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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_____________________
May 4, 1998
Date of Report (Date of earliest
event reported)
ION LASER TECHNOLOGY, INC.
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(Exact name of registrant as specified in its charter)
Utah 0-17594 87-0410364
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(State of (Commission File Number) (IRS Employer
incorporation) Identification No.)
3828 South Main Street
Salt Lake City, Utah 84115
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(Address of principal executive offices) (Zip Code)
(801) 262-5555
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(Registrant's telephone number,
including area code)
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
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Pursuant to a Stock Purchase Agreement, dated as of May 4, 1998 (the
"Stock Purchase Agreement"), between the Registrant and LCO Investments Limited
("LCO"), the Registrant issued and sold to LCO 1,860,465 shares (the "New
Shares") of Common Stock, par value $.001 per share, of the Registrant on May 5,
1998 for an aggregate purchase price of $5,000,000 (the "Stock Purchase"). The
New Shares, together with LCO's other holdings of Common Stock, constitute
approximately 33% of the Registrant's issued and outstanding Common Stock. LCO
also holds currently exercisable options (the "Options") to acquire an
additional 1,173,334 shares of Common Stock which, taken together with the
outstanding Common Stock held by LCO, constitute approximately 40% of the
Registrant's Common Stock, after giving effect to all exercisable options. LCO's
source of funds for the Stock Purchase was its own capital.
Pursuant to the Stock Purchase Agreement, the Registrant has amended
the terms of the Options to change the exercise price of the Options from $9.00
to $4.50 per share of Common Stock. Pursuant to a Registration Rights Agreement,
dated as of May 4, 1998 (the "Registration Rights Agreement"), between the
Registrant and LCO, LCO has acquired certain rights to cause the Registrant to
register the New Shares for offer and sale under the Securities Act of 1933, as
amended.
LCO has retained its rights, granted in 1996 in connection with an
earlier purchase of Common Stock, for so long as LCO and its affiliates and
permitted transferees continue to hold 5% or more of the outstanding Common
Stock of the Registrant, (i) to nominate two persons for election as directors
of the Registrant ("LCO Directors"), (ii) to remove any LCO Director from the
board of directors at any time by written notice to the board and (iii) in the
event of the death, disability, legal incapacity, resignation or removal of an
LCO Director, to designate a successor nominee for election as a director of the
Registrant.
In connection with the closing of the Stock Purchase Agreement,
Messrs. Milton G. Adair, David E. Neff and Richard S. Braddock resigned as
directors of the Registrant, and two new directors nominated by LCO were
appointed as directors, R. Eric Montgomery and Brian Delaney. Accordingly, the
Registrant's current Board of Directors consists of Anthony M. Pilaro, Richard
V. Trefz, E. Wyatt Cannady, R. Eric Montgomery, and Brain Delaney.
LCO is a corporation organized under the laws of Guernsey, Channel
Islands, and is wholly owned by The ERSE Trust. The sole trustee of The ERSE
Trust is CAP Advisers
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Limited, a company organized under the laws of the United Kingdom. Anthony M.
Pilaro, a director of the Registrant, is a director of LCO and a director of CAP
Advisers Limited. Based on LCO's ownership of Common Stock of the Registrant,
the membership of one of LCO's directors (Mr. Pilaro) on the board of directors
of the Registrant, and LCO's right to nominate two additional candidates for the
Registrant's board of directors, LCO may be deemed to control the Registrant as
of May 5, 1998. As a result of the resignations of Milton G. Adair, Richard S.
Braddock and David E. Neff as directors of the Registrant, Mr. Pilaro, Mr.
Montgomery and Mr. Delaney comprise a majority of the board of directors. Based
on Mr. Pilaro's seat on the Registrant's board of directors and his power to
influence the management and conduct of the business and affairs of LCO, Mr.
Pilaro may be deemed to have indirect control of the Registrant.
The terms of the Stock Purchase are set forth in full in the Stock
Purchase Agreement and the Registration Rights Agreement, which are filed as
exhibits to this Report.
Items 2-4. Not Applicable.
Item 5. Other Events.
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On May 5, 1998, the Registrant consummated the Stock Purchase,
described under Item (1) above and in the Stock Purchase Agreement, included as
an exhibit to this Report. On the same date, the Registrant announced plans for
a significant restructuring of the Registrant's operations, research and
development activities and announced that Richard V. Trefz would become the
President and Chief Executive Officer of the Registrant. In conjunction with
its restructuring, the Registrant expects to take a one-time special charge of
approximately $2.2 million (pre-tax) in the fiscal quarter ending March 31,
1998.
Additional information with respect to the Registrant's restructuring
plans and other events is contained in the Registrant's press release, dated May
5, 1998, which is filed as an exhibit to this Report and is incorporated herein
in its entirety.
Item 6. Not Applicable.
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Item 7. Exhibits.
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Exhibit No. Description
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(10)(a) Stock Purchase Agreement, dated as of May 4, 1998, between the
Registrant and LCO Investments Limited.
(10)(b) Registration Rights Agreement, dated as of May 4, 1998, between
the Registrant and LCO Investments Limited.
(99) Press release, dated May 5, 1998, issued by the Registrant.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
ION LASER TECHNOLOGY, INC.
By /s/ Brian Delaney
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Name: Brian Delaney
Title: Acting Chief Financial
Officer
Date: May 6, 1998
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EXHIBIT INDEX
Exhibit No.
Under Reg. Sequential
S-K, Item 601 Description Page Number
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(10)(a) Stock Purchase Agreement, dated
as of May 4, 1998, between the
Registrant and LCO Investments
Limited.
(10)(b) Registration Rights Agreement,
dated as of May 4, 1998, between
the Registrant and LCO
Investments Limited.
(99) Press release, dated May 5, 1998,
issued by the Registrant.
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THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND WILL BE OFFERED AND SOLD BY THE COMPANY IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF FEDERAL AND STATE
LAW BY VIRTUE OF THE COMPANY'S INTENDED COMPLIANCE WITH THE PROVISIONS OF
SECTION 4(2) AND/OR REGULATION S PROMULGATED UNDER THE ACT. THE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
STOCK PURCHASE AGREEMENT
Ion Laser Technology, Inc.
3828 South Main Street
Salt Lake City, Utah 84121
Attn: Milton Adair
President and Chief Executive Officer
Gentlemen:
In connection with the offer and proposed issuance of $5,000,000 in Common
Stock (the "Offering") by Ion Laser Technology, Inc., a Utah corporation ("ILT"
or the "Company"), in reliance on exemptions from the registration requirements
of the U.S. Securities Act of 1933, as amended (the "Act"), LCO Investments
Limited ("Purchaser") and the Company hereby agree as follows:
1. Purchase of Securities. Subject to the terms and conditions of this
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Agreement, Purchaser hereby agrees to acquire, and the Company agrees to issue
and sell, One Million Eight Hundred Sixty Thousand Four Hundred Sixty Five
(1,860,465) shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"). The shares of Common Stock acquired by Purchaser hereunder
shall be referred to in this Agreement as the "Shares." The total purchase
price (the "Purchase Price") for the Shares shall be Five Million Dollars
($5,000,000), the Purchase Price per Share being the higher of the Company's
book value per share and the closing sale price per share of the Common Stock on
the date the Company's Board of Directors authorized this Agreement. The
Purchaser shall pay the Purchase Price in full at Closing, as hereinafter
defined, via wire transfer to an account of the Company identified by the
Purchaser and under the control of persons designated by or acceptable to the
Purchaser on or before the Closing Date, as that term is defined in Section 6 of
this Agreement. Wire instructions shall be provided prior to the Closing.
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2. Amendment of Old Options. The Company hereby agrees to amend that
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certain Option to Purchase Shares of Common Stock dated May 8, 1997 issued to
LCO Investments Limited, relating to 400,000 shares of Common Stock, and that
certain Amended and Restated Option to Purchase Shares of Common Stock dated May
8, 1997 issued to LCO Investments, relating to 773,334 shares of Common Stock
(together, the "Old Options"), such that the purchase price of the shares
underlying the Old Options shall be changed from $9.00 per share to $4.50 per
share. The amendment to the Old Options shall be in the form set forth in
Exhibit "A" (the "Amendment to Option Agreements") and by this reference made a
part hereof.
3. Board Nominee Rights. The Company covenants and agrees that for so
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long as the Purchaser and its affiliates and permitted transferees collectively
are the beneficial owners of 5% or more of the issued and outstanding shares of
Common Stock of the Company, (i) the Purchaser shall have the right to nominate
two persons (each, a "Purchaser Director") for election to the Board of
Directors of the Company, (ii) the Purchaser shall have the exclusive right to
remove any Purchaser Director from the Board of Directors at any time by written
notice to the Board of Directors, and (iii) in the event of the death,
disability, legal incapacity, resignation or removal of a Purchaser Director,
the Purchaser shall have the exclusive right to designate a successor nominee
for election as a director of the Company (which successor, upon such election,
shall be a Purchaser Director). In determining the beneficial ownership of the
Purchaser and its affiliates and permitted transferees for purposes of this
Section, the shares of stock issuable upon any options granted by the Company to
the Purchaser, its affiliates or permitted transferees (including, without
limitation, the Old Options) shall be deemed to be issued and outstanding as
though such options had been exercised in full. The Company and the Purchaser
intend to have the Purchaser's rights under this Section supersede and not be
duplicative of its rights set forth in Section 7.3 of the Stock Purchase
Agreement, dated as of April 1, 1996, by and among the Company, the Purchaser,
Richard S. Braddock and Pinnacle Fund, L.P.
4. Delivery of Share Certificates and Amended Option Agreements. At the
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Closing, the Company shall deliver to Purchaser certificates representing the
Shares, which shall be fully paid and nonassessable upon issuance, and the
Amended Option Agreements.
5. Registration Rights and Exchange Filings. The Shares shall be subject
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to certain registration rights, as provided in that certain Registration Rights
Agreement attached hereto as Exhibit "B" and by this reference made a part
hereof. (Such Registration Rights Agreement, together with this Agreement, and
the Amendment to Option Agreements, constitute the "Transaction Documents"). In
addition, ILT shall make appropriate filings under the rules of the American
Stock Exchange ("AMEX") in order that the Shares will be included in the
Company's listing with the AMEX.
6. Closing. Payment of the Purchase Price by the Purchaser and delivery
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of the Shares and the fully executed Amended Option Agreements by ILT shall be
deemed to be the completion of the transactions contemplated by this Agreement
("Closing"). Closing shall occur
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concurrently with the execution of this Agreement, such later date as the Shares
shall have been listed with the AMEX, or such later date as the parties may
hereafter agree in writing (the "Closing Date").
7. Use and Disposition of Proceeds. The gross proceeds of this
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transaction will be Five Million Dollars ($5,000,000). The Company agrees to
use the proceeds as shall be determined or directed by its Board of Directors as
constituted from time to time following the Closing, or as shall be determined
or directed pursuant to authority delegated by such Board.
8. Representations and Warranties of Purchaser. To induce the Company's
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acceptance of this Agreement, Purchaser hereby represents and warrants to the
Company and its agents and attorneys as follows:
8.1 Investor Status. Purchaser is an "accredited investor" within
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the meaning of Section 501(a) of Regulation D under the Act or is not a
"U.S. Person" as that term is defined under Rule 902(o)(1) of Regulation S
under the Act.
8.2 Liquidity. Purchaser presently has sufficient liquid assets to
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pay the Purchase Price. Purchaser has adequate means of providing for its
current needs and contingencies and has no need for liquidity in its
investment in the Company or for a source of income from the Company.
Purchaser is capable of bearing the economic risk and the burden of the
investment contemplated by this Agreement, including, but not limited to,
the possibility of the complete loss of the value of the Shares and the
limited transferability of the Shares, which may make the liquidation of
the Shares impossible in the near future.
8.3 Organization, Standing, Authorization. Purchaser is duly
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organized, validly existing, and in good standing under the laws of the
Guernsey, Channel Islands and has the requisite power and authority to
enter into this Agreement, acquire the Shares, and execute and deliver any
documents or instruments in connection with this Agreement. The execution
and delivery of this Agreement, and all other documents and instruments
executed by Purchaser in connection with any of the transactions
contemplated by this Agreement, have been duly authorized by all required
action of Purchaser's members or managers. The person executing, on
Purchaser's behalf, this Agreement and any other documents or instruments
executed by Purchaser in connection with this Agreement is duly authorized
to do so.
8.4 Absence of Conflicts. Purchaser represents and warrants that the
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execution and delivery of this Agreement and any other document or
instrument executed in connection with this Agreement, and the consummation
of the transactions contemplated thereby, and compliance with the
requirements thereof, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on
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Purchaser, or the provision of any indenture, instrument or agreement to
which Purchaser is a party or is subject, or by which Purchaser or any of
their properties is bound, or conflict with or constitute a material
default thereunder, or result in the creation or imposition of any lien
pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by such Purchaser to any
third party, or require the approval of any third-party pursuant to any
material contract, agreement, instrument, relationship or legal obligation
to which Purchaser are subject or to which any of their properties,
operations or management may be subject.
9. Sole Party in Interest. Purchaser represents that it is the sole and
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true party in interest, and no other person or entity has or will have upon the
issuance of the Shares beneficial ownership interest in the Shares or any
portion thereof, whether direct or indirect (excluding any contractual right to
payments based on the value of such Shares), other than the equity holders or
beneficiaries of such Purchaser.
9.1 Investment Purpose. Purchaser represents that it is acquiring
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the Shares for its own account and for investment purposes and not for the
account or benefit of any U.S. person or other person or entity or for or
with a view to resale or distribution.
9.2 Knowledge and Experience. Purchaser is experienced in evaluating
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and making speculative investments, and has the capacity to protect
Purchaser's interests in connection with the acquisition of the Shares.
Purchaser has such knowledge and experience in financial and business
matters in general, and investments in the laser industry in particular,
that Purchaser is capable of evaluating the merits and risks of Purchaser's
investment in the Company. Purchaser has been informed that an investment
in the Company is speculative and has concluded that Purchaser's proposed
investment is appropriate in light of its overall investment objectives and
financial situation.
9.3 Investment Advisors. No party has received or will receive any
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compensation or other remuneration for advising Purchaser with respect to
this investment other than legal counsel, and Purchaser represents that no
investment advisor or purchaser representative has been consulted or
retained in connection with Purchaser's decision to invest in the Company.
9.4 Disclosure, Access to Information. Purchaser confirms that it
---------------------------------
has received and thoroughly read and is familiar with and understands this
Agreement, and that all documents, records, books and other information
pertaining to Purchaser's investment in the Company requested by Purchaser
have been made available for inspection and copying and that there are no
additional materials or documents that have been requested by Purchaser
that have not been made available by the Company. Purchaser further
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acknowledges that since August 1997, Mr. Anthony Pilaro, a director of the
Purchaser, has served as a member of the Board of Directors of the
Company. Purchaser further acknowledges that the Company is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Purchaser has reviewed or received copies
of any such reports that have been requested by it. Without limiting the
generality of the foregoing, Purchaser acknowledges that it has received
and has reviewed copies of the following documents and materials, all of
which are incorporated herein by reference:
(1) Articles of Incorporation of the Company, as amended;
(2) Bylaws of the Company, as amended;
(3) Annual Report on Form 10-KSB for the fiscal years ended
March 31, 1996 and 1997;
(4) Quarterly Reports on Form 10-QSB for the quarters ended
June 30, September 30, and December 31, 1996 and 1997.
9.5 Exclusive Reliance on this Agreement. In making the decision to
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purchase the Shares, Purchaser has relied exclusively upon information
included in this Agreement or incorporated herein by reference pursuant to
Section 9.4, and not on any other representations, promises or information,
whether written or verbal, by any person. The Purchaser acknowledges that
the Company has realized and is continuing to realize net losses; that its
cash resources have declined significantly; that to date, the Company has
been unable to perform its obligations under its Distribution Agreement
("DMD Agreement") with Dental/Medical Diagnostics, Inc. ("DMD") in
accordance with the terms of the DMD Agreement, and is aware of the
termination provisions and other terms and conditions of the DMD Agreement.
9.6 Advice of Counsel. Purchaser understands the terms and
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conditions of this Agreement, has investigated all issues to Purchaser's
satisfaction, has consulted with such of Purchaser's own legal counsel or
other advisors as Purchaser deems necessary, and is not relying, and has
not relied on the Company for an explanation of the terms or conditions of
this Agreement or any document or instrument related to the transactions
contemplated thereby. Purchaser further acknowledges, understands and
agrees that, in arranging for the preparation of this Agreement and all
other documents and materials related thereto, the Company has not
attempted to procure, and has not procured, legal representation for
Purchaser.
9.7 Accuracy of Representations and Information. All representations
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made by Purchaser in this Agreement and all documents and instruments
related to this Agreement, and all information provided by Purchaser to the
Company concerning Purchaser and its financial position is correct and
complete in all material respects as of
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the date hereof. If there is any material change in such information before
the actual issuance of the Shares, Purchaser immediately will provide such
information to the Company.
9.8 No Representations. None of the following have ever been
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represented, guaranteed, or warranted to Purchaser by the Company or any of
its employees, agents, representatives or affiliates, or any broker or any
other person, expressly or by implication:
(1) The approximate or exact length of time that Purchaser will
be required to remain as owner of the Shares;
(2) The percentage of profit or amount of or type of considera
tion, profit or loss (including tax write-offs or other tax benefits)
to be realized, if any, as a result of an investment in the Shares; or
(3) The past performance or experience on the part of the
Company or any affiliate or their associates, agents or employees, or
of any other person as being indicative of future results of an
investment in the Shares.
9.9 Federal Tax Matters. Purchaser has reviewed and understands the
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federal income tax aspects of its purchase of the Shares, and has received
such advice in this regard as Purchaser deems necessary from qualified
sources such as attorneys, tax advisors or accountants, and is not relying
on any representative or employee of the Company for such advice.
9.10 No Brokers or Finders. Purchaser represents that no third person
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has in any way brought the parties together or been instrumental in the
negotiation, execution, or consummation of this Agreement or any
instrument, document or agreement related to this Agreement, or will
receive a fee or any compensation for doing so. Purchaser agrees to
indemnify the Company against any claim by any third person for any
commission, brokerage fee, finders fee, or other payment with respect to
this Agreement or the transactions contemplated hereby based upon any
alleged agreement or understanding between such party and such third
person, whether expressed or implied, arising from the actions of such
party. The covenants set forth in this Section shall survive the Closing
Date and the consummation of the transactions contemplated by this
Agreement.
10. Certain Risk Factors. Purchaser has been informed about and fully
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understands that there are risks associated with an investment in the Company,
including those disclosed in documents incorporated herein by reference pursuant
to Section 9.4, and those enumerated in Section 9.5, of this Agreement.
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11. Manner of Sale. At no time was Purchaser presented with or solicited
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by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
12. Restricted Shares. Purchaser understands and acknowledges that the
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Shares have not been registered under the Act, or any state securities laws, and
that they will be issued in reliance upon certain exemptions from the
registration requirements of those laws, and thus cannot be resold unless they
are registered under the Act or unless the Company has first received an opinion
of competent securities counsel that registration is not required for such
resale. Purchaser agrees that it will not resell any Shares unless such resale
transaction is in accordance with Regulation S and/or Rule 144 under the Act,
pursuant to registration under the Act, or pursuant to an available exemption
from registration. With regard to the restrictions on resales of the Shares or
any security underlying or into which the Shares are or may be convertible,
Purchaser is aware (i) of the limitations and applicability of Securities and
Exchange Commission Rule 144, (ii) that the Company will issue stop transfer
orders to its stock transfer agent in the event of attempts to improperly
transfer any such securities; and (iii) that a restrictive legend will be placed
on certificates representing the Shares and any security underlying or into
which any of the Shares are or will be convertible, which legend will read
substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND STATE SECURITIES
LAWS AND THEREFORE HAVE NOT BEEN REGISTERED UNDER THE ACT OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF REGULATION S OR, IF APPLICABLE, RULE 144 UNDER THE ACT, COMPLIANCE WITH
THE REGISTRATION OR QUALIFICATION PROVISIONS OF THE ACT OR APPLICABLE STATE
LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. THE COMPANY WILL INSTRUCT ITS STOCK TRANSFER AGENT NOT TO
RECOGNIZE ANY SALE OF THESE SECURITIES UNLESS SUCH SALE IS MADE PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR THE COMPANY HAS FIRST
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
SECURITIES COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
13. Indemnification. The Company agrees to indemnify the Purchaser, its
---------------
officers, employees and agents, and hold them harmless from and against any and
all liability, damage,
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cost or expense, including attorney's fees, incurred on account or arising out
of any inaccuracy or omission in or breach of the declarations, covenants,
agreements, representations, and warranties by the Company set forth or
incorporated by reference herein.
14. Representations and Warranties of the Company. The Company hereby
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represents and warrants to Purchaser as follows:
14.1 Organization, Standing, Etc. The Company is duly organized,
----------------------------
validly existing, and in good standing under the laws of the State of Utah,
and has the requisite power and authority to enter into and perform this
Agreement and to execute and perform under the documents, instruments and
agreements related to this Agreement.
14.2 Authorization. The execution and delivery of this Agreement and
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the consummation of the transactions contemplated herein have been duly
authorized by all required action of the Company, including any necessary
approval by its Board of Directors or shareholders, and each of the
Transaction Documents and all instruments and agreements to be delivered in
connection therewith constitute its legal, valid and binding obligation,
enforceable against the Company in accordance with their respective terms,
subject to laws of general application relating to the rights of creditors
generally. The qualified directors of the Company have authorized this
Agreement and the consummation of the transactions contemplated hereby in
accordance with the provisions of Section 16-10a-852 of the Utah Business
Corporation Act.
14.3 Absence of Conflicts. Neither the execution and delivery of the
--------------------
Transactions Documents or any other agreement or instrument to be delivered
to the Purchaser in connection therewith, nor the consummation of the
transactions contemplated thereby, by the Company, shall (i) conflict with
or result in a breach of or constitute a violation or default under (A) any
provision of the Articles of Incorporation or By-laws, each as amended to
date, of the Company, or (B) the provision of any indenture, instrument or
agreement to which the Company is a party or by which it or any of its
properties is bound, or (C) any order, writ, judgment, award, injunction,
decree, law, statute, rule or regulation, license or permit applicable to
the Company; (ii) result in the creation or imposition of any lien pursuant
to the terms of any such indenture, instrument or agreement, or constitute
a breach of any fiduciary duty owned by the Company to any third party, or
(iii) require the approval of any third party pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which
the Company is subject or to which it or any of its properties, operations
or management may be subject.
14.4 Capitalization. The authorized capital stock of the Company
--------------
consists of 50,000,000 shares of Common Stock par value $.001 per share.
As of May 1, 1998, 5,809,307 shares of Common Stock were issued and
outstanding, and no shares were held
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in the Company's treasury. All of the outstanding shares of Common Stock
are, and the Shares will be when paid for and issued, duly authorized,
validly issued, fully paid and non-assessable and free of any preemptive
rights.
14.5 Financial Statements. The Company's annual reports on Form 10-
--------------------
KSB for the fiscal years ended March 31, 1996 and 1997 (the "10-K's"), and
its quarterly reports on Form 10-QSB for the periods ended June 30,
September 30, and December 31, 1996 and 1997 (the "10-Qs"), and all 8-K's
filed by the Company since March 31, 1996 (the "8-K's) and its 1996 and
1997 Annual Proxy Statements, copies of which have been filed with or
furnished to the Securities and Exchange Commission, were when filed or
furnished, accurate in all material respects and did not include any untrue
statement of material fact or omit to state any material fact necessary to
make the statements therein not misleading. The financial statements
included in the 10-K's and the 10-Qs present fairly the financial position
of the Company at such dates and the results of its operations and cash
flows for the periods then ended, in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered by such statements.
14.6 Litigation, Etc. Except as disclosed in the 10-K's and the 10-
----------------
Q's and 8-K's, there are no suits, actions or legal, administrative,
arbitration or other proceedings or governmental investigations or other
controversies pending, or to the knowledge of the Company threatened, or as
to which the Company has received any notice, claim or assertion, which
involve a potential cost or liability to the Company which would singly or
in the aggregate, materially or adversely affect the financial condition,
results of operations, business or prospects of the Company. The Company
is not in default with respect to any order, writ, injunction or decree of
any court or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign affecting or relating to it which is material to the financial
condition, results of operations or business of the Company.
14.7 Brokers and Finders. Neither the Company nor any person acting
-------------------
on behalf of the Company has employed any broker, agent or finder, or
incurred any liability for any brokerage fees, agents' commissions or
finders' fees, in connection with the transactions contemplated herein.
The Company agrees to indemnify Purchaser against any claim by any third
person for any commission, brokerage fee, finders fee, or other payment
with respect to this Agreement or the transactions contemplated hereby
based upon any alleged agreement or understanding between such party and
such third person, whether expressed or implied, arising from the actions
of such party. The covenants set forth in this Section shall survive the
Closing Date and the consummation of the transactions contemplated by this
Agreement.
9
<PAGE>
14.8 Regulatory Compliance. To the best knowledge of the Company, it
---------------------
has operated and is currently operating in compliance in all material
respects with all laws, rules, regulations, orders, decrees, licenses or
permits applicable to it or to its business. The Company has not received
any notice from the FDA or any other governmental agency or authority of
any noncompliance by the Company with any law, rule, regulation, order,
decree, license or permit applicable to it or its business or properties.
14.9 Articles of Incorporation and By-laws. The Company has delivered
-------------------------------------
to the Purchaser copies of its Articles of Incorporation and all amendments
thereto, which copies are complete and correct. The Company is not in
default under or in violation of any provisions of its Articles of
Incorporation. The Company's Articles of Incorporation have not been
amended since the date of certification thereof and no action has been
taken for the purpose of effecting any amendment thereto. The Company has
delivered to the Purchaser copies of its By-laws and all amendments
thereto, which copies are complete and correct. The Company is not in
default under or in violation of any provision of its By-laws.
14.10 Product Liability. Except as disclosed to Purchaser prior to
-----------------
Closing, the Company has not received any notice, claim or assertion
regarding an actual or alleged liability of the Company with respect to any
of its products.
14.11 OEM Relationships. Except as disclosed to Purchaser prior to
-----------------
Closing, the Company has not received any notice, claim or assertion from
or with respect to any OEM counterparty of the Company regarding intention
of such OEM party to either discontinue its relationship with the Company
or develop or market products in competition with the Company.
14.12 Patents and Proprietary Rights. The Company received FDA market
------------------------------
clearance for the argon laser in February 1996. The Company also received
formal notice of allowance for its initial patent application concerning
laser teeth whitening in April, 1997. The Company has no reason to believe
that any of its patents or proprietary rights infringes upon or otherwise
violates the patents or proprietary rights of any other party. Except as
disclosed to Purchaser prior to Closing, the Company has not received any
notice, claim or assertion that its patents or proprietary rights infringe
upon or otherwise violate the patents or proprietary rights of any other
party.
14.13 Unincorporated Documents or Materials. With respect to any
-------------------------------------
document or other materials received by the Purchaser from the Company or
its representatives which are incorporated herein by reference herein, (i)
the Company has no reason to believe any of such documents and materials or
any projections contained therein contain errors or misstatements or do not
adequately describe the transactions contemplated by this Agreement or the
status of the development of the Company's technology, and (ii) such
10
<PAGE>
documents, materials and projections were prepared by the Company and its
management in good faith.
14.14 Information. To the best knowledge of the Company, the
-----------
information concerning the Company set forth in this Agreement is complete
and accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under which they
were made, not misleading.
15. Nondisclosure. Except as required by applicable securities laws,
-------------
rules and regulations, prior to the Closing Date, no press release or other
announcement concerning the proposed transactions will be issued except by
mutual consent of the parties. This Agreement and all negotiations and
discussions between the parties in connection with this Agreement shall
be strictly confidential and will not be disclosed in any manner prior to the
Closing Date, except to employees and agents of the parties on a need-to-know
basis, as required by applicable law or regulations or as otherwise agreed by
the parties. After Closing, disclosure shall be at the sole discretion of the
Company.
16. Conditions to Closing. Closing of the transactions contemplated by
---------------------
this Agreement shall be contingent upon the satisfaction of the following
conditions precedent:
16.1 Approvals, Waivers, Etc. ILT shall have delivered to Purchaser
------------------------
evidence of all approvals, including waivers and consents, of its board of
directors, government or third-parties which may be required for the sale
of the Shares, in full force and effect as of the Closing Date.
16.2 Absence of Litigation. No litigation shall have been threatened
---------------------
or shall be pending challenging the purchase of the Shares contemplated by
this Agreement or which could have a material adverse effect on ILT.
16.3 No Bankruptcy. ILT shall not have filed for bankruptcy
-------------
protection, the appointment of a trustee or receiver, assignment for the
benefit of creditors, nor have taken any other action designed to protect
the Company, its property or assets from the rights of creditors; and no
other person shall have made any such filing or taken any such action in
respect of ILT.
16.4 No Breach of Agreements. Neither the execution and delivery of
-----------------------
the Transactions Documents or any other agreement or instrument to be
delivered to the Purchaser in connection therewith, nor the consummation of
the transactions contemplated thereby, by the Company, shall have
conflicted with or resulted in a breach of or constituted a violation or
default under (A) any provision of the Articles of Incorporation or By-
laws, each as amended to date, of the Company, or (B) the provision
11
<PAGE>
of any indenture, instrument or agreement to which the Company is a party
or by which it or any of its properties is bound, or (C) any order, writ,
judgment, award, injunction, decree, law, statute, rule or regulation,
license or permit applicable to the Company.
16.5 AMEX Additional Listing Application. ILT shall have made all
-----------------------------------
appropriate filings under the rules of the American Stock Exchange and
shall have received notification from the AMEX that the Shares have been
approved for listing.
16.6 ILT Board Approval. The "qualified directors" of ILT (within the
------------------
meaning of Section 16-10a-850 of the Utah Business Corporation Act) shall
have authorized and approved the transactions contemplated by this
Agreement pursuant to the laws of the state of Utah.
16.7 Directors. Effective prior to or as of the Closing, the Company
---------
shall have accepted the resignations of Messrs. Milton G. Adair, David E.
Neff, and Richard S. Braddock as directors of the Company, and Eric
Montgomery and Brian Delaney shall have been appointed directors of the
Company.
16.8 Appointment of Executive Committee. As of the Closing, the Board
----------------------------------
of Directors of ILT shall have appointed Richard V. Trefz, Anthony M.
Pilaro and Brian Delaney to constitute the whole Executive Committee of the
Board, having all the power and authority delegable to an executive
committee under the laws of the State of Utah.
16.9 No Shareholder Approval Required. Counsel to ILT shall be
--------------------------------
satisfied that no approval or authorization of the transactions
contemplated by this Agreement by the shareholders of ILT shall be required
under or pursuant to the laws of the state of Utah, or the rules and
regulations promulgated by the AMEX.
16.10 Opinions. The Company shall have delivered to the Purchaser an
--------
opinion of counsel to the Company that the Shares, when paid for and
issued, will be validly issued, fully paid and non-assessable, that the
Transaction Documents have been duly authorized and constitute legal and
binding obligations of the Company enforceable according to their terms,
and that no approval or authorization by the shareholders of ILT shall be
required under or pursuant to the laws of the state of Utah.
17. General Provisions.
------------------
17.1 Attorneys' Fees. In the event of a default in the performance of
---------------
this Agreement or any document or instrument executed in connection with
this Agreement, the defaulting party, in addition to all other obligations
of performance hereunder, shall pay reasonable attorneys' fees and costs
incurred by the non-defaulting party to enforce performance of this
Agreement.
12
<PAGE>
17.2 Choice of Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Utah, including choice of law
rules.
17.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when so signed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument.
17.4 Entire Agreement. This Agreement, and the Exhibits, Schedules
----------------
and other attachments referred to herein (all of which are incorporated in
this Agreement by reference) collectively set forth the entire agreement
between the parties as to the subject matter hereof, supersede any and all
prior or contemporaneous agreements or understandings of the parties
relating to the subject matter of this Agreement, and may not be amended
except by an instrument in writing signed by all of the parties to this
Agreement.
17.5 Expenses. The parties shall be responsible for and shall pay
--------
their own costs and expenses, including without limitation attorneys' fees
and accountants' fees and expenses, in connection with the conduct of the
due diligence inquiry, negotiation, execution and delivery of this
Agreement and the instruments, documents and agreements executed in
connection with this Agreement. Notwithstanding the foregoing, the Company
shall pay any stock transfer taxes payable in connection with the issue and
sale of the Shares to the Purchaser, and expenses which the Company is
obligated to pay under the Registration Rights Agreement with respect to
the Shares.
17.6 Headings. The headings of the sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
17.7 Notices. All notices or other communications provided for under
-------
this Agreement shall be in writing, and mailed, telecopied or delivered by
hand delivery or by overnight courier service, to the parties at their
respective addresses as indicated below or at such other address as the
parties may designate in writing:
(1) If to Purchaser:
LCO Investments Limited
Canada Court
Upland Road, St. Peter Port
Guernsey, Channel Islands
With a copy to:
13
<PAGE>
Michael Yong
Cap Advisers Limited
36 Fitzwilliam Place
Dublin 2, Ireland
(Tel. 011-353-1-661-4433)
(Fax 011-353-1-661-2456)
Craigh Leonard
Richards & O'Neil, LLP
885 Third Avenue
New York, N.Y. 10022-4873
(Tel. 212-207-1200)
(Fax 212-750-9022)
Robert B. Hiden, Jr.
Sullivan & Cromwell
125 Broad Street
New York, N.Y. 10004
(Tel. 212-558-3812)
(Fax 212-558-4783)
(2) If to the Company:
Ion Laser Technology, Inc.
3828 South Main Street
Salt Lake City, Utah 84115
Fax: (801) 262-5770
With a copy to:
Jeffrey M. Jones, Esq.
DURHAM, EVANS, JONES & PINEGAR, P.C.
Key Bank Tower, Suite 850
50 South Main Street
Salt Lake City, Utah 84144
Fax: (801) 363-1835
All notices and communications shall be effective as follows: When mailed,
upon three (3) business days after deposit in the mail (postage prepaid);
when telecopied, upon confirmed transmission of the telecopied notice; when
hand delivered, upon delivery; and
14
<PAGE>
when sent by overnight courier, the next business day after deposit of the
notice with the overnight courier.
17.8 Severability. Should any one or more of the provisions of this
------------
Agreement be determined to be illegal or unenforceable, all other
provisions of this Agreement shall be given effect separately from the
provision or provisions determined to be illegal or unenforceable and shall
not be affected thereby.
17.9 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors, but shall not be
assignable by Purchaser without the prior written consent of the Company;
provided that Purchaser may assign its rights hereunder and in the
Registration Rights Agreement relating to the Shares to one or more
affiliates of Purchaser or to one or more charitable foundations in
circumstances where such assignees assume all obligations of Purchaser
thereunder and any such assignment does not violate the Securities Act of
1933, and provided further that Purchaser may sell or assign any or all of
the Shares in accordance with this Agreement and such Registration Rights
Agreement.
17.10 Survival of Representations, Warranties and Covenants Closing.
-------------------------------------------------------------
All warranties, representations, indemnities and agreements made in this
Agreement by a party hereto shall survive the date of this Agreement, the
Closing Date, the consummation of the transactions contemplated by this
Agreement, and the issuance by the Company of the Shares.
15
<PAGE>
IN WITNESS WHEREOF, the party named below has caused this Agreement to be
executed, as of the date first above written.
LCO INVESTMENTS LIMITED
BY: /s/ Anthony Pilaro
----------------------
NAME: Anthony M. Pilaro
----------------------
TITLE: Chairman
----------------------
DATE: May 4, 1998
ACCEPTED AND AGREED:
ION LASER TECHNOLOGY, INC.
BY: /s/ Milton G. Adair
----------------------
NAME: Milton G. Adair
----------------------
TITLE: President & CEO
----------------------
DATE: May 4, 1998
16
<PAGE>
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") between ION LASER
TECHNOLOGY, INC., a Utah corporation (the "Company"), and LCO INVESTMENTS
LIMITED, a company organized under the laws of Guernsey, Channel Islands
("LCO"), is made and entered into as of May 4, 1998. LCO is referred to herein
as "Holder."
RECITALS
A. The Company and Holder have entered into that certain Stock Purchase
Agreement (the "Purchase Agreement") of even date with this Agreement, pursuant
to which Holder has agreed to purchase and the Company has agreed to sell shares
of its Common Stock, par value $.001 per share (the "Shares"), which Shares
(the "Registrable Securities") are now restricted and not registered under the
Securities Act of 1933, as amended, (the "Act") or under the provisions of any
state securities law.
B. Holder would not have agreed to execute the Purchase Agreement or to
consummate the transactions contemplated by the Purchase Agreement unless the
Company had agreed to enter into this Agreement.
AGREEMENT
In consideration of the promises contained in this Agreement and in the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which the parties acknowledge by their signatures below, the
Company and Holder agree as follows:
1. Piggyback Registrations. If at any time after 180 days from the date
-----------------------
of this Agreement the Company proposes to file a registration statement covering
proposed sales by it or any of its shareholders of shares of its capital stock
in a manner which would permit registration of shares of common stock for sale
to the public (other than a registration statement (i) covering only shares
issuable upon (a) the exercise of employee stock options or pursuant to an
employee stock purchase, dividend reinvestment or similar plan, or (b) the
exercise of a convertible security, or (ii) under a Registration Statement filed
on Form S-4 or S-8 or any similar form under the Act or (iii) pursuant to
Section 2, below), the Company will give prompt notice to Holder of such
proposed registration (which notice shall describe the proposed filing date and
the date by which the registration rights granted pursuant to this Section 1
must be exercised, the nature and method of any such sale or disposition of
securities and shall include a listing of the jurisdictions, if any, in which
the Company proposes to register or qualify the securities under the applicable
state securities or "Blue Sky" laws of such jurisdictions). At the request of
Holder
<PAGE>
given within thirty (30) calendar days after the receipt of such notice by
Holder (which request shall specify the number of shares Holder requests to be
included in such registration), the Company will use its best efforts to cause
all shares as to which registration has been requested by Holder to be included
in such registration statement for sale or disposition in accordance with the
method described in the initial notice given to Holder and subject to the same
terms and conditions as the other shares of capital stock being sold, and
thereafter shall cause such registration statement to be filed and become
effective; provided, however, that the Company shall be permitted to (A)
withdraw the registration statement for any reason in its sole and exclusive
discretion and upon the written notice of such decision to Holder shall be
relieved of all of its obligations under this Section 1 with respect to that
particular registration; or (B) exclude all or any portion of the shares sought
to be registered by Holder from such registration statement if the offering of
the shares is an underwritten offering and to the extent that, in the judgment
of the managing underwriter of the offering, the inclusion of such shares would
be materially detrimental to the offering of the remaining shares of capital
stock, or such delay is necessary in light of market conditions. Any shares
sought to be registered by Holder so excluded from a registration statement
shall be excluded pro rata based on the total number of shares of capital stock
being sold by all selling security holders (other than the Company).
2. Demand Registration. If at any time after 180 days from the date of
-------------------
this Agreement the Company shall be requested in writing by LCO (and LCO then
holds any issued and outstanding Registrable Securities at such time) to effect
the registration under the Act of shares of the Company's Common Stock then
owned by Holder (which request shall specify the aggregate number of shares
intended to be offered and sold by Holder, shall describe the nature or method
of the proposed offer and sale thereof and shall contain an undertaking by
Holder to cooperate fully with the Company in order to permit the Company to
comply with all applicable requirements of the Act and the rules and regulations
thereunder and to obtain acceleration of the effective date of the registration
statement contemplated thereby), the Company shall effect the registration of
such securities on an appropriate form under the Act, provided that:
2.1 LCO's rights under this Section 2 shall be exercisable only if
the shares as to which LCO requests registration have an aggregate value of at
least $500,000 based on the average of the closing sale price for the Company's
common stock as listed on the American Stock Exchange or any other exchange on
which the Company's common stock then may be traded for the thirty (30) trading-
day period immediately preceding the date of such request for registration;
2.2 The independent members of the Company's Board of Directors, with
the advice of such investment bankers or securities professionals as the Board
shall deem necessary, shall have determined in good faith that the cost of
complying with the request for registration under this Section 2 would not have
a materially adverse effect upon the Company, its operations or the market for
the Company's common stock, provided, however, that if the independent members
of the Company's Board of Directors determine in good faith that the cost of
complying
2
<PAGE>
with the request for registration would have a material adverse effect upon the
Company, its operations or the market for the Company's common stock, the
Company may decline Holder's request to register Holder's Registrable Securities
under the Act, provided further, however, that in such event the Company may not
thereafter again decline LCO's request for registration based upon this Section
so long as such subsequent request is received by the Company more than 120 days
after LCO's request for registration which was declined based upon this Section;
2.3 LCO shall be entitled to three demand registrations, provided
that registrations two and three may be effected on Form S-3 or its then
equivalent form promulgated by the SEC and, provided further, that any request
for registration pursuant to this Section 2 which does not result in the
declaration of effectiveness of a registration statement (which effectiveness is
maintained continuously for at least 120 days or such shorter period ending when
all shares to which LCO has requested registration in accordance herewith have
been sold in accordance with such registration) covering the offer and sale of
shares owned by Holder and requested to be included in such registration
statement, whether as a result of the withdrawal of the registration statement
by the Company or through other action or inaction of the Company or for any
other reason except for the voluntary decision of Holder to terminate the
registration after the request for such registration has been delivered to the
Company, shall not be counted in determining the number of times registration
rights have been exercised pursuant to this Section 2;
2.4 The Company shall be entitled to postpone the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2, if at the time it receives a request for such
registration, the independent members of the Company's Board of Directors
determine that such registration and offering would materially interfere with
any existing or then presently contemplated financing, acquisition, corporate
reorganization or other material transaction involving the Company, and the
Company promptly gives LCO written notice of such determination, provided,
however, that such postponement shall not extend beyond the time that such
material interference continues to exist; and
2.5 LCO shall have no right to demand registration with respect to
any shares within ninety (90) calendar days after the effective date of any
registration statement previously filed by the Company, other than a
registration statement on Form S-8 or similar form.
3. Registration Procedures. If and whenever this Agreement contemplates
-----------------------
that the Company will effect the registration under the Act of any shares held
by Holder, the Company shall:
3.1 prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement on the appropriate form with respect to such
shares and use its best efforts to cause such registration statement to become
and remain effective as provided herein, provided that before filing any
amendments or supplements to a registration statement or
3
<PAGE>
prospectus, including documents incorporated by reference after the initial
filing of the registration statement, the Company will furnish to Holder and the
underwriters, if any, copies of all such documents proposed to be filed at least
five business days prior thereto, which documents will be subject to the
reasonable review of Holder and underwriters, and the Company will not file an
amendment to a registration statement or prospectus or any supplement thereto
(including such documents incorporated by reference) to which Holder or the
underwriters, if any, shall reasonably object;
3.2 prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith and
to take such other action as may be necessary to keep such registration
statement effective until the earlier of (i) the completion of the distribution
of shares so registered, or (ii) expiration of the 120 day period following
immediately the effective date of such registration statement (at which time
unsold shares may be deregistered), and otherwise comply with applicable
provisions of the Act and the rules and regulations promulgated under the Act;
3.3 furnish to Holder and its counsel, and to each underwriter of the
shares to be sold by Holder, without charge, such number of copies of one or
more preliminary prospectuses, any supplements thereto and a final prospectus
and any supplements thereto in conformity with the requirements of the Act, and
such other documents as Holder or such underwriter may reasonably request, in
order to facilitate the public sale or other disposition of such shares;
3.4 if, during any period in which, in the opinion of the Company's
counsel, a prospectus relating to the shares is required to be delivered under
the Act in connection with any offer or sale contemplated by any registration
statement, any event known to the Company occurs as a result of which the
prospectus would include an untrue statement of material fact or omit to state
any material fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the related prospectus to comply with the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the respective rules and regulations thereunder, to notify Holder promptly and
to prepare and file with the SEC an amendment or supplement, whether by filing
such documents pursuant to the Act or the Exchange Act as may be necessary to
correct such untrue statement or omission or to make any registration statement
or the related prospectus comply with such requirements and to furnish to Holder
and its counsel such amendment or supplement to such registration statement or
prospectus;
3.5 timely to file with the SEC (i) any amendment or supplement to
any registration statement or to any related prospectus that is required by the
Act or the Exchange Act or requested by the SEC, and (ii) all documents (and any
amendments to previously filed documents) required to be filed by the Company
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act;
4
<PAGE>
3.6 within five days of filing with the SEC of (i) any amendment or
supplement to any registration statement, (ii) any amendment or supplement to
the related prospectus, or (iii) any document incorporated by reference in any
of the foregoing or any amendment of or supplement to any such incorporated
document, to furnish a copy thereof to Holder;
3.7 to advise Holder and its counsel promptly (i) when any post-
effective amendment to any registration statement becomes effective and when any
further amendment of or supplement to the prospectus shall be filed with the
SEC, (ii) of any request or proposed request by the SEC for an amendment or
supplement to any registration statement, to the related prospectus, to any
document incorporated by reference in any of the foregoing or for any additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of any registration statement or any order directed to the related
prospectus or any document incorporated therein by reference or the initiation
or threat of any stop order proceeding or of any challenge to the accuracy or
adequacy of any document incorporated by reference in such prospectus, (iv) of
receipt by the Company of any notification with respect to the suspension of the
qualification of the shares for sale in any jurisdiction or the initiation or
threat of any proceeding for such purpose, and (v) of the happening of any event
which makes untrue any statement of a material fact made in any registration
statement or the related prospectus as amended or supplemented or which requires
the making of a change in such registration statement or such prospectus as
amended or supplemented in order to make any material statement therein not
misleading;
3.8 on or before the date a registration statement is declared
effective, use its best efforts to register or qualify the shares covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as Holder shall reasonably request, considering the nature and
size of the offering, and do such other acts and things as may be reasonably
necessary to enable Holder to consummate the public sale or other disposition in
each such jurisdiction of such shares; provided, however, that the Company shall
not be obligated to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it has not been qualified, or to file any
general consent to service of process;
3.9 use its best efforts to cause all shares sold pursuant to any
registration statement to be listed on each national securities exchange, if
any, on which such shares are then listed;
3.10 enter into customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities;
3.11 make reasonably available for inspection by Holder, any
underwriter participating in any disposition pursuant to the registration
statement, and any attorney,
5
<PAGE>
accountant or other agent retained by Holder or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records and other information which the
Company determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records, in the opinion of counsel reasonably acceptable
to the Company, is necessary to avoid or correct a misstatement or omission in
the registration statement, or (ii) the release of such records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
Holder agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
3.12 use its best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holder, or
the managing underwriter, reasonably requests;
3.13 use its best efforts to obtain an opinion or opinions from
counsel for the Company in customary form;
3.14 make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the earliest
possible moment; and
3.15 cooperate with Holder and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to be
sold under the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holder may request.
4. Agreements of Holder. Holder (i) upon receipt of a notice from the
--------------------
Company of the occurrence of any event of the kind described in Subsection 3.4
shall forthwith discontinue Holder's disposition of securities included in the
registration statement until Holder receives copies of the supplemented or
amended prospectus, and (ii) if so directed by the Company, shall deliver to the
Company, at the Company's expense, all copies (other than permanent file copies)
then in Holder's possession of the prospectus covering such securities that was
in effect at the time of receipt of such notice.
5. Withdrawal. If Holder disapproves of the terms of any offering, the
----------
sole remedy of Holder shall be to withdraw Holder's securities therefrom by
giving written notice to the
6
<PAGE>
Company and any managing underwriter (if any). Holder's securities of the
Company so withdrawn from the offering also shall be withdrawn from
registration.
6. Participation in Underwritten Registrations. In the case of any
-------------------------------------------
registration under Section 2, if Holder or the Company determines to enter into
an underwriting agreement in connection therewith, or in the case of a
registration under Section 1, if the Company determines to enter into an
underwriting agreement in connection therewith, (i) all shares of Holder's
securities to be included in such registration shall be subject to an
underwriting agreement, which shall be in customary form and contain such terms
as are customarily contained in such agreements, and (ii) no person may
participate in any such registration unless such person (A) agrees to sell such
person's securities on the basis provided in such underwriting arrangement, and
(B) completes and executes all questionnaires, powers-of-attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
7. Registration Expenses. With respect to each registration effected
---------------------
pursuant to Section 1 and to each registration under Section 2 of this
Agreement, the Company shall pay the following fees, disbursements and expenses:
all registration and filing fees, printing expenses, auditors' fees, listing
fees, registrar and transfer agent's fees, fees and disbursements of counsel to
the Company, reasonable fees and disbursements of not more than one counsel to
Holder in the case of each registration under Section 2 of this Agreement,
expenses (including reasonable fees and disbursements of counsel) of complying
with applicable securities or "Blue Sky" laws, and the fees of any securities
exchange in connection with the review of such offering. The underwriting
discounts and commissions allocable to the shares included in any offering shall
be borne by Holder.
8. Indemnification.
---------------
8.1 In each case of a registration of shares under the Securities Act
pursuant to this Agreement, the Company will indemnify and hold harmless Holder,
its officers and directors, each underwriter (as defined in the Act), and each
other person, if any, who controls Holder or any such underwriter within the
meaning of the Act or the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including the fees and expenses of counsel in
connection therewith), arising out of any untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such shares were registered under the Act, any prospectus or preliminary
prospectus contained therein, or any amendment or supplement thereto (including,
in each case, documents incorporated by reference therein), or arising out of
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
except insofar as such losses, claims, damages or liabilities arise out of any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to Holder, Holder's counsel, or any underwriter, and
furnished to the Company in writing by Holder or such counsel
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<PAGE>
or underwriter; provided that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter (or the
benefit of any person controlling such underwriter) from whom the person
asserting any such losses, claims, damages or liabilities purchased shares to
the extent such losses, claims, damages or liabilities result from the fact that
a copy of the final prospectus had not been sent or given to such person at or
prior to written confirmation of the sale of such shares to such person.
8.2 In each case of a registration of shares under the Act pursuant
to this Agreement, Holder will indemnify and hold harmless the Company, its
directors, its officers who sign the registration statement, its attorneys, each
underwriter and each person, if any, who controls the Company or such
underwriter within the meaning of the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company to Holder, but only with
reference to information provided to the Company in writing by Holder and
furnished to the Company by Holder expressly for use in the registration
statement, any publicly available report of Holder published within the time
frame of the registration statement, any prospectus or preliminary prospectus
contained therein, or any amendment or supplement thereto.
8.3 In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "Indemnified Party") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemni fied Party unless (i) the Indemnifying Party has agreed to the
retention of such counsel at its expense, or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party, the Indemnifying Party proposes that the same counsel
represent both the Indemnified Party and the Indemnifying Party and
representation of both parties by the counsel would be inappropriate due to
actual or potential differing interests between them. It is understood, where
the expense of separate counsel shall be borne by the Indemnifying Party
pursuant to the foregoing sentence, that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm qualified in
such jurisdiction to act as counsel for such Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Party agrees to
indemnify the Indemnified Party from and against any loss or liability by reason
of such settlement or judgment.
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<PAGE>
8.4 The indemnification pursuant to this Section 8 shall be on such
other terms and conditions as are at the time customary and reasonably required
by underwriters in public offerings, including providing for contribution in the
event indemnification provided in this Section 8 is unavailable or insufficient.
9. Holdback Agreement. Holder agrees not to effect any public sale or
------------------
distribution of the Company's shares of capital stock during the seven (7)
calendar days prior to and the ninety (90) calendar day period beginning on the
effective date of any underwritten registration statement effected pursuant to
this Agreement (except as part of such underwritten registration) unless the
managing underwriter or underwriters with respect to such offering otherwise
agree.
10. Selection of Underwriters. The Company will have the right to select
-------------------------
the investment banking firm(s) acting as managing underwriter in connection with
any underwritten public offering; provided, that in the event the offering is
--------
pursuant to a demand registration hereunder, Holder shall have the sole right to
select such managing underwriter.
11. Survival. The indemnification provisions of Section 8 shall not
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terminate and shall survive forever.
12. Rule 144. The Company agrees that it will use its best efforts to
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file in a timely manner all reports required to be filed by it pursuant to the
Exchange Act and, at any time and upon request of Holder, will furnish Holder
and others with such information as may be necessary to enable Holder to effect
sales of Registrable Securities without registration pursuant to Rule 144 under
the Act.
13. General.
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13.1 Assignment. Except in connection with the transfer by Holder
----------
of not less than 100,000 shares of Common Stock, Holder's rights under this
Agreement shall not be transferable without the written consent of the Company;
provided that LCO may assign its rights under this Agreement to one or more
affiliates or to one or more charitable foundations who agree to be bound by
this Agreement as if they were LCO. Any attempted assignment or other transfer
of this Agreement in contravention of this Section 13.1 shall be null and void.
13.2 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when so signed shall be deemed to be an original,
and such counterparts together shall constitute one and the same instrument.
13.3 Entire Agreement. This Agreement sets forth the entire
----------------
agreement between the parties as to the subject matter hereof, supersedes any
and all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter of
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<PAGE>
this Agreement, and may not be amended except by an instrument in writing signed
by all of the parties to this Agreement.
13.4 Governing Law. The laws of the State of Utah (without giving
-------------
effect to the choice of law provisions thereof) shall govern the interpretation
and enforcement of this Agreement.
13.5 Headings. The headings of the sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.6 Notices. All notices or other communications provided for
-------
under this Agreement shall be in writing, and mailed, telecopied or delivered by
hand delivery or by overnight courier service, to the parties at their
respective addresses as indicated below or at such other address as the parties
may designate in writing:
If to LCO:
LCO Investments Limited
Canada Court
Upland Road, St. Peter Port
Guernsey, Channel Islands
With a copy to:
Michael Yong
Cap Advisers Limited
36 Fitzwilliam Place
Dublin 2, Ireland
(Tel. 011-353-1-661-4433)
(Fax 011-353-1-661-2456)
Craigh Leonard
Richards & O'Neil, LLP
885 Third Avenue
New York, N.Y. 10022-4873
(Tel. 212-207-1200)
(Fax 212-750-9022)
Robert B. Hiden, Jr.
Sullivan & Cromwell
125 Broad Street
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<PAGE>
New York, N.Y. 10004
(Tel. 212-558-3812)
(Fax 212-558-4783)
If to the Company:
Ion Laser Technology, Inc.
3828 South Main Street
Salt Lake City, Utah 84115
With a copy to:
Durham, Evans, Jones & Pinegar
50 South Main, Suite 850
Salt Lake City, Utah 84144
Attn: Jeffrey M. Jones, Esq.
All notices and communications shall be effective as follows: When mailed, upon
three (3) business days after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the telecopied notice; when hand
delivered, upon delivery; and when sent by overnight courier, the next business
day after deposit of the notice with the overnight courier.
13.7 Remedies. Any person having rights under any provision of this
--------
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
DATED: May 4, 1998.
ION LASER TECHNOLOGY, INC., a Utah corporation
By /s/ Milton G. Adair
-----------------------------------
Milton G. Adair,President and CEO
LCO INVESTMENTS LIMITED
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<PAGE>
By Anthony M. Pilaro
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Its Chairman
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<PAGE>
ION LASER TECHNOLOGY, INC. NEWS RELEASE
3828 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84115
FOR IMMEDIATE RELEASE Contact: Richard V. Trefz
- --------------------- 801-262-5555
ION LASER TECHNOLOGY MAKES ANNOUNCEMENT
SALT LAKE CITY, May 5, 1998 -- Ion Laser Technology, Inc. (AMEX:ILT)
announced that its Board of Directors had adopted a number of measures intended
to address the Company's weakened financial condition. The Board approved
plans for a significant restructuring of the Company's operations, research and
development activities, and management and research personnel. The Company also
completed the issuance of $5,000,000 of additional Common Stock to the Company's
principal shareholder in order to provide needed cash resources.
In connection with the restructuring, Milton G. Adair, Acting
President of the Company, Richard S. Braddock, Chairman of the Board, and David
E. Neff have resigned as directors, and Brian Delaney and R. Eric Montgomery
have been elected as new directors. Anthony M. Pilaro will also continue to
serve as a director, and Mr. Adair has agreed to serve as a consultant to the
Company until July 31, 1998. Richard V. Trefz, a continuing director and an
executive with 20 years of management experience in medical and industrial
products, will become President and Chief Executive Officer.
Pursuant to a Stock Purchase Agreement with LCO Investments Limited
(LCO), LCO has purchased from the Company 1,860,465 shares of Common Stock for
an aggregate purchase price of $5,000,000. The new shares, when added to LCO's
other holdings, constitute approximately 33% of the Company's Common Stock and
40% on a fully diluted basis giving effect to exercisable options. Pursuant to
the Stock Purchase Agreement, the Company has amended the terms of LCO's
outstanding options for 1,173,334 shares of Common Stock to change the exercise
price of the options from $9.00 to $4.50 per share. LCO is retaining its right,
granted in 1996 in connection with an earlier purchase, to nominate for election
and remove two Directors of the Company for so long as LCO and its affiliates
and permitted transferees continue to hold 5% or more of the the Company's
outstanding Common Stock. Pursuant to this right, LCO nominated Messrs.
Montgomery and Delaney as directors of the Company. Mr. Pilaro is a director of
LCO, as well as a director of CAP Advisers Limited, the sole trustee of a trust
which owns all of the interests in LCO.
The Company has experienced significant delays in completing the
testing to permit initial production of its dental and tooth whitening device
known as Apollo 9500, which has occasioned delays in the testing of related
whitening and composite materials. Because of these delays, and the substantial
expenses incurred by the Company for pre-production, marketing and sales efforts
in connection with these products, the Company's cash and short-
<PAGE>
term capital resources had fallen to a level that the Board of Directors
considered insufficient to carry out the Company's announced plans for continued
development and ultimate production of these and other products and to continue
normal operations. The Board of Directors approved the stock sale to LCO as part
of its overall plan for improving the immediate liquidity of the Company and
providing working capital for the pursuit of the Company's activities, including
research and development.
Because of technical difficulties in the production of Apollo 9500
units to meet minimum specifications, the Company expects that it will be unable
to honor a June 30, 1998 deadline for delivery of Apollo 9500 units to its
exclusive domestic distributor, Dental/Medical Diagnostics, Inc. (DMD). Under
the Company's agreement with DMD, a failure to meet the June 30 deadline could
result in DMD's termination of the agreement and could require the Company to
refund $500,000 in advance payments received from DMD. The Company has
initiated a re-evaluation of the existing Apollo 9500 design and plans to revise
the product specifications to ensure consistent and verifiable curing and teeth
whitening capacities. Until such improvements are made and tested to the
satisfaction of Company management, the Company will not make any deliveries of
Apollo 9500 units. The Company cannot currently estimate a date by which it
could deliver Apollo 9500 units and, therefore, there can be no assurance that
any continuation of the distribution agreement with DMD beyond June 30 would
permit the Company to earn revenues under that agreement or would not result in
further delivery failures. The Company expects to engage in discussions with DMD
with respect to their distribution arrangements and the Apollo 9500. The
Company cannot predict the outcome of those discussions.
The Company had anticipated that whitening chemistry and composite
materials for use with the Apollo 9500 would produce revenues for the Company in
fiscal 1998. This is now uncertain, and the Company believes that consumable
materials will not be available for sale until the Apollo 9500 is ready for
delivery.
The new Board of Directors has determined that while the Company
continues development of the Apollo 9500, the Company's longer term business
strategy will focus on the development of teeth whitening materials and a
second-generation laser tooth whitening (LTW) system. As part of this effort,
the Company has retained the consulting services of John W. Warner, an
experienced research and technology consultant and entrepreneur who was one of
the leading contributors to the development of ophthalmic applications of laser
technology. The Company expects that Dr. Warner, under the direction of Mr.
Trefz, the President and CEO, will lead the Company's assessment of existing
products and LTW development efforts at research and development facilities to
be established in Illinois. Dr. Warner has previously acted as a consultant to
Michigan State University and Northwestern University, and was the founder and
CEO of Taunton Technologies, Inc., a predecessor of VISX Inc. Mr. Pilaro was
also a founder of Taunton Technologies.
In an effort to control Company expenses and to concentrate available
resources
2
<PAGE>
on the products that the Company considers most promising, the Company intends
to shut down its manufacturing operations in Salt Lake City and sell its plant
there as soon as practicable, and is terminating and making severance
arrangements for substantially all of its employees. The Company currently plans
to close down or, if a purchaser can be found, to sell its industrial laser
division. The Company expects to take a one-time special charge of approximately
$2.2 million (pre-tax) in the fiscal quarter ending March 31, 1998 in
conjunction with the restructuring.
The Company's headquarters will be relocated to Pennsylvania. The
Company is currently considering the establishment of new production facilities
at the Pennsylvania location, but a final decision has not yet been made.
Production of the Apollo 9500 is expected to be moved to Illinois on an interim
basis.
The new President and CEO of the Company, Richard Trefz, has extensive
and varied management experience. From 1995 to the present, he has served as
Group Vice President of Inductotherm Industries, Inc., responsible for
overseeing strategic planning, manufacturing and marketing at three industrial
manufacturing subsidiaries. He previously served as President of Den-Tal-Ez,
Inc., a manufacturer of dental operatory equipment.
R. Eric Montgomery, a new Director, is an experienced chemist who
holds numerous patents for dental and other health-related technologies. He is
the President and CEO of OraCeutical LLC and also serves as president or
scientific consultant to several other dental products companies. He has
previously provided consulting services to the Company with respect to the
development of chemical teeth whitening agents.
Brian Delaney, a new Director who has been appointed Acting Chief
Financial Officer, is a chartered accountant in Ireland who has been Group
Financial Director of CAP Advisers Limited since 1994.
The Company has also retained the consulting services of Salim Nathod.
Dr. Nathod is an internationally recognized expert in teeth whitening
technologies who is also associated with OraCeutical LLC. He was previously a
senior researcher in advanced oral care technology with Colgate Palmolive Co.,
and has published widely in his field. Dr. Anthony Cipolla, who was the co-
designer and original product manager for the Apollo 9500, will continue as a
consultant to the Company with respect to that product.
3
