corporation or dispositions to the Corporation of equity
securities of the Corporation made pursuant to the terms of this Plan;
(e) to determine the terms and conditions of any Award granted hereunder
(including, without limitation, (i) the restrictive periods applicable to
Restricted Stock Unit Awards and (ii) the performance objectives and periods
applicable to Performance Stock Unit Awards);
(f) to waive compliance by a Participant with any obligation to be
performed by such Participant under any Award and to waive any term or condition
of any such Award (provided, however, that no such waiver shall detrimentally
affect the rights of the Participant without such Participant's consent); and
(g) to determine the terms and conditions which shall govern all written
agreements evidencing the Awards.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time deem advisable; to interpret the provisions of this Plan and
the terms and conditions of any Award issued, expired, terminated, canceled or
surrendered under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan.
All decisions made by the Committee pursuant to the provisions of this Plan
and as to the terms and conditions of any Award (and any agreements relating
thereto) shall be final and binding on all persons, including the Corporation
and the Optionees.
SECTION 3. NUMBER OF SHARES OF STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under this Plan shall be one hundred fifty thousand (150,000). Such shares of
Stock may consist, in whole or in part, of authorized and unissued shares of
Stock, treasury shares or issued shares of Stock reacquired by the Corporation
at any time, as the Board may determine.
To the extent that (a) a Stock Option expires or is otherwise terminated,
canceled or surrendered without being exercised (including, without limitation,
in connection with the grant of a replacement option) or
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<PAGE>
(b) any Restricted Stock Unit Award or Performance Stock Unit Award granted
hereunder expires or is otherwise terminated or is canceled, the shares of Stock
underlying such Stock Option or subject to such Restricted Stock Unit Award or
Performance Stock Unit Award shall again be available for issuance in connection
with future Awards under this Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off, or other change in corporate
structure or capitalization affecting the Stock, the Committee shall make an
equitable adjustment or substitution in the number and class of shares reserved
for issuance under this Plan, the number and class of shares covered by
outstanding Awards and the option price per share of Stock Options to reflect
the effect of such change in corporate structure or capitalization on the Stock;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated; provided further, however, that if by reason of any such
change in corporate structure or capitalization a Participant holding a
Restricted Stock Unit Award or Performance Stock Unit Award shall be entitled,
subject to the terms and conditions of such Award, to additional or different
shares of any security, the issuance of such additional or different shares
shall thereupon be subject to all of the terms and conditions (including
restrictions and performance criteria) which were applicable to such Award prior
to such change in corporate structure or capitalization; and, provided, further,
however, that unless the Committee in its sole discretion determines otherwise,
any issuance by the Corporation of shares of stock of any class or securities
convertible into shares of stock of any class shall not affect, and no such
adjustment or substitution by reason thereof shall be made with respect to, the
number or class of shares reserved for issuance under this Plan, the number or
class of shares covered by outstanding Awards or any option price or applicable
price.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Corporation, its Subsidiaries and
its Related Entities who are responsible for or contribute to the management,
growth or profitability of the business of the Corporation, its Subsidiaries or
its Related Entities shall be eligible to be granted Awards; provided however,
with respect to an employee of a Related Entity, that such person was an
employee of the Corporation, a Subsidiary or, if originally an employee of the
Corporation or a Subsidiary, of another Related Entity immediately prior to
becoming employed by such Related Entity and accepted employment with such
Related Entity at the request of the Corporation or a Subsidiary. The
Participants under this Plan shall be selected, from time to time, by the
Committee, in its sole discretion, from among those Eligible Employees.
SECTION 5. STOCK OPTIONS.
(a) GRANT AND EXERCISE. Stock Options may be granted either alone or in
addition to other Awards granted under this Plan. Any Stock Option granted under
this Plan shall be in such form as the Committee may, from time to time,
approve, and the terms and conditions of Stock Option Awards need not be the
same with respect to each Optionee. Each Optionee shall enter into a Stock
Option agreement ("Stock Option Agreement") with the Corporation, in such form
as the Corporation shall determine, which agreement shall set forth, among other
things, the option price of the option, the term of the option and conditions
regarding exercisability of the option granted thereunder.
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(i) NATURE OF OPTIONS. The Committee shall have the authority to
grant any Participant Nonqualified Stock Options.
(ii) EXERCISABILITY. Subject to such terms and conditions as
shall be determined by the Committee in its sole discretion at or after the time
of grant, Stock Options shall be exercisable from time to time to the extent of
33% of the number of shares of Stock covered by the Stock Option immediately
upon the date of grant of the Stock Option, and to the extent of 100% of the
number of shares of Stock covered by the Stock Option on and after the first
anniversary and before the expiration of the stated term of the Stock Option (or
to such lesser extent as the Committee in its sole discretion shall determine at
the time of grant or to such greater extent as the Committee in its sole
discretion shall determine at or after the time of grant).
(iii) METHOD OF EXERCISE. Stock Options may be exercised by
giving written notice of exercise delivered in person or by mail as required by
the terms of any Stock Option Agreement at the Corporation's principal executive
office, specifying the number of shares of Stock with respect to which the Stock
Option is being exercised, accompanied by payment in full of the option price in
cash or its equivalent as determined by the Committee in its sole discretion. If
requested by the Committee, the Optionee shall deliver to the Corporation the
Stock Option Agreement evidencing the Stock Option being exercised for notation
thereon of such exercise and return thereafter of such agreement to the
Optionee. As determined by the Committee in its sole discretion at or after the
time of grant, payment of the option price in full or in part may also be made
in the form of shares of unrestricted Stock already owned by the Optionee (based
on the Fair Market Value of the Stock on the date the Stock Option is
exercised). The Committee also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with this Plan's purpose and applicable law. An Optionee shall
generally have the rights to dividends or other rights of a stockholder with
respect to shares of Stock subject to the Stock Option when the Optionee has
given written notice of exercise, has paid in full for such shares of Stock,
and, if requested, has made representations described in Section 9(a) of this
Plan.
(b) TERMS AND CONDITIONS. Stock Options granted under this Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem desirable.
(i) OPTION PRICE. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant, but shall be not less than 100% of the Fair Market Value of the
Stock on the date of the grant.
(ii) OPTION TERM. The term of each Stock Option shall be fixed
by the Committee at the time of grant, but no Stock Option shall be exercisable
more than ten years after the date such Stock Option is granted.
(iii) TRANSFERABILITY OF OPTIONS. Except as otherwise
determined by the Committee, no Stock Options shall be transferable by the
Optionee otherwise than by will or by the laws of descent and distribution and
all Stock Options shall be exercisable, during the Optionee's lifetime, only by
the Optionee, or in the case of Optionee's legal incompetency, only by
Optionee's guardian or legal representative.
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(iv) OPTION EXERCISE AFTER TERMINATION BY REASON OF DEATH OR
DISABILITY. If an Optionee's employment with the Corporation, any Subsidiary or
any Related Entity terminates by reason of death or Disability, and Stock Option
held by such Optionee may thereafter be exercised for a period of one year (or
such shorter period as the Committee in its sole discretion shall specify at or
after the time of grant) from the date of such termination or until the
expiration of the stated term if such Stock Option, whichever period is shorter,
to the extent to which the Optionee would on the date of termination have been
entitled to exercise the Stock Option (or to such greater or lesser extent as
the Committee in its sole discretion shall determine at or after the time of
grant).
(v) OPTION EXERCISE AFTER TERMINATION WITHOUT CAUSE OR
CONSTRUCTIVE TERMINATION. If an Optionee's employment with the Corporation, any
Subsidiary, or any Related Entity is terminated, by the Corporation or such
Subsidiary or such Related Entity, without "Cause" (as such term is defined
within the Stock Option Agreement) or in the event of "Constructive Termination"
(as such term is defined within the Stock Option Agreement) of the Optionee's
employment with the Corporation or such Subsidiary or such Related Entity is so
terminated the Committee, in its sole discretion, may permit the Optionee to
exercise any Stock Option held by such Optionee, to the extent not theretofore
exercised, in whole or in part with respect to all remaining shares covered by
the Stock Option at any time prior to the expiration of the Stock Option (or
such shorter period as the Committee in its sole discretion shall specify at or
after the time of grant), to the extent to which the Optionee would on the date
of termination have been entitled to exercise the Stock Option (or to such
greater or lesser extent as the Committee in it sole discretion shall determine
at or after the time of grant). An Optionee's acceptance of employment, at the
request of the Corporation or a Subsidiary, with a Related Entity (or acceptance
of employment, at the request of the Corporation or a Subsidiary, with any other
Related Entity), shall not be deemed a termination of employment hereunder and
any Stock Option held by Optionee may be exercised thereafter to the extent that
the Optionee would on the date of exercise have been entitled to exercise such
Stock Option if such Optionee had continued to be employed by the Corporation or
such Subsidiary (or such initial Related Entity), provided that the Optionee has
been in continuous employ with the Related Entity to which such Optionee has
moved from the date of acceptance of employment therewith until the date of
exercise.
(vi) OPTION EXERCISE AFTER TERMINATION OR RESIGNATION. If an
Optionee's employment with the Corporation, any Subsidiary, or any Related
Entity terminates for any reason not set forth in Sections 5(iv) or (v) above,
the Committee, in its sole discretion, may permit the Optionee to exercise any
Stock Option held by such Optionee to the extent such Option was exercisable on
the date of such termination (or to such greater or lesser extent as the
Committee in its sole discretion shall determine at or after the time of grant)
for a period of ninety (90) days from the date of such termination (or such
shorter period as the Committee in its sole discretion shall specify at or after
the time of grant).
(vii) OTHER TERMINATION. Except as otherwise provided in this
Section 5 of this Plan, or as determined by the Committee in its sole
discretion, if an Optionee's employment with the Corporation, any Subsidiary or
any Related Entity terminates, all Stock Options held by the Optionee will
terminate.
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SECTION 6. RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS.
(a) GRANT. Awards of Restricted Stock Units or Performance Stock Units may
be granted either alone or in addition to other Awards granted under this Plan.
Each Restricted Stock Unit or Performance Stock Unit represents the right to
receive, subject to the terms and provisions of this Plan and any agreements
evidencing such Awards, one share of Stock. If the Committee in its sole
discretion so determines at the time of grant, a Participant to whom a
Restricted Stock Unit Award or Performance Stock Unit Award has been granted may
be credited with an amount equivalent to all cash dividends ("Dividend
Equivalents") that would have been paid to the holder of such Restricted Stock
Unit Award or Performance Stock Unit Award if one share of Stock for every
Restricted Stock Unit or Performance Stock Unit awarded had been issued to the
holder on the date of grant of such Restricted Stock Unit Award or Performance
Stock Unit Award. The Committee shall determine the terms and conditions of each
Restricted Stock Unit Award and Performance Stock Unit, including without
limitation, the number of Restricted Stock Units or Performance Stock Units to
be covered by such Awards, the restricted period applicable to Restricted Stock
Unit Awards and the performance objectives applicable to Performance Stock Unit
Awards. The Committee in its sole discretion may prescribe terms and conditions
applicable to the vesting of such Restricted Stock Unit Awards or Performance
Stock Unit Awards in addition to those provided in this Plan. The Committee
shall establish such rules and guidelines governing the crediting of Dividend
Equivalents, including the timing, form of payment and payment contingencies of
Dividend Equivalents, as it may deem desirable. The Committee in its sole
discretion may at any time accelerate the time at which the restrictions on all
or any part of a Restricted Stock Unit Award lapse or deem the performance
objectives with respect to all or any part of a Performance Stock Unit Award to
have been attained. Restricted Stock Units Awards and Performance Stock Unit
Awards shall not be transferable otherwise than by will or by the laws of
descent and distribution. Shares of Stock shall be deliverable upon the vesting
of Restricted Stock Unit Awards and Performance Stock Unit Awards for no
consideration other than services rendered or, in the Committee's sole
discretion, the minimum amount of consideration other than services (such as the
par value of Stock) required to be received by the Corporation in order to
assure compliance with applicable state law, which amount shall not exceed 10%
of the Fair Market Value of such shares of Stock on the date of issuance. Each
such Award shall be evidenced by a Restricted Stock Unit agreement ("Restricted
Stock Unit Award Agreement") or Performance Stock Unit Award agreement
("Performance Stock Unit Award Agreement").
(b) TERMS AND CONDITIONS. Unless otherwise determined by the Committee in
its sole discretion:
(i) a breach of any term or condition provided in this Plan,
the Restricted Stock Unit Award Agreement or the Performance Stock Unit Award
Agreement or established by the Committee with respect to such Restricted Stock
Unit Award or Performance Stock Unit Award will cause a cancellation of the
unvested portion of such Restricted Stock Unit Award or Performance Stock Unit
Award (including any Dividend Equivalents credited in respect thereof) and the
Participant shall not be entitled to receive any consideration in respect of
such cancellation; and
(ii) termination of such holder's employment with the
Corporation, any Subsidiary or any Related Entity prior to the lapsing of the
applicable restriction period or attainment of applicable performance objectives
will cause a cancellation of the unvested portion of such Restricted Stock Unit
Award or Performance Stock Unit Award (including any
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Dividend Equivalents credited in respect thereof) and the Participant shall not
be entitled to receive any consideration in respect of such cancellation.
(c) COMPLETION OF RESTRICTION PERIOD AND ATTAINMENT OF PERFORMANCE
OBJECTIVES. To the extent that restrictions with respect to any Restricted Stock
Unit Award lapse or performance objectives with respect to any Performance Stock
Unit Award are attained and provided that other applicable terms and conditions
have been satisfied:
(i) such of the Restricted Stock Units or Performance Stock
Units as to which restrictions have lapsed or performance objectives have been
attained shall become vested and the Committee shall cause to be issued and
delivered to the Participant a stock certificate representing a number of shares
of Stock equal to such number of Restricted Stock Units or Performance Stock
Units, and, subject to Section 11(a) hereof, free of all restrictions; and
(ii) any Dividend Equivalents credited in respect of such
Restricted Stock Units or Performance Stock Units shall become vested to the
extent that such Restricted Stock Units or Performance Stock Units shall have
become vested and the Committee shall cause such Dividend Equivalents to be
delivered to the Participant.
Any such Restricted Stock Unit Award or Performance Stock Unit Award
(including any Dividend Equivalents credited in respect thereof) that shall not
have become vested at the end of the applicable restricted period or the period
given for the attainment of performance objectives shall expire, terminate and
be cancelled and the Participant shall not thereafter have any rights with
respect to the Restricted Stock Units or Performance Stock Units (or any
Dividend Equivalents credited in respect thereto) covered thereby.
SECTION 7. AMENDMENT AND TERMINATION.
The Board may amend, alter, or discontinue this Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of a
Participant under any Award theretofore granted without such Participant's
consent, or which, without the approval of the stockholders of the Corporation
(where such approval is necessary to satisfy then applicable requirements of
Rule 16b-3 under the Exchange Act, any Federal tax law relating to Incentive
Stock Options or applicable state law), would:
(a) except as provided in Section 3 of this Plan, increase the total number
of shares of Stock which may be issued under this Plan;
(b) except as provided in Section 3 of this Plan, decrease the option price
of any Stock Option to less than 100% of the Fair Market Value on the date of
the grant of the Option;
(c) change the class of employees eligible to participate in this Plan; or
(d) extend (i) the period during which Stock Options may be granted or (ii)
the maximum period of any Award under Sections 5(b)(ii) or 6(b)(i) of this Plan.
Except as restricted herein with respect to Incentive Stock Options, the
Committee may amend or alter the terms and conditions of any Award theretofore
granted, and of any agreement evidencing such Award, prospectively or
retroactively, but no such amendment or alteration shall impair the rights of
any Optionee under such Award or agreement without such Optionee's consent.
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SECTION 8. UNFUNDED STATUS OF PLAN.
This Plan is intended to constitute an "unfunded" plan. With respect to any
payments not yet made and due to a Participant by the Corporation, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general unsecured creditor of the Corporation.
SECTION 9. GENERAL PROVISIONS.
(a) The Committee may require each Optionee purchasing shares of Stock
pursuant to a Stock Option to represent to and agree with the Corporation in
writing that such Optionee is acquiring the shares of Stock without a view to
distribution thereof. All certificates for shares of Stock delivered under this
Plan and, to the extent applicable, all evidences of ownership with respect to
Dividend Equivalents delivered under this Plan, shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed or
quotation system on which the Stock is admitted for trading and any applicable
Federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan shall
not confer upon any employee of the Corporation, any Subsidiary or any Related
Entity any right to continued employment with the Corporation, any Subsidiary or
any Related Entity as the case may be, nor shall it interfere in any way with
the right of the Corporation, any Subsidiary or any Related Entity to terminate
the employment of any of its employees at any time.
(c) Each Participant shall be deemed to have been granted an Award on the
date the Committee took action to grant such Award under this Plan or such later
date as the Committee in its sole discretion shall determine at the time such
grant is authorized.
(d) Unless the Committee otherwise determines, each Participant shall, no
later than the date as of which the value of an Award first becomes includable
in the gross income of the Participant for federal income tax purposes, pay to
the Corporation, or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Award. The obligations of the Corporation under
this Plan shall be conditional on such payment or arrangements and the
Corporation (and, where applicable, its Subsidiaries and its Related Entities)
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant. A Participant may
elect to have such tax withholding obligation satisfied, in whole or in part, by
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(i) authorizing the Corporation to withhold from shares of Stock to be issued
upon the exercise of a Stock Option or upon the vesting of any Restricted Stock
Unit Award or the Performance Stock Unit Award a number of shares of Stock with
an aggregate Fair Market Value that would satisfy the withholding amount due, or
(ii) transferring to the Corporation shares of Stock owned by the Participant
with an aggregate Fair Market Value that would satisfy the withholding amount
due. With respect to any Participant who is an executive officer, the election
to satisfy the tax withholding obligations relating to the exercise of a Stock
Option or to the vesting of a Restricted Stock Unit Award or Performance Stock
Unit Award in the manner permitted by this subsection (d) shall be made during
the "window period" as described within the Corporation Insider Trading Policy
unless otherwise determined in the sole discretion of the Committee of the
Board.
(e) No member of the Board or the Committee, nor any officer or employee of
the Corporation acting on behalf of the Board or the Committee, shall be
personally liable for any action, failure to act, determination or
interpretation taken or made in good faith with respect to this Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Corporation acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Corporation in respect of any such
action, failure to act, determination or interpretation.
(f) This Plan is intended to satisfy the conditions of Rule 16b-3 under the
Exchange Act, and all interpretations of this Plan shall, to the extent
permitted by law, regulations and rulings, be made in a manner consistent with
and so as to satisfy the conditions of Rule 16b-3 under the Exchange Act. The
term "executive officer" as used in this Plan means any director or officer who
is subject to the provisions of Section 16(b) of the Exchange Act. Any
provisions of this Plan or the application of any provision of this Plan
inconsistent with Rule 16b-3 under the Exchange Act shall be inoperative and
shall not affect the validity of this Plan.
(g) Notwithstanding any other provision herein to the contrary, the maximum
number of shares with respect to which Awards may be granted to the same
Participant under this Plan may not exceed, in the aggregate, 20,000 shares,
except to the extent of adjustments authorized by Section 3 of this Plan.
SECTION 10. EFFECTIVE DATE OF PLAN.
This Plan shall be effective January 1, 1998, subject to the approval by
the affirmative vote of the holders of a majority of the shares of Stock of the
Corporation present in person or by proxy at the meeting of stockholders on that
date.
SECTION 11. TERM OF PLAN.
No Award shall be granted under this Plan on or after the tenth anniversary
of the effective date of this Plan; provided, however, that Awards granted prior
to such tenth anniversary may extend beyond that date.
10
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Exhibit 4(g)
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT made and entered into this 4th day of December, 1998,
by and between NP#2, LLC, a Utah limited liability company, hereinafter referred
to as the "Landlord", and Laser Corporation, a Utah corporation, hereinafter
referred to as the "Tenant":
W I T N E S S E T H
Article 1. PREMISES AND TERM. Landlord hereby leases and by these presents
does lease and demise to the Tenant, and the Tenant does lease and take from the
Landlord, the premises described on Exhibit "B" attached hereto, consisting of
approximately 32,275 square feet of office/production/warehouse space, the
Demised Premises, situated in the building to be erected on the property
described on Exhibit "A" attached hereto, together with all the easements,
rights, privileges and appurtenances thereunto belonging or in any way
appertaining to the Demised Premises.
TO HAVE AND TO HOLD the said Demised Premises, together with all and
singular the improvements, appurtenances, rights, privileges and easements
thereunto belonging to or in anywise appertaining, unto Tenant for a term
commencing as of the date set forth herein under Article 3 and continuing
thereafter to and including the date ten (10) years from the first day of the
first month immediately following such commencement date, subject, however, to
extension and renewal if hereafter provided. When the date of commencement of
the term has been determined, Landlord and Tenant may enter into in agreement in
recordable form setting forth such date at the request of either the Landlord or
the Tenant.
Article 2. CONSTRUCTION OF IMPROVEMENTS.
---------- -----------------------------
A. Building and On-Site Improvements. Landlord agrees, at Landlord's sole
cost and expense, to construct a building shell and on-site improvements, in
accordance with the plans which have been attached hereto and incorporated
herein as Exhibits "A" and "B", and initialed by the parties, which plans the
parties have carefully reviewed and specifically approved. Excluding any
improvements needed to fulfill Tenant's specific needs (i.e. argon and nitrogen
tanks, water treatment system and related accessors, screening, interior
improvements above a building shell finish, etc.) construction of the building
shell and all on-site improvements shall be done and made at the sole expense of
Landlord, including the implementation of utilities roughed into the building.
B. Tenant Improvements. Landlord agrees to construct or cause to be
constructed the Tenant Improvements within the Demised Premises ("Tenant
Improvements"), for the benefit of Tenant in accordance with the plans and
specifications to be prepared by Stonehocker Architect, which plans and
specification the parties will complete no later than January 15, 1999. Upon
completion of the Tenant Improvement plans, the parties shall carefully review
and specifically approve said plans prior to contractor's bids and subsequent
commencement of construction. Following the completion and approval of said
plans and specifications, Landlord shall obtain bids from a minimum of three (3)
reputable general contractors to accomplish the Tenant Improvements, following
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which, Landlord and Tenant shall determine which general contractor will be
hired to complete the Tenant Improvements and award the bid, All contracts for
construction shall be solely between Landlord and such selected contractor.
Landlord shall provide to Tenant a copy of the Construction Contract and shall
provide, following the completion of the Tenant Improvements, a specific
accounting of all expenditures actually made and incurred.
C. Cost of Tenant Improvement. The minimum rent defined in Article 7. RENT
hereinbelow contemplates and takes into consideration the subject Demised
Premises being leased to Tenant in a finished condition with the inclusion of
Landlord's financial participation in the Tenant Improvements to the Demised
Premises to the extent of and in the amount of FIVE HUNDRED TWENTY THOUSAND
DOLLARS ($520,000.00), hereinafter referred to as "Landlord's Participation
Budget." Said allowance shall be used for the construction of interior
improvements, construction management fee (10%), space planners and consultants,
architectural and engineering fees for Tenant Improvements, a separate and
dedicated HVAC system, and the design and actual distribution of the electrical
system specific to Tenant's requirements.
D. In the event the actual cost of the Tenant Improvements is less than
anticipated, whereby Landlord's contribution toward the Tenant Improvements is
less than $520,000, the savings experienced by Landlord shall be passed on to
Tenant in the form of rental abatement in the first months of the lease term. In
the event the actual cost of the Tenant Improvements, as agreed to by Tenant
during the bid process or as pre-approved by Tenant thereafter, exceeds the
Landlord's Participation Budget, Tenant shall:
a. reimburse Landlord for all cost exceeding the Tenant Improvement
Allowance in a lump sum payment to be made by Tenant to Landlord upon
the completion of the Tenant Improvements.
OR
b. At Tenant's option, Landlord shall provide up to an additional $30,000
in excess of the $520,000 Tenant Improvement Allowance specified
hereinabove with such excess (not to exceed $30,000) reimbursed to
Landlord as additional minimum rental over the ten (10) year primary
lease term at an annual amortization interest rate of ten and one-half
percent (10-1/2%). The formula to convert the excess Tenant Improvement
Allowance to additional rent shall be as follows:
Excess Tenant Improvement Costs (not to exceed $30,000)
x.1619 (10 year amortization constant at 10-1/2%)
------------------------
Additional Rent per year
-:- 12
------------------------
Additional rent per month
Example:
$30,000.00 Excess Tenant Improvement Costs
x .1619 (10 year amortization constant at 10- 1/2%)
----------
$ 4,857.00 Additional rent per year
-:- 12
----------
$ 404.75 Additional rent per month
----------
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<PAGE>
The additional rental shall be added to the rental specified in Article 7. Rent
hereinbelow, implemented by an Amendment to the Lease to be entered into between
Landlord and Tenant following completion of the construction of the Tenant
Improvements. NOTE: The Landlord's maximum participation for Tenant Improvements
shall not exceed FIVE HUNDRED AND FIFTY THOUSAND DOLLARS AND NO CENTS
($550,000.00). Any amount exceeding such limit shall be reimbursed by Tenant to
Landlord in the form of lump sum payment at the completion of the construction
of the Tenant Improvements.
Article 3. TENANT'S POSSESSION. The term of this Lease shall commence when
the Landlord delivers to Tenant, in a condition ready for occupancy, possession
of the Demised Premises described on Exhibit "B" located in the building to be
constructed by the Landlord. Tenant shall accept possession of the said
improvements when they are ready for occupancy. The words "ready for occupancy"
are defined for this purpose to mean the date upon which the construction work
referred to in Article 2 is substantially completed in accordance with the plans
and specifications referred to therein, (excluding completed landscaping and
asphalt work - both weather related), Tenant's inspection and reasonable
approval of the substantial completion of the Demised Premises and a Certificate
of Occupancy (permanent or temporary) has been issued by the appropriate
governmental officials. Landlord shall use best reasonable efforts to provide
Tenant's occupancy by April 15, 1999, conditioned upon the following.
a. Execution of this Lease Agreement by December 4, 1998.
b. With Tenant's supportive and timely input, completion of the Tenant
Improvement plans by the Landlord's architect, to be completed by
January 15, 1999.
c. The award of the Tenant Improvement buildout contract to a general
contractor by January 31, 1999.
d. West Valley City's issuance of a Tenant Improvement permit by February
1, 1999.
e. Commencement of interior improvements by February 1, 1999.
If, subject to the requirements and dates set forth in this Article 31
Landlord fails to deliver possession of the Demised Premises to Tenant in
accordance herewith on or before April 30, 1999, and Tenant is forced to
holdover its existing lease, Landlord shall participate in Tenant's increase in
the Net/Net/Net rent actually incurred under Tenant's existing lease due to
Tenant's holdover under such existing lease (the "Holdover Rent"). For example,
if Tenant is obligated to pay $10,000 in holdover Net/Net/Net rent per month in
addition to the amount of monthly Net/Net/Net rent already due under Tenant's
existing lease, such additional amount shall constitute and be defined herein as
the "Holdover Rent." Landlord shall participate in Tenant's Holdover Rent for
the period commencing on May 1, 1999, and continuing each month thereafter until
Landlord delivers possession of the Demised Premises to Tenant in accordance
herewith, but only up to a maximum of $ 10,000 per month and only for the
Holdover Rent. Thus, if the monthly Holdover Rent is less than $10,000, Landlord
shall only pay such lesser amount. Landlord shall pay the Holdover Rent due
hereunder in the form of granting Tenant reduced rent at the commencement of the
term of this Lease, once Tenant has taken possession of the Demised Premises and
the term hereof has commenced in accordance with the terms of this Lease.
Further, if Landlord is obligated to participate in the Holdover Rent hereunder,
the term of this Lease shall automatically be extended for the same period of
weeks or months during which Landlord actually participated in Tenant's Holdover
Rent.
3
<PAGE>
In the event the Landlord has not delivered possession of the Demised
Premises to Tenant, (assuming strict adherence to the above-specified dates)
within seven (7) months following the execution of this Lease, Tenant shall have
the right to terminate this Lease with the provision of written notice so
stating provided to Landlord within ten (10) days of the expiration of the said
seven (7) month period, a which neither Landlord or Tenant shall have any
further rights or obligations under the subject Lease,
Article 4. OBLIGATIONS OF TENANT AND LANDLORD.
---------- -----------------------------------
4.1 Property Taxes. Subject to Tenant's reimbursement, Landlord shall pay,
in a timely manner, all taxes, and assessments lawfully levied or assessed
against the building or buildings or any part thereof. Tenant shall reimburse
Landlord, within ten (10) days from the date Landlord submits to Tenant a
statement setting forth the amount due Landlord under the provisions of this
paragraph, for such real property taxes and assessments due on the Demised
Premises as additional rent hereunder. Tenant shall pay 1/ 12 of the estimated
annual taxes in advance each month in addition to the minimum rental payment due
hereunder.
Landlord may dispute and contest the real property taxes and assessments on
the Demised Premises. Tenant may, at its sole cost and expense, after it has
paid Landlord in full any taxes or assessments due hereunder, upon fifteen (15)
days prior written notice to Landlord, contest with the appropriate governmental
authority such tax or assessment. Tenant shall be entitled to any refund of any
tax or penalty paid by Tenant, or paid by Landlord and reimbursed by Tenant to
Landlord. (See Lease Rider "A" Building Expenses attached hereto and
incorporated herein.)
4.2 Personal Property Taxes. Tenant shall additionally pay, when due, all
personal property taxes and license fees levied and assessed against the Demised
Premises during the term of this Lease. Nothing contained in this Lease shall
require or be construed to obligate the Tenant to pay any franchise, excise,
corporate, estate, inheritance, succession, capital levy or transfer tax of the
Landlord, or any income, profits or revenue tax upon the income of the Landlord,
provided, however, that in any case where a tax may be levied, assessed or
imposed upon Landlord for the privilege of renting or leasing the Demised
Premises or which is based upon the rental revenue derived therefrom, Tenant
shall pay to Landlord as additional rent hereunder the amount of said tax, but
in no event shall the Tenant be obligated to pay an amount greater than that
which would be payable if the Demised Premises were the only asset of the
Landlord.
4.3 Tenant's Insurance. The Tenant shall, during the entire term of this
Lease, at the Tenant's sole cost and expense, but for the mutual benefit of the
Landlord and Tenant, maintain general public liability insurance against claims
for personal injury, death or property damage occurring upon, in or about the
entire property described oil Exhibit "B" attached hereto and on, in or about
the adjoining streets and passageways, such insurance to afford protection to
the limit of not less than $1,000,000 in respect to injury or death to a single
person, and to the limit of not less than $2,000,000 in respect to any one
accident, and to the limit of not less than $250,000 in respect to property
damage or a combined single limit policy not less than $2,000,000 per
occurrence. All policies shall name Landlord and the mortgagee of the property
as an additional named insured, as their interest may appear. The initial
mortgagee shall be Key Bank Corporation.
4
<PAGE>
Tenant shall also provide insurance coverage to the extent of the full
replacement value covering all of Tenant's property, fixture, equipment, tools,
improvements, stock, goods, wares or merchandise, that it may have in or on or
about the Demised Premises.
Other Forms Of insurance may be reasonably required to cover future risks
against which a prudent Tenant would protect itself.
All policies of insurance provided for herein shall be issued by insurance
companies with a general policy holder's rating of not less than A and a
financial rating of AAA, as rated in the most current available "Best's Guide"
Insurance Reports, and qualified to do business in the state of Utah.
The policies for the foregoing insurance shall provide that the proceeds
thereof shall be payable to the Tenant and to the Landlord, as their respective
interests may appear. Said required Tenant insurance covet age shall be verified
to the Landlord by an insurance carrier in the form of either a certified copy
of the. policy or other written verification of insurance coverage acceptable to
Landlord and the lending institution for the Demised Premises. Such insurance
policies shall provide that Landlord be given thirty (30) days written notice
prior to any cancellation or alteration of any policy.
To the extent that Tenant fails to provide the foregoing insurance, either
hazard or liability, Tenant shall be responsible to Landlord, as his interest
appears, for such damage that would have been insured by said policies but for
Tenant's failure to obtain such insurance.
4.4 Landlord's Insurance. Subject to Tenant's reimbursement, Landlord shall
provide fire, lightning, and extended coverage ("all risk") insurance and such
additional insurance coverage as may be required by Landlord's mortgagee
(including loss of rents insurance) on the Demised Premises for the full
replacement value thereof or such value as is required by Landlord's mortgagee,
whichever is greater, against such loss. Tenant shall reimburse Landlord as
additional rental hereunder, for such insurance premium costs within ten (10)
days from the date Landlord submits to Tenant a statement setting forth the
amount due Landlord under the provisions of this paragraph. Tenant shall pay
1/12 of the estimated annual building insurance premium in advance each month
along with the minimum rental payment. (See Lease Rider "A" Building. Expenses
attached hereto and incorporated herein.)
4.5 Subrogation. Landlord and Tenant shall indemnify, defend and hold the
other harmless from all claims arising from the other's use of the Premises or
the conduct of its business or from any activity, work or thing done, permitted
or suffered by the other on or about the Premises, the Building, the Project or
the Common Areas. Landlord and Tenant shall further indemnify, defend and hold
the other harmless from all claims arising from any act, neglect, fault or
omission of the other or the agents, representatives or employees of Landlord or
Tenant, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
thereon. In case any action or proceeding shall be brought against Landlord or
Tenant by reason of any such claim, Landlord or Tenant, upon notice from the
other, shall defend the same at its expense. All of the insurance policies
required hereunder pertaining to the Demised Premises shall contain an
endorsement by the respective insurance carriers waiving any and all rights of
subrogation against Landlord or Tenant, a copy of which endorsement or
endorsements, or evidence thereof by way of certificate shall be furnished to
the other.
5
<PAGE>
4.6 Assumption of Risk. Anything herein to the contrary notwithstanding,
after the commencement of the term as provided in Article 3, the Tenant and
Landlord assume full risk of damage to their property, fixtures, equipment,
tools, improvements, stock, goods, wares or merchandise, that they may have in
or on or about the Demised Premises, resulting from events of force majeure,
including but not limited to, fire, lightning, extended coverage perils, flood
and any catastrophe, regardless of cause or origin. The Landlord or Tenant shall
not be liable to the other or anyone claiming by, through or under the other,
including Tenant's or Landlord's insurance carrier or carriers, for any loss or
damage resulting from fire, lightning or extended coverage perils or from an act
of God. Landlord or Tenant shall not be liable to the insurance carrier for
damages insured against, either directly or by way of subrogation.
Article 5. TENANT'S USE. The Tenant may use the Demised Premises for
conducting its light manufacturing, sales and service business. Tenant shall use
the Demised Premises only for lawful and proper purposes, which are permissible
under applicable law (including under applicable zoning laws). Tenant shall not
make any use of the Demised Premises which will cause cancellation of any
insurance policy covering the same and shall not keep or use on the Demised
Premises any article, item, or thing which is prohibited by the terms of the
hazard insurance policy covering the improvements. Tenant shall not commit any
waste upon the Demised Premises and shall not conduct or allow any business,
activity or thing on the Demised Premises which is or becomes unlawful,
prohibited, or a nuisance or which may cause damage to Landlord, to occupants in
the vicinity, or to other third parties. Tenant shall comply with and abide by
all laws, ordinances, and regulations of all municipal, County, state and
federal authorities which are now in force or which may hereafter become
effective with respect to use and occupancy of the Demised Premises.
Tenant represents to Landlord that neither Tenant or any affiliates of
Tenant will unlawfully generate, store or dispose of any Hazardous Substances
(as defined below) at or in the area of the Demised Premises and Property.
Tenant covenants with Landlord: a) to prohibit any unlawful generation,
storage or disposal of Hazardous Substances at the Demised Premises, b) to
deliver promptly to Landlord true and complete copies of all notices received by
Tenant from any governmental authority with respect to the generation, storage
or disposal by Tenant of Hazardous Substances (whether or not at the Demised
Premises); and c) to permit entry onto the Demised Premises by Landlord of
Landlord's representative(s) at any reasonable time to veii1y Tenant's
compliance with the foregoing.
Tenant agrees to indemnify and defend Landlord (with legal counsel
reasonably acceptable to Landlord) from and against any costs, fees or expenses
(including, without limitation, cleanup expenses, third party claims and
environmental impairment expenses and reasonable attorneys' fees and expenses)
incurred by Landlord in connection with Tenant's generation, storage, or
disposal of Hazardous Substances at or near the Demised Premises in accordance
with the foregoing and with Tenant's compliance with the foregoing
representations and covenants. This indemnification by Tenant shall survive
termination or expiration of this Lease.
6
<PAGE>
"Hazardous Substances" shall mean (i) hazardous substances as defined in
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, (ii) "PCBs", as defined in 40 C.F.R. 761 et seq. and "TCDD" as defined
in 40 C.F.R. 755 et seq. (or in either case analogous regulations promulgated
under the Toxic Substances Control Act, as amended), (iii) "asbestos" as defined
in 29 C. F. R. 19 10. 1001 et seq. (or analogous regulations promulgated under
the Occupational Safety and Health Act of 1970, as amended), and (iv) waste oils
and other petroleum hydrocarbon compounds.
In the event Tenant's business, or use of the Demised Premises, should
require the legal storing of barrels, drums and other storage containers, Tenant
covenants with Landlord to provide Landlord no less often than every six (6)
months with a complete and accurate list of all storage containers, chemical
inventories and quantities. Such inventory list shall be updated by Tenant to
Landlord semi-annually and certified as a true and correct inventory.
Additionally, Tenant shall supply Landlord with a container and contents
disposal plan acceptable to Landlord or in the alternative, a bond payable to
Landlord to fund the disposal and discardment of all chemicals and/or storage
containers located on or about the Demised Premises. Said bond shall be used by
Landlord in the event Tenant fails to properly dispose of such containers and
chemicals.
Tenant covenants with Landlord to store all chemical containers in a safe
and secure manner either inside the Demised Premises or within a secured fenced
area, so as not to cause a nuisance to Landlord and other tenants in the
proximity of the Demised Premises, and to prevent the unlawful infiltration of
chemicals and container discardment by others.
Article 6. POSSESSION. Possession of the Demised Premises shall be
delivered to the Tenant as herein provided, free and clear of all Tenants and
occupants and the rights of either. The Demised Premises shall also be free of
liens, encumbrances and violations of laws, ordinances and regulations adversely
affecting the use and occupancy of the Demised Premises, except those presently
of record including mortgages and trust deeds and those that may be specified
herein. Tenant agrees to deliver to the Landlord physical possession of the
Demised Premises, including all keys to the Demised Premises, upon the
termination or expiration of this Lease or any extension thereof, in as good
order, condition, and state of repair as when received by Tenant, reasonable
wear and tear thereof and damage by fire, acts of God or the elements excepted.
7
<PAGE>
Article 7.
----------
7.1 Minimum Rent. The Tenant agrees to pay the Landlord at such address as
shall from time to time be designated by Landlord, as minimum rental during the
initial term of this Lease without right of offset or deduction, the sum of.
1st Lease Year $19,547.00/month $234,564.00/year Net/Net/Net
2nd Lease Year $19,547.00/month $234,564.00/year Net/Net/Net
31d Lease Year $19,547.00/month $234,564.00/ycar Net/Net/Net
4th Lease Year $21,050.00/month $252,600.00/year Net/Net/Net
5th Lease Year $21,050.00/month $252,600.00/year Net/Net/Net
6th Lease Year $21,050.00/month $252,600.00/year Net/Net/Net
7th Lease Year $22,669.00/month $272,028.00/year Net/Net/Net
8th Lease Year $22,669.00/month $272,028.00/year Net/Net/Net
9th Lease Year $22,669.00/month $272,028.00/year Net/Net/Net
10th Lease Year $24,412.00/month $292,944.00/year Net/Net/Net
Minimum rental shall be payable monthly, in advance, without demand on the
first day of each calendar month throughout the I-ease term. Should Tenant's
occupancy of the Demised Premises commence oil any day other than oil the first
(1st) day of the calendar month, the first rental shall be prorated accordingly.
7.2 Late Penalty. Tenant shall be charged a five percent (5%) late fee on
all rental payments (minimum and/or additional) which are received by Landlord
more than ten (10) days after their due date. Such late fee shall compensate
Landlord for (i) the costs attributable to providing notice of delinquency; and
(ii) the expense of servicing the mortgage loan on Landlord's Building from
alternative funds. In addition, any rental payments which are not paid within
twenty (20) days of their due date shall bear interest thereafter at the rate of
one and one-quarter percent (1-1/4%) per month, or the highest rate permitted by
law, whichever is lower, until paid.
Article 8. SIGNS. With the prior written approval of Landlord, which
approval shall not be unreasonably withheld, Tenant shall have the right and
privilege to place on the building or Demised Premises signage necessary for the
operation of Tenant's business. Such sign installation shall not adversely
affect or damage the physical structure of the building, nor detract from the
overall harmony of the building and the Great Lakes Business Park development.
All such signs must conform with the codes and regulations of West Valley City
arid adhere to the signage criteria for the development.
Upon the expiration or termination of the lease, the Tenant shall remove
all signage installed by Tenant and repair any damaged areas on the building or
Demised Premises caused thereby, to a condition acceptable to the Landlord.
Article 9. ALTERATIONS AND IMPROVEMENTS. Tenant shall have the right,
subject to Landlord's prior written approval, to make non-structural
alterations, additions, or improvements (hereinafter collectively referred to as
"improvements") to the interior of the Demised Premises, which approval shall
not be unreasonably withheld. Said improvements arid additions shall be
accomplished at Tenant's sole cost and expense and shall be made in compliance
with all building codes and ordinances, laws, and regulations applicable to the
Demised Premises. Tenant shall cause all improvements to be accomplished in a
good workmanlike manner using the same quality and finish to match existing.
Landlord shall have the right, but not the obligation, to require Tenant's
removal of said improvements at the expiration or termination of the Lease,
including restoration of the Demised Premises, to its original state of
improvement and configuration, ordinary wear arid tear, and acts of God
excepted.
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Tenant shall keep the Demised Premises free from any liens arising out of
any work performed, material furnished or obligation incurred by or for Tenant
or any person or entity claiming through or under Tenant. In the event that
Tenant shall not, within thirty (30) days following the imposition of any such
lien, cause the same to be released by payment or posting of a bond, Landlord
shall have the fight, but not the obligation, to cause such lien to be released
by such means as Landlord deems proper, including payment of the claim giving
rise to such lien, All such sums paid and all expenses incurred by Landlord in
connection therewith shall be due arid payable to Landlord by Tenant as
additional rent within fifteen (15) days of Tenant's receipt of Landlord's
invoice.
Article 10. FIXTURES AND PERSONAL PROPERTY. All fixtures (not including
trade fixtures) installed or attached to the Demised Premises by and/or at the
expense of Tenant shall become the Property of the Landlord. Any trade fixtures
installed in the Demised Premises by and at the expense of the Tenant shall
remain the property of the Tenant or Tenant's trade fixture Lessors, and the
Landlord agrees that so long as Tenant is not in default hereunder, Tenant or
its Lessors shall have the right at any time to remove any and all of its trade
fixtures which it may have stored or installed in the Demised Premises. Landlord
expressly agrees to waive or subordinate any claim which Landlord may or might
have against the trade fixtures and personal property of Tenant in favor of a
Lessor who intends to Lease any of the same to Tenant. Tenant shall be required,
at the expiration or termination of this Lease Agreement or any extension or
renewal thereof, to remove any and all of its trade fixtures which it may have
stored or installed in the Demised Premises. Tenant will repair all damage to
the Demised Premises occasioned by such trade fixture removal. If Tenant shall
holdover beyond lease expiration or lease termination, with Landlord's approval
of such holdover, for removal of fixtures and equipment (not to exceed ten (10)
days), Tenant shall pay to the Landlord as rental therefore, a sum equal to the
prorata portion of the previous monthly rental thereof In the event Tenant has
not completed the removal of its fixtures arid equipment arid restoration of the
Premises caused thereby, within the ten (10) day period following the expiration
or termination of the lease, Landlord shall, in Tenant's behalf and at Tenant's
sole and exclusive expense, cause such fixtures and equipment to be removed and
the Premises to be restored. Upon completion, the cost of said removal and
restoration, plus twenty percent (20%) for overhead and profit, including
prorated rental for the period of time required to accomplish such, shall be
passed on to Tenant for Tenant's payment to Landlord.
Article 11. UTILITIES. The Tenant shall pay for all water, heat, gas,
electricity, and other costs of utilities connected with, consumed, or used by
it in connection with its occupancy of the Demised Premises. Landlord shall
cause the natural gas, water, and electrical power utilities to be separately
metered to the Demised Premises during the construction of the Tenant
Improvements. fit the event that one or more of such utilities or related
services shall be supplied to the Demised Premises and to one or more other
tenants within the development without being individually metered or measured by
any reasonable means to the Demised Premises, Tenant's appropriate proportionate
share thereof shall be paid as additional rent based upon Landlord's estimate of
Tenant's anticipated usage. Tenant's proportionate share of such utility or
related service shall be determined by multiplying the total amount of such
utility or service by a fraction, the numerator of which is the floor area of
the Demised Premises and the denominator of which is the total floor area of the
building or buildings being served. In the event any utility service to the
Demised Premises is interrupted or temporarily discontinued for any reason
whatsoever, (excluding the gross negligence of the Landlord), Landlord shall not
be liable therefor to Tenant. The rent required to be paid hereunder shall not
be abated as a result thereof, and Tenant waives any claims it might otherwise
have against Landlord as a result of any such interruption or discontinuation.
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Article 12. MAINTENANCE AND REPAIRS. It is understood and agreed that the
Landlord shall, at its sole cost and expense, keep and maintain, during the term
of the Lease Agreement or any extension or renewal thereof, the foundations,
roof replacement (excluding roof maintenance and repair) and structural support
portion of the improvements in proper condition and in a good state of repair.
Landlord shall provide a one (1) year construction warranty on the building and
interior improvements commencing with Landlord's completion of the construction
work defined in Article 2 hereinabove. Landlord shall not be responsible for any
maintenance or repair caused by the fault or neglect of the Tenant, or due to
hazards and risks covered or required to be covered by insurance hereunder
except as insurance proceeds are available therefor. All other maintenance and
repair of said structure, including but not limited to, painting of walls, and
maintenance, repair and replacement of equipment, shall be the responsibility of
the Tenant.
It is understood and agreed that should either party to this Agreement fail
or refuse to start and to proceed thereafter with due diligence to make any
repairs or maintenance as may be reasonably necessary for the purpose of
fulfilling the terms and conditions of the agreements herein set forth within a
reasonable length of time (not to exceed seven (7) days) after being notified in
writing of the need thereof, that the other party hereto may make such repairs
at the cost and expense of the party so failing or refusing. In the event of an
emergency situation, Tenant may, in its discretion, make emergency repairs
without giving written notification to Landlord, and Landlord shall reimburse
Tenant in the event that such repairs were the responsibility of the Landlord
hereunder and were not due to the fault of Tenant or Tenant's agents. The rights
of Tenant hereunder specifically do not include the right to offset or deduct
any amounts claimed hereunder from rentals due.
With prior reasonable verbal notice, Landlord reserves the right to enter
upon the Demised Premises (in a manner that will not unnecessarily interfere
with the business of Tenant) during business hours at any time to inspect the
same and to make necessary repairs to fulfill Landlord's obligation hereunder.
Article 13. RESTORATION OF DAMAGE. If the Demised Premises are partially
damaged by fire, the elements or other casualty, covered by the "all risk"
insurance policy referred to hereinabove, Landlord shall promptly repair all
damage and restore the Demised Premises to their condition immediately prior to
the occurrence of such damage. During the period of reconstruction referred to
above, rent payable by Tenant shall ratably abate, based on the percentage of
the Demised Premises usable during reconstruction. The term of the Lease shall
extend one additional day for each day the entire Demised Premises are not
usable due to the reconstruction process.
If the Demised Premises shall be totally destroyed and/or shall it be
determined that more than one hundred eighty (180) days will be required to
repair or rebuild the Demised Premises, both Landlord and Tenant shall have the
right to terminate this Lease Agreement upon written notice to the other within
thirty (30) days of the occurrence at which time this Lease Agreement shall
become null and void.
Article 14. EMINENT DOMAIN. If, during the term hereof, or any renewal
term, the entire Demised Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of eminent
domain, this Lease and all right, title and interest of Tenant hereunder shall
cease and come to an end on the date of vesting of title pursuant to such
proceeding, or upon the date Tenant is dispossessed under an order of immediate
occupancy, whichever first occurs. If less than all of the Demised Premises
shall be taken for any public or quasi-public use under any governmental law,
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ordinance or regulation, by right of eminent domain, and conditioned upon
Tenant's reasonable ability to conduct its business operation as intended, this
Lease shall not terminate, but the rent payable hereunder during the unexpired
portion of this Lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances. In any taking of the Demised Premises
or any part thereof, whether or not this Lease is terminated as provided in this
Paragraph, the parties hereto may claim and shall be entitled to receive an
award or compensation therefor in accordance with their respective legal rights
and interests.
Article 15. DEFAULT IN PAYMENT OF RENT OR ABANDONMENT. In the event of
default by Tenant in the performance of its obligation to pay rent hereunder, or
in the event Tenant shall vacate or abandon the Demised Premises, or in the
event Tenant, or any guarantor hereunder, shall be adjudicated as bankrupt for
the benefit of creditors, or enter into an arrangement or participate
voluntarily or involuntarily in any bankruptcy or related proceeding under
Federal or State Law, Landlord shall have the light to terminate this Lease and
to re-enter the Demised Premises or any part thereof with or without process of
law, or Landlord, at his option, without terminating this Lease, shall have the
right to re-enter the Demised Premises and sublet the whole or any part thereof,
for the account of the Tenant, upon as favorable terms and condition as the
market will allow. In the latter event, the Landlord shall have the right to
collect any rent which may thereafter become payable under such sublease and to
apply the same first to the payment of any expenses incurred by the Landlord in
the dispossessing the Tenant and in Subletting the Demised Premises, and
Landlord may charge interest at the rate equal to one percentage point higher
than the prime bank rate of Key Bank of Utah in Salt Lake City, which rate shall
vary from time to time as the prime bank rate varies, per annum on such
expenses; and, second, to the payment of the rental herein reserved and the
fulfillment of' tenant's covenants hereunder, and the Tenant shall be liable for
amounts equal to the installments of rent as they become due, less any amounts
actually received by the Landlord and applied on account of rental as aforesaid.
The Landlord shall not be deemed to have terminated this Lease by reason of
taking possession of the Demised Premises unless written notice of such
termination has been served on the Tenant.
Article 16. OTHER DEFAULTS BY TENANT. It is mutually agreed that if the
Tenant shall default in performing any of the terms or provisions of this Lease
Agreement other than as provided in the preceding Article, and if the Landlord
shall give to the Tenant notice in writing of such default, and if the Tenant
shall fail to cure such default within thirty (30) days after the date of
receipt of such notice, or if the default is of such a character as to require
more than thirty (30) days to cure, and if Tenant shall fail to use reasonable
diligence in curing such default, then in such applicable event the Landlord may
cure such default for the account of and at the cost and expense of Tenant, plus
interest at the rate equal to one percentage point higher than the prime bank
rate of Key Bank of Utah, in Salt Lake City, which rate shall vary from time to
time as the prime bank rate varies, per annum, and the sum so expended by the
Landlord and interest shall be deemed to be additional rent and on demand shall
be paid by the Tenant on the day when rent shall next become due and payable.
Failure to pay any additional rent as provided in this Article shall be deemed a
failure to pay rent within the meaning of Article 15.
Article 17. QUIET ENJOYMENT. Landlord represents and warrants that it has
full right and authority to enter into this Lease. Tenant, upon paying all
rentals and performing all the Tenant's covenants, terms and conditions in this
Lease Agreement, shall and may peaceably and quietly hold and enjoy the Demised
Premises for the term of this Lease Agreement. Tenant understands that other
persons and entities conduct businesses or reside near the Demised Premises.
Tenant covenants and agrees to conduct its business in such a manner as to not
unreasonably interfere with the occupants of surrounding properties.
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Article 18. WAIVER . No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any Such right
or power to be construed to be a waiver thereof Subject to the provisions of
this Article, every such right arid power may be exercised at anytime during the
continuance of such default, It is further agreed that a waiver by either of the
parties hereto of any of the covenants and agreements hereof to be performed by
the other shall not be construed to be a waiver of any Succeeding breach thereof
or of any other covenants or agreements herein contained.
Article 19. ATTORNEY'S FEE. In the event of any action at law or inequity
between Landlord and Tenant to enforce any of the provisions and/or rights
hereunder or to recover damages for breach hereof, the unsuccessful party to
such litigation covenants and agrees to pay to the successful party all costs
and expenses, including reasonable attorney's fees, incurred therein by such
successful party, arid if Such successful party shall recover judgment in any
such action or proceeding, such costs and expenses and attorney's fees shall be
included in and as a part of such judgment.
Article 20. NOTICES. Any notices or demand required or permitted to be
given under this Lease Agreement shall be deemed to have been properly given
when, and only when, the same is in writing and has been deposited in the United
States Mail, with postage prepaid, to be for-warded by certified mail and
addressed as follows:
TO THE LANDLORD AT: NP#2, LLC
c/o S-PM, Inc.
90 East 7200 South, Suite 200
Salt Lake City, Utah 84047
801-255-4704
TO THE TENANT AT: Laser Corporation
2417 South Lake Superior Place
West Valley City, Utah 84119
801-972-1311
Such addresses may be changed from time to time by either party by serving
notices as above provided.
Article 21. SUBORDINATION. This Lease shall be subject and subordinate to
all mortgages or trust deeds which may now or hereafter affect the real property
comprising the Demised Premises, and also to all renewals, modifications,
consolidations and replacements of said mortgages and Trust Deeds. Although no
instrument or act on the part of Tenant shall be necessary to effectuate such
subordination, Tenant will, nevertheless, execute and deliver in a prompt and
diligent manner such further reasonable instruments confirming such
subordination of this Lease as may be reasonably desired by the holders of said
mortgages or trust deeds.
Article 22. ASSIGNMENT AND SUBLEASING. With the specific prior written
consent of Landlord first obtained, Tenant can, at any time, assign this Lease
or sublet all or any portion of the Demised Premises Landlord's consent shall
not be unreasonably withheld. Any purported assignment or sublease without
Landlord's prior written approval shall be null and void and of no force and
effect whatsoever. Tenant shall have the right to sublease all or portions of
the Demised Premises to subsidiaries of Tenant without the specific written
consent from Landlord. Tenant shall provide written notice to Landlord of any
Sublease to a subsidiary.
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Article 23. SCOPE OF THE AGREEMENT. This Lease Agreement shall be
considered to be the only agreement between the parties hereto. All negotiations
and oral agreements acceptable to both parties are included therein.
Article 24. OBLIGATIONS OF SUCCESSORS. Landlord and Tenant agree that all
of the provisions hereof are to be construed as covenants and agreements as
though the words importing such covenants and agreements were used in each
separate paragraph hereof, and that all of the provisions hereof shall bind and
inure to the benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns.
Article 25. HOLDOVER. If, at the expiration or termination of this Lease or
any extension thereof', Tenant shall hold over for any reason, if Landlord
consents to the holding over, the tenancy of Tenant thereafter shall be from
month to month only and shall, in the absence of a written agreement to the
contrary, be subject to all the other terms and conditions of this Lease with
the monthly rental adjusted to One Hundred Fifty Percent (150%) of the monthly
rental for the last month of the primary Lease term or subsequent Lease renewal
terms.
Article 26. PARKING. The plans and specifications for the construction of
the Demised Premises, as approved by the parties, depict adjacent parking for
the non-exclusive use of Tenant. Such parking and maintenance thereof shall
remain under the control of Landlord (subject to reimbursement as hereinafter
set forth) and Landlord shall have the right from time to time to publish
reasonable nondiscriminatory regulations for Tenant's use of the parking, with
which regulations Tenant covenants to comply. Tenant shall have the right to the
non-exclusive use of up to seventy (70) parking spaces adjacent to the Demised
Premises.
Article 27. GREAT LAKES BUSINESS PARK DEVELOPMENT. The parties acknowledge
that Exhibit "A" hereto contains a proposed site plan for Landlord's entire
construction project to be known as Great Lakes Business [lark (hereinafter
referred to as the "Development"). Tenant acknowledges that the site plan for
the Development is subject to change and that Landlord may construct the
Development in a totally different configuration or may not develop certain
portions. During or after construction of the Development, Landlord reserves the
fight to sell the Development or portions thereof as developed with buildings or
as undeveloped property. The parties understand that in the event of Landlord's
sale of portions of the property developed as an integral part of the
Development, prior to such sale, Landlord shall place cross easement, access and
parking easements, suitable to Landlord upon released and unreleased portions of
the Development to facilitate its continued integral use. Common Area
Maintenance provisions contained in the next immediate paragraphs of this Lease
shall be Unaffected by any such partial sale and the Landlord shall exercise his
best efforts to ensure the parking and common areas of the entire Development,
as built, will be under common management.
Article 28. COMMON AREAS. Areas within the outer property lines of the
Development as delineated oil the plat attached hereto marked Exhibit "A,"
exclusive of areas therein specified or as built 1'or leasing to Tenants shall
be known as Common Areas, as shall all other areas from time to time designated
by Landlord for use as part of the Development. Landlord covenants and agrees at
its sole cost and expense to improve said Common Areas by installing and
constructing thereon parking lots, access roads, pedestrian walkways, sidewalks,
exterior canopies, delivery and landscaped areas and lighting Facilities to the
extent to which Landlord shall determine to be necessary. Said Common Areas
shall be available for the common use of all Landlord's Tenants in the
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Development, their employees, customers and invitees. Notwithstanding anything
elsewhere herein contained, Landlord reserves the tight from time to time to
make reasonable changes in, additions to and deletions from the Common Areas and
the purposes to which the same may be devoted, and the use of Common Areas shall
at all times be subject to such reasonable rules and regulations as may be
promulgated by Landlord.
Article 29. COMMON AREA MAINTENANCE. Landlord will regularly maintain or
cause to be regularly maintained in a first class manner the Common Areas and
Tenant will reimburse Landlord for Tenant's prorata share of the cost of such
maintenance as hereinafter provided.
(a) Common area maintenance costs and expenses shall be determined in
accordance with generally accepted accounting principles consistently applied
and allocated to any particular calendar year on the accrual method of
accounting. Such costs and expenses shall include, but shall not be limited to
upkeep, exterior painting, repairs, replacements and improvements in the Common
Areas, snow removal, sweeping and cleanup, depreciation allowance on any
machinery and equipment owned by Landlord and used in connection therewith,
payroll and payroll costs, utility services including fire line water service
charges, police protection, night watchmen, premiums for public liability,
property damage and fire insurance including the Common Areas, any real estate
tax and/or tax consultant expense incurred for the purpose of maintaining
equitable tax assessments on the Development, all property taxes or assessments
levied or assessed against all Common Areas, which, if not separately assessed,
shall be determined, for land, by the ratio of land area designated for Common
Area use to the total land area in the Development and, for improvements on a
fair and equitable allocation among the various improvements in the Development,
giving weight to the factors which determine the amount of the real property tax
or assessment in question. In addition, such costs shall include administrative
costs equal to ten percent 10%) of the total cost paid or incurred by Landlord
under this paragraph.
(b) Tenant shall pay as additional rent to Landlord, Tenant's prorata share
of such common Area expenses in the following manner:
(1) From and after the date the minimum rental provided for herein has
commenced, but Subject to adjustment as hereinafter in this Subparagraph (1)
provided, Tenant shall pay Landlord in advance on the first day of each calendar
month during the term of this Lease an estimated and adjustable monthly amount
covering Tenant's proportionate share of common area services and expenses,
which amount may be adjusted by Landlord by notice to Tenant at the end of any
calendar month on the basis of Landlord's experience and reasonably anticipated
costs. (See Lease Rider "A" Building Expenses attached hereto and incorporated
herein.)
(2) Within thirty (30) days following the end of each calendar year,
Landlord shall furnish Tenant a statement covering the calendar year just
expired, showing the total operating costs, the amount of Tenant's prorata share
Of Such Common area expenses for such calendar year and the payments made by
Tenant with respect to such calendar year as set forth in subparagraph (b) 1. If
Tenant's prorata share of such common area expenses exceeds Tenant's payments so
made, Tenant shall pay Landlord the deficiency within ten (10) days after
receipt of such statement. If said payments exceed Tenant's prorata share of
such common area expenses, Tenant shall be entitled to offset the excess against
payments next thereafter to become due Landlord as set forth in said
subparagraph (b) 1. Tenant's prorata share of the total common area expenses for
the previous calendar year shall be that portion of all such expenses Which is
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equal to the proportion which the number of square feet of gross leasable area
in the Demised Premises bears to tire total number of square feet of gross
leasable area of buildings in the entire Development which are from time to time
completed as of the commencement of each calendar year.
There shall be appropriate adjustment of Tenant's share of the common area
expenses as of the commencement an(] expiration of tire term of this Lease. The
term "Gross Leasable Area", as used herein, shall be deemed to mean arid include
all fully enclosed areas for the exclusive use arid occupancy by occupant,
measured from the exterior surface of exterior walls (and from the extensions
thereof, in the case of openings), including warehousing or storage areas,
clerical or office areas, mezzanines or the second levels of any spaces arid
employee areas. "Gross Leasable Area" shall not include docks, areas for truck
loading and unloading nor any utility and/or mechanical equipment vaults or
rooms (to the extent which facilities lie outside exterior building lines).
Anything to the contrary notwithstanding, in the event Landlord or his
designated agent do not maintain the entire common area in the Development, then
and in that event, for the length of time such condition may exist, Landlord's
responsibility shall only be towards the maintenance and repair of those
portions of tire common area not maintained by others, and the "expense in
connection with said common areas" shall only refer to such areas maintained by
Landlord. In this event, Tenant's proportionate share of the expenses shall be
determined on the basis of the proportion of such expenses which the number of
square feet of gross leasable area in the Demised Premises bears to the total
number of square feet of gross leasable area of buildings in tire entire
Development which are from time to time completed as of the commencement of each
calendar year, exclusive of the area occupied and maintained by others.
Article 30. SECURITY DEPOSIT. Tenant shall pay an amount equal to last
months rent at the time of signing this Lease and in addition, on February 1,
1999, Tenant shall pay an amount equal to first months rent. The amount equal to
first months rent shall be applied to the first full month of the Lease term.
The amount equal to last months rent shall be held by Landlord as security for
the faithful performance of Tenant throughout the Lease term. The security
deposit shall be refundable to Tenant at the end of the Lease term upon Tenant's
satisfactory performance throughout the Lease term.
Article 31. FORCE MAJEURE. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
Lease, then performance of such act shall be excused For tire period of the
delay arid the period for the performance of any such act shall be extended for
a period equivalent to the period of such delay. The provisions of this Section
shall not operate to excuse Tenant from prompt payment of rent or any other
payments required by the terms of this Lease.
Article 32. ESTOPPEL CERTIFICATE. Within ten (10) days after request
therefor by Landlord, or in the event that upon any sale, assignment or
hypothecation of the demised premises and/or the land thereunder by Landlord, an
estoppel statement shall be required from Tenant, Tenant agrees to deliver to
any proposed mortgagee or purchaser, or to Landlord, in recordable form a
certificate certifying (if such be the case) that this Lease is in full force
and effect and that there are not defenses or offsets thereto, or stating those
claimed by Tenant.
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Article 33. LEASE RENEWAL OPTION. Landlord hereby grants Tenant the right
and option to renew this Lease for one (1) additional and successive five (5)
year period under the same Lease terms and conditions, subject to an adjustment
of rental described below. To exercise this Lease renewal option, Tenant must
provide written notice to Landlord stating Tenant's desire to renew this Lease
at least one hundred twenty (120) days prior to the expiration of the primary
Lease term. Tenant must be current under all Lease terms and conditions for the
Lease renewal right and option to be effective.
The rental for the Lease renewal term shall be at "Market Rent" which is
being experienced at the time Tenant notifies Landlord of its intent to renew
the lease. Landlord and Tenant shall agree on the lease renewal (rental) within
thirty (30) days after Tenant's notice to renew the Lease, or Tenant's lease
renewal option shall become null and void.
The term "Market Rent" shall mean the annual amount per square foot that a
willing, comparable Tenant would pay and a willing, comparable, Landlord of a
comparable building in the immediate area would accept at arms length, giving
appropriate consideration to the annual rental rate per rentable square foot,
brokerage commissions, if any, length of lease term, size and location of
premises being leased, and other generally applicable terms and conditions of
tenancy for a similar space and occupant.
Article 34. The submission of this Lease for examination does not
constitute a reservation of or option for the Demised Premises and this Lease
becomes effective as a Lease only upon execution and delivery thereof by
Landlord to Tenant.
(Signature blocks on following page.)
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IN WITNESS WHEREOF, the Landlord and Tenant have duly executed and affixed their
respective seals to this Lease Agreement on the day and year first above
written.
LANDLORD: NPH2, LLC
a Utah limited liability company
/s/ F.C. Stangl III
By ------------------------
F.C. Stangl III
Manager
TENANT: LASER CORPORATION
a Utah corporation
/s/ B. Joyce Wickham
By -----------------------
B. Joyce Wickham
President/CEO
Attached hereto and incorporated herein:
Lease Rider "A" - Building Expenses
Exhibit "A" - Development Site Plan
Exhibit "B" - Building Plan
Exhibit "B1" - Preliminary Floor Plan
- October 14, 1998 Written Proposal
- November 25, 1998 Written Proposal - "Revised"
459956
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LEASE RIDER "A"
BUILDING EXPENSES
-----------------
With reference to Tenant's appropriate proportionate share of property tax,
insurance expenses and common area service expenses as defined in the Lease
Agreement, Tenant hereby agrees to pay, as additional monthly rental, THREE
THOUSAND THREE HUNDRED DOLLARS AND NO CENTS ($3,300.00) to be paid monthly, in
advance, along with the monthly rental previously stated in Lease ARTICLE 7.
Minimum Rent. The above stated fee is an estimated and adjustable fee for such
expenses and services. At the end of each calendar year, Landlord shall furnish
a statement to Tenant defining what the actual tax, insurance and common area
expenses are for the calendar year just expired, stating what Tenant's
appropriate proportionate share of such expenses are and compare such to that
amount which has been prepaid by Tenant, If Tenant's proportionate share of such
expenses exceeds Tenant's payments so made, Tenant shall pay Landlord the
deficiency within ten (10) days after receipt of said statement. If Tenant's
prepaid payments exceed Tenant's proportionate share of such expenses, the
excess shall be applied against future payments for such expenses. Tenant shall
have the right, with ten ( 10) days prior written notice to Landlord, to review
Landlord's property tax, insurance expense records for the Subject development
of which the Demised Premises is a part.
Landlord's Initials Tenant's Initials
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Exhibit 4(j)
LASER CORPORATION
COMMON STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of August 5, 1998, by and between
LASER CORPORATION, a Utah corporation (the "Company"), and REINHARDT THYZEL, an
individual resident of Switzerland (the "Investor").
The parties hereby agree as follows:
1. Purchase and Sale.
1.1 Sale and Issuance of Stock. Subject to the terms and conditions of
this Agreement, the Investor agrees to purchase at the Closing. and the Company
agrees to sell and issue to the investor at the Closing, against cash payment,
521,739 shares of Common Stock (the "Shares") of the Company at the purchase
price of $1.15 per share.
1.2 Closing. The purchase and sale of the shares being purchased by the.
Investor shall take place at such time and place as the Company and the Investor
mutually agree upon (which time and place are designated the "Closing).
Following the Closing, the Company shall deliver to the Investor, or his agent,
a certificate representing the number of Shares which Investor Is purchasing
against delivery to the Company by the Investor of cash or a certified bank
cashier's check or evidence of wire funds transfer satisfactory to the Company
in the full amount of the Purchase Price.
1.3 Use of Proceeds. The Company agrees to use the proceeds from the
sale of the Shares for the repayment of outstanding obligations, for the
reduction of trade debt and for working capital purposes.
2. Representations and Warranties of the Company.
Except its set forth in a written schedule attached to this Agreement, the
Company hereby represents and warrants to the Investor that:
2.1 Incorporation. The Company and each of the Subsidiaries (as defined
in paragraph 2.3) is a corporation duly organized and validly existing, is in
good standing under the laws of the state or other place of its incorporation,
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. and the Company and each of the
Subsidiaries is qualified as a f6mign corporation in each jurisdiction where the
failure so to qualify would have a material adverse effect on its business or
operations.
2.2 Capitalization. The authorized capital of the Company consists of
10,000,000 shares of Common Stock, of which at Closing not more than 865,799
shares will be issued and outstanding. Schedule 2.2 contains a complete listing
of sham of Common Stock reserved for issuance upon exercise of outstanding stock
options.
<PAGE>
2.3 Subsidiaries. The Company does not presently control, directly or
indirectly. any corporation, association or business entity other than American
Laser Corporation. American Laser Medical Inc. and American Laser Software, Inc,
(referred to herein as the "Subsidiaries"). Each of the Subsidiaries is wholly
owned by the Company.
2.4 Authorization. All corporate action on the part of the Company, its
officers and directors necessary for the authorization, execution. delivery and
performance of all obligations of the Company under this Agreement and for the
authorization, issuance and delivery of the Shares being sold hereunder has been
or shall be taken prior to the Closing, and this Agreement, when executed and
delivered, shall constitute a valid and legally binding obligation of the
Company. Issuance of the Shares is not subject to preemptive rights or other
preferential rights of any present or future: stockholders in the Company.
2.5 Validity of Securities. The Shares to be purchased and sold pursuant
to this Agreement, when issued, sold and delivered in accordance with its terms
for the consideration expressed herein, shall be duly and validly issued.
2.6 Consents. All consents, approvals, orders, authorizations or
registration, qualification, designation and declaration or filing with any
federal or state governmental authority, or any other third party, on the part
of the Company and the Subsidiaries required in connection with the consummation
of the transactions contemplated herein shall have been obtained prior to, and
be effective as of, the Closing or will be timely filed thereafter.
2.7 Compliance With Other Instruments. The Company and each of the
Subsidiaries is not in violation of any provisions of its respective Articles of
Incorporation, its Bylaws, any material mortgage, indenture, lease, agreement or
other instrument to which it is a party, or of any provision of any federal or
state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company or the Subsidiaries. The execution, delivery and
performance of this Agreement will not result in any such violation or be in
conflict or constitute a default under any such provision.
2.8 Litigation. There are no actions, proceedings or investigations
pending. or to the knowledge of the Company or the Subsidiaries threatened which
question the validity of this Agreement or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
conditions, affairs or prospects of the Company and the Subsidiaries, nor, to
the knowledge of the Company and the Subsidiaries, has there occurred any event
or does there exist any condition which might properly be the basis therefor.
2.9 Patents. The Company and the Subsidiaries own or have a valid right
to use the patents, patent rights, licenses, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions, and intellectual property rights being used to conduct their
businesses as now operated and as now proposed to be operated; and the conduct
of business as now operated and as now proposed to be operated does not and will
not conflict with valid patents, patent rights, licenses. trade secrets,
trademarks, trademark rights, trade names or trade name rights of franchises,
copyrights, inventions, and intellectual property rights of others. The Company
and the Subsidiaries have no obligation to compensate any person or entity for
the use of any such patents or rights and have granted to no person or entity
2
<PAGE>
any license of other rights to use In any manner any of the patents or rights of
the Company or the Subsidiaries, whether requiring the payment of royalties or
not.
2.10 Financial Statements. The Company has previously furnished true and
complete copies of statements of financial condition as of December 31, 1997,
and the related statements of operations and statements of changes in financial
position for the years/periods then ended, all certified by Tanner & Co.,
independent accountants, and unaudited consolidated financial statements as of
March 31, 1998 and for the three months then ending.
The books of account of the Company and the Subsidiaries fully and
fairly reflect all of the transactions of such companies and are complete and
accurate. Neither the Company nor any of the Subsidiaries is subject. to any
undisclosed material liability not (i) reflected in its March 31, 1998 unaudited
financial statements, or (ii) reflected and specifically identified on a
schedule attached to this Agreement and so identified, or (iii) incurred in the
ordinary course of business since March 31, 1998. For purposes of this
Agreement, all financial statements of the Company shall be deemed to include
any notes to such financial statements.
2.11 Absence of Certain Changes. Since March 31, 1993, whether or not in
the ordinary course or business, there has not occurred or arisen (a) any
material adverse change in the financial condition, operations business or
prospects of the Company or We Subsidiaries considered as a whole or (b) any
event, condition or state of facts of any character which materially or
adversely affects, or may materially or adversely affect, the t1nancial
condition, operations, business or prospects of the Company and the Subsidiaries
considered as a whole.
2.12 Tax Return and Reports. All federal income tax and state franchise
tax returns and tax reports required to be filed by the Company and the
Subsidiaries have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns or reports arc required to be filed. All
such returns and reports constitute complete and accurate representations, in
all material respects, of The tax liabilities of the company and the
Subsidiaries, AU federal income tax and state franchise and other taxes
(including interest and penalties) due from, the Company and the Subsidiaries
have been fully paid or adequately provided for on the books and financial
statements of the Company or the Subsidiaries. None of the federal Income tax
returns of the Company have been audited by the Internal Revenue Service. The
Company knows of no additional assessments or adjustments pending or threatened
for any period, not of any basis for any such assessment or adjustment. The
Company and the Subsidiaries and their affiliates have not entered into any
agreements with federal and state taxing authorities extending the statute of
limitations with respect to the assessment of federal and state taxes for any
period.
2.13 Agreements. Neither the Company nor any of the Subsidiaries has
breached, nor has any such entity received oral or written notice of any claim
or threatened claim that the Company or any of the Subsidiaries has breached,
any of the terms or conditions of any agreement, contract, lease, commitment or
understanding, whether oral or written, the breach or breaches of which singly
or in the aggregate could materially or adversely affect the financial
condition, operations, business or prospects of the Company and the Subsidiaries
considered as a whole.
3
<PAGE>
2.14 Pension Benefit Plan. The Company does not have or make
contributions to any pension, defined benefit or defined contribution plans
which are subject to the Federal Employee Retirement Income Security Act of
1974, as amended ("ERISA").
2.15 Registration Rights. Except as set forth in this Agreement, no
person or entity has demand or other rights to cause the Company to file any
registration statement under the Securities Act of 1933, as amended (the "Act"),
relating to any securities of the Company or any right to participate in any
such registration statement.
3. Representations and Warranties of the Investor.
The Investor represents and warrants to the Company as follows:
3.1 Authorization. When executed and delivered by such Investor, this
Agreement will constitute the valid and legally binding obligation of such
Investor.
3.2 Access to Information. The Investor has had access to all
information about the Seller that exists in the possession and control of the
Company, and has met with and questioned executive officers and directors of the
Company to his satisfaction. He has had a full opportunity to analyze and
understand the risks of an investment in the Company, including but not limited
to those set out in the attached disclosure schedule.
3.3 Risk of Loss. The Investor understands and accepts that an
investment in the Company has inherent and significant risks, including the risk
of possible loss of Investor's entire investment.
4. Securities Act of 1933.
4.1 Investment Representation.
(a) This Agreement is made with the Investor in reliance upon Investor's
representations to the Company, which the Investor hereby confirms, that the
Shares to be received will be acquired for investment for an indefinite period
for Investor's own account and not with a view to the sale or distribution of
any part thereof, and that he has no present intention of selling or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of Investor's property shall at all times be within Investor's
control. By executing this Agreement, the Investor further represents that he
does not have any contract, undertaking, agreement or arrangement with any
person to sell or transfer to such person any of the Shares.
(b) The Investor understands that the Shares are not and may never be
registered under the Act on the ground that the sale provided for in this
Agreement and the issuance of securities is exempt pursuant to Section 4(2) of
the Act and Rule 506 of Regulation D thereunder, and that the Company's reliance
on such exemption is predicated on Investor's representations set forth herein.
4
<PAGE>
(c) The Investor agrees that in no event will he make a disposition of
any of the Shares, unless the Shares shall have been registered under the Act,
unless and until (i) ho shall have notified the Company with a statement of the
circumstances surrounding the proposed disposition and (ii) he shall have
furnished the Company with an opinion of counsel reasonably satisfactory to the
Company to the effect that (A) such disposition will not require registration of
such securities under the Act, and (B) that appropriate action necessary for
compliance with the Act has been taken.
(d) The Investor is an "accredited investor" as that term is defined in
Ru1e 501 promulgated under the Act. Nevertheless, the Investor has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of Investor's investment, has the ability to
bear the economic risks of Investor's investment and has been furnished with and
has had access to such information as would be made available in the form of a
registration statement together with such additional information as is necessary
to verify the accuracy of the information supplied and to have all questions
which have been asked by the Investor answered by the Company.
(e) The Investor understands that if a registration statement covering
the Shares under the Act is not in effect when he desires to sell any of the
Shares, he may be required to hold such Securities for an indeterminate period.
The Investor also acknowledges that any sale of the Shares which might be made
by him in reliance upon Rule 144 under the Act may be made by only in limited
amounts in accordance with the terms and conditions of that Rule.
4.2 Legends. All certificates for the Shares shall bear substantially
the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
BY THE ISSUEE FOR INVESTMENT PURPOSES. SAID SHARES MAY NOT BE SOLD OR
TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR
(B) THE TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS TRANSFER
AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION SATISFACTORY TO
COUNSEL FOR THE COMPANY OR A "NO-ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER."
4.3 Rule 144. The Company covenants and agrees that: (i) at all times
while it is subject to the reporting requirements of Section 13 or 15(d) of the
Securities Fxchange Act of 1934 a will use its best efforts to comply with the
current public information requirements of Rule 144(c)(1) under the Act; and
(ii) it will furnish the Investor upon request with all information about the
Company required for the preparation and filing of Form 144.
4.4 Disclosures. On the Disclosure Schedule attached to this Agreement
is a listing of risk factors, material facts and financial information not
5
<PAGE>
contained in the financial statements or tax returns discussed in paragraph 2,
above, or not apparent from a reading of the same, prepared by the Company and
delivered to the Investor prior to Closing. Investor represents and warrants
that he has read and undersstood all of the disclosures in such Schedule and is
purchasing the Shares in full awareness of the same.
5. Registration Rights.
The Company covenants and agrees as follows:
5.1 Company Registration. Whenever the Company proposes to register any
of its Common Stock under the Act for a public offering for cash, whether as a
primary or secondary offering (or pursuant to registration rights granted to
holders of other securities of the Company), the Company shall, each such time,
give the Investor written notice of its intent to do so. Upon the written
request of Investor given within thirty (30) days after receipt of any such
notice, the Company shall use its best efforts to cause to be Included in such
registration all of the Shares which the Investor requested to be registered:
provided (i) at lust ten percent of the Shares hold by the Investor, but no more
than 100,000 shares, are included in each such request, (ii) the Investor agrees
to sell shams in the same manner and on the same terms and conditions as the
other Common Stock which the Company proposes to register, and (iii) if the
registration is to include Common Stock to be sold for the account of the
Company, the proposed managing underwriter does not advise the Company that in
its opinion the inclusion of the Investor's Shares is likely to affect adversely
the success of the offering by the Company or the price it would receive in
which case the rights of the Investor shall be as provided in subparagraph 5.9
hereof.
5.2 Obligations of the Company. Whenever required under subparagraph 5.1
to use its best efforts to effect the registration of any of the Shares or to
effect registration pursuant to subparagraph 5.9, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement with respect to such shares and use its best
efforts to cause such Registration Statement to become and remain effective for
at least one hundred eighty (180) days.
(b) Prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to permit the disposition of all securities covered by such
Registration Statement.
(c) Furnish to the Investor such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Shares owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such Registration Statement under such other securities or Blue Sky laws of
such jurisdictions (not exceeding ten unless otherwise agreed upon by the
Company) as shall be reasonably appropriate for the distribution of the
securities covered by the Registration Statement, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions, and further provided that (anything herein to the
contrary notwithstanding with respect to the bearing of expenses) if any
6
<PAGE>
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification therein of the securities
be borne by selling shareholders, then such expenses shall be payable by selling
shareholders pro rata, to the extent required by such jurisdiction.
5.3 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this paragraph 5 that
the Investor shall furnish to the Company such information regarding it, the
Shares held by it, and the intended method of disposition thereof as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
5.4 Underwriting Requirements. In connection with any offering in an
underwriting of shares being issued by the Company, the Company shall not be
required under subparagraph 5.1 to include any of the Investor's Shares therein
unless he accepts and agrees to the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company.
5.5 Delay of Registration. So long as the Company has given any notice
required by subparagraph 5.1 hereof, the Investor shall have no right to take
any action to restrain, enjoin or otherwise delay any registration as the result
of any controversy which might arise with respect to the interpretation or
implementation of this paragraph 5.
5.6 Indemnification. In the event any of the Shares are included in a
Registration Statement under this paragraph 5:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless Investor against any losses, claims, damages or liabilities, joint or
several, to which he may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities or actions in respect thereof arise
out of or are based upon any untrue or alleged untrue statement of any material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein, or allegedly necessary to make the statements therein
not misleading; and will reimburse the Investor for any legal or other expenses
reasonably incurred by him in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subparagraph 5.6(a) &boil not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without: the consent of the Company nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Investor.
7
<PAGE>
(b) To the extent permitted by law, the Investor will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed such registration statement, each person, if any, who controls the
Company within the meaning of the Act, and any underwriter for the Company
(within the meaning of the Act) against any losses, claims, damages, or
liabilities to which the Company or any such director, officer, controlling
person, or underwriter may become subject, under the Act or otherwise, insofar
its such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or allegedly necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by the Investor expressly for use in connection with such registration; and the
Investor will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there were material
misstatements or omissions.
(c) Promptly after receipt by an indemnified party under this
subparagraph 5.6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this subparagraph 5.6, notify the indemnifying party in writing of
the commencement thereof and the indemnifying party shall have the right to
participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the ability
to defend such action, shall relieve such indemnifying party under this
subparagraph 5.6, but the omission so to notify the indemnifying party will not
relieve such party of any liability which such party may have to any indemnified
party otherwise other than under this subparagraph 5.6.
(d) If recovery is not available under the foregoing indemnification
provisions of this paragraph, for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be entitled
to contribution to liabilities and expenses, except to the extent that
contribution is not permitted under Section 11(f) of the Act. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by each party from the offering of
the securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claims was asserted, the
opportunity to correct and prevent any statement of omission, and any other
equitable considerations appropriate under the circumstances; provided that in
no event will any Investor be required to contribute an amount in excess of the
original cost that Investor of Investor's Shares Included in that offering. The
Company and the Underwriters agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capital allocation.
8
<PAGE>
5.7 Reports under the Securities Exchange Act of 1934. With a view to
making available to the Investor the benefits of Rule 144 promulgated under the
Act, the Company agrees to use its best efforts (i) to file with the SEC in a
timely manner all reports and other documents required to be filed by an issuer
of securities registered under the Act or the Securities Exchange Act of 1934,
as amended, (ii) to maintain in effect the registration of Investor's Common
Stock under Section 12 of the Securities Exchange Act of 1934, as amended, and
(iii) so long as any Investor owns any of the Shares, to furnish in writing upon
such Investor's request the following information: (A) the Company's name,
address and telephone number, (B) the Company's Internal Revenue Service
identification number, (C) the Company's SEC file number, (D) the number of
shares of Common Stock outstanding as shown by the most recent report or
statement published by the Company, (E) the average weekly volume of trading in
such shares reported on all national securities exchanges during the four
calendar weeks preceding the date of receipt of request by the Investor, and (F)
whether the Company has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding twelve months,
With respect to a rule or regulation of the SEC (other than Rule 144) which may
at any time permit. an Investor to sell Common Stock to the public without
registration, the Company agrees to take such action as is reasonable to enable
utilization of such rule.
5.8 Limitations on Subsequent Registration Rights. From and after the
Closing, the Company will not, without the prior written consent of the
Investor, enter into any agreement with any holder or prospective holder of any
securities of the Company which allows such holder or prospective holder of any
securities of the Company to include such securities in any registration filed
under subparagraph 5.1 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
diminish the amount of Shares which are included.
5.9 Transfer of Registration Rights. Incident to the sales of Shares,
any transferee of Shares representing at least 50,000 shares of Common Stock
(which amount will be appropriately adjusted for stock splits and combinations)
will be entitled to registration rights under this paragraph 5 to the same
extent as Investor.
5.10 Registration and Blue Sky Fees. In connection with any registration
of Investor's Shares, Investor will pay or reimburse the Company for his pro
rata share of all registration and/or blue sky fees paid to securities
regulatory agencies.
6. Covenants.
Financial Statements. The Company promptly shall deliver to the Investor
annual and quarterly financial statements.
7. Miscellaneous.
7.1 Agreement is Entire Contract. Except as specifically referenced
herein, this Agreement constitutes the entire contract between the parties
9
<PAGE>
hereto concerning the subject matter hereof and no party shall be liable or
bound to the other in any manner by any warranties, representations or covenants
except as specifically set forth herein. Any previous agreement among the
parties related to the transactions described herein is superseded hereby. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided herein.
7.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Utah.
7.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.4 Title and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience and are not to be considered in construing
this Agreement.
7.5 Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
addressed to a party at the following addresses:
If to the Company: If to the Investor:
Laser Corporation Reinhardt Thyzel
Attn: President Secstrasse 9
1832 South 3850 West 8460 Rapperswill
Salt Lake City, Utah 84104 SWITZERLAND
or to another address as a party may designate by ten (10) days advance written
notice to the other party.
7.6 No Finder's Fees. Each party represents that it is not, and will not
be, obligated for any finder's fee or commission payable in cash in connection
with this transaction. The Investor hereby agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which any such Investor or any of the
Investor's employees or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investor from any
liability for any commission and compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of Investor's officers, employees or
representatives is responsible.
10
<PAGE>
7.7 Survival of Warranties. The warranties and representations of the
Company contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing hereunder for one year
from the date hereof.
7.8 Amendment of Agreement. Except as expressly provided herein, any
provision of this Agreement may be amended or waived on behalf of all Investors
by a written instrument signed by the Company and by Investors holding at least
a majority of the aggregate of the shares of Common Stock issuable and issued
upon conversion of the Shares.
7.9 Election of Investor as Director of the Company. The Company agrees
that it shall cause its bylaws to be amended to expand the number of directors
to five (5) and will appoint the Investor or his nominee to fill the newly
created vacancy.
7.10 The purchase and sale of the Shares as set forth herein is
conditioned upon the approval of the Company's shareholders as is required under
the NASDAQ Market Place Rules.
In Witness Whereof, the undersigned have executed this Agreement as of the
day and year first written above.
LASER CORPORATION
/s/ B. Joyce Wickham
By:-----------------------
B. Joyce Wickham,
President
INVESTOR
/s/ Reinhardt Thyzel
--------------------------
Reinhardt Thyzel
11
<PAGE>
DISCLOSURE SCHEDULE
2.8 The NASD has commenced a proceeding to determine if the Company's
common stock should remain listed on the NASDAQ Small Cap market
system.
2.9 The Company is paying patent royalties to Patlex under a preexisting
arrangement disclosed to Investor.
2.12 The Company was audited by the Internal Revenue Service for the tax
years 1983, 1984 and 1985. These audits have been resolved.
2.14 The Company has a 401(K) profit sharing plan to which it has made no
contributions.
4.4 The following risk factors have been disclosed to and discussed with
Investor prior to the Investor signing the Stock Purchase Agreement:
(a) The laser and medical device markets are highly competitive. There
are numerous other manufacturers of lasers and laser medical devices
who have greater financial resources and market power than the Company.
There can be no assurance that the Company's current or future products
will gain market acceptance.
(b) The Company has experienced operating losses over the past two
years and during the first two quarters of the current year. Cost
containment and marketing efforts of management have not as yet been
able to turn the company back to profitability.
(c) A few customers account for a significant portion of the Company's
sales revenues. The loss of any one of these customers could have a
material effect on the Company's results.
(d) The Company's Common Stock is currently traded through the NASDAQ
SmallCap Market system. The NASD has recently enacted more stringent
requirements for listing of a company on the SmallCap Market system,
and the Company currently cannot meet one of the new requirements.
While the proceeds of Investor's purchase of the Shares should put the
Company in compliance with all of the NASD requirements for continued
listing on the SmallCap Market system, there can be no assurance that
the NASD will allow the Company's Common Stock to continue to be listed
on the SmallCap Market system nor that the Company will stay in
compliance with requirements for continued listing on the SmallCap
Market system. There is also the possibility that the NASD will enact
even stricter standards in the future that the Company will not be able
to meet.
(e) The Company needs new investment capital above and beyond the
proceeds from Investor's purchase of the Shares. There can be no
assurance that the Company will be able to raise the needed additional
capital timely, at reasonable cost, or at all.
12
<PAGE>
(f) Certain of the Company's products are subject to government
regulation, including regulation by the Food & Drug Administration in
the United States, Although the Company believes it is in compliance
with all applicable regulatory requirements, there is no assurance that
changes in regulatory requirements or policies will not materially
adversely effect the Company.
(g) The NASD has advised the Company that it does not meet the public
float requirement for listing the Company's common stock on the NASDAQ
SmallCap Market system. A public float of $1,000,000 is required. The
Company has until October 28, 1998 to meet this requirement prior to
delisting.
459995/gel
13
<PAGE>
LASER CORPORATION AND SUBSIDIARIES
----------------------------------
EXHIBIT 21 - STATEMENT RE: SUBSIDIARIES OF THE REGISTRANT
---------------------------------------------------------
Subsidiary Place of Incorporation
---------- ----------------------
American Laser Corporation Utah
American Laser Medical, Inc. Utah
American Laser Software, Inc. Utah
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LASER
CORPORATION DECEMBER 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 531,734
<SECURITIES> 0
<RECEIVABLES> 344,091
<ALLOWANCES> 25,000
<INVENTORY> 967,722
<CURRENT-ASSETS> 1,891,280
<PP&E> 2,223,664
<DEPRECIATION> 2,020,863
<TOTAL-ASSETS> 2,234,284
<CURRENT-LIABILITIES> 1,072,677
<BONDS> 0
0
0
<COMMON> 70,003
<OTHER-SE> 1,091,604
<TOTAL-LIABILITY-AND-EQUITY> 2,234,284
<SALES> 3,310,719
<TOTAL-REVENUES> 3,336,105
<CGS> 3,142,826
<TOTAL-COSTS> 5,046,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,710,252)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,710,252)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,710,252)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
